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A Tale of Two Pricing Journeys: Evolving to Usage Models

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Usage based pricing is often perceived to be the truest pricing model that best aligns to customer value. Join two cloud services firms, Pertino and SendGrid, as they share their pricing journeys, their quest to evolve to new models built around consumption, and their learning along the way. They will discuss pros and cons of different models and address the business case and operational requirements to support.

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A Tale of Two Pricing Journeys: Evolving to Usage Models

  1. 1. A Tale of Two Pricing Journeys Evolving to Usage-Based Models Todd Krautkremer VP Marketing Joe Hamlet Senior Manager, Business Systems @tkrautkremer @jhamlet
  2. 2. #Subscribed14 @tkrautkremer Todd Krautkremer VP Marketing
  3. 3. #Subscribed14 @tkrautkremer About Pertino – What We Do Cloud Network Service that lets anyone build a secure network in minutes, connecting everyone with everything IT, from anywhere. • GA Launched in Jan 2014 • 5,000+ Freemium customers • 130 paying customers in 5 months • Targeting SMB IT organizations • Inbound marketing model • Consumption-based pricing
  4. 4. #Subscribed14 @tkrautkremer About Pertino – Current Pricing
  5. 5. #Subscribed14 @tkrautkremer Changing Buyer Landscape Losing control of the audience • Attention economy • Wealth of information is creating a poverty of knowledge Losing control of the message • Customers seek out and trust other sources • Can’t control what is said, who’s saying it, how fast it travels Losing control of the brand • Brand affinity based on experience, instinct and feels right • People don’t like to be sold, they like to buy, and they buy in tribes Losing control of the sales process • 98% of all IT buying processes start with a search • 57% of the buying journey is complete before sales enters the picture
  6. 6. #Subscribed14 @tkrautkremer What Does It All Mean? Customer preference is driven by third-party Influence and hands-on experience Buying process is increasingly driven by customer’s “compelling events” It’s essential to intimately understand customer’s buying journey Product moving upstream in sales process, packaging/pricing are enablers Buyer’s Journey Map – The Path to Purchasing Engage Product Engage Process Engage Content
  7. 7. #Subscribed14 @tkrautkremer Which Free-mium is Right For You? High Reach Millions Low Affinity High Affinity Collaborative Value (more users drive more users, user-perpetuating) High growth, highly viral Low Reach 100K’s Alternative Value (give away product to build community) Lower growth, higher value Experiential Value (facilitate buyer’s journey, offset marketing expense) Lower growth, higher conversion Usage Value (value increases with usage, self-perpetuating) High growth, faster CAC recovery
  8. 8. #Subscribed14 @tkrautkremer Common Pricing Misconceptions Two wrongs don’t make a right, but three lefts do! 1. Everyone should be happy to pay for your product 2. There’s some mythical “perfect” price 3. Pricing can never be changed once chosen 4. Delaying charging indefinitely due to 1, 2 or 3
  9. 9. How Do You Determine Pricing? Slide 9 == + = + Relational Value Analysis (+/= indicates perceived value of Pertino from Spiceworks Community)
  10. 10. #Subscribed14 @tkrautkremer How Do You Determine Pricing? Local Maxima Consumer Surplus Demand Curve Demand Curve mapped to profit Bronze Silver Gold Demand Curve Analysis
  11. 11. #Subscribed14 @tkrautkremer Evolving To Usage PricingPricing Product Maturity GB/month Hybrid Devices Users Freemium Support enterprise (e.g. pooling) Support multi-device Starting point Support new use cases (e.g. DR) We are here
  12. 12. #Subscribed14 @tkrautkremer Pricing In Context of SaaS Metrics LTV > 3X CAC CAC back < 12 mo.
  13. 13. #Subscribed14 @tkrautkremer Platform Considerations • Best-of-breed approach • End-to-end automation • Deep SaaS platform Integration • Facilitates buyer’s journey at every waypoint • Agile, scalable billing platform • Swapping out systems while scaling is difficult SaaS Operational & Automation Platform Build For the Business Your Building
  14. 14. #Subscribed14 @tkrautkremer Summary • Pricing as strategy, not pricing strategy • Buying landscape has changed, deal with it • Understand your customer’s buying journey • Pricing and packaging play a role in the buyer’s journey, not just the destination • Balance market factors with SaaS metrics • Choose your platforms wisely, billing can be a boon or bane
  15. 15. #Subscribed14 @jhamlet Joe Hamlet Senior Manager, Business Systems
  16. 16. #Subscribed14 A Snapshot of SendGrid Denver, CO Boulder, CO Orange County, CA Providence, RI Romania Key Customers Founded 2009 210 Employees 160K Customers 13 Billion Emails Sent Developer Focused
  17. 17. of the world’s wanted email does not reach the inbox 20%
  18. 18. #Subscribed14 Value Proposition
  19. 19. #Subscribed14 SendGrid Pricing Story
  20. 20. #Subscribed14 Make it Simple, Make it Scale
  21. 21. #Subscribed14 Package Changes Mid-month package changes  Risk of revenue loss  Operational overhead
  22. 22. #Subscribed14 Package Changes Solution Load usage daily Queuing
  23. 23. #Subscribed14 Usage Volatility Overage based pricing  Revenue volatility  Decreased predictability
  24. 24. #Subscribed14 Solution Reduce usage based pricing model Volume based packages choices Tiered + Recurring usage model Usage Volatility
  25. 25. #Subscribed14 What’s next
  26. 26. #Subscribed14 Q&A Todd Krautkremer VP Marketing Joe Hamlet Senior Manager, Business Systems @tkrautkremer @jhamlet

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