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"SaaS Metrics, how does to leverage the subscription economy?" by Patrick Campbell, CEO at Price Intelligently

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At TheFamily, we believe that anyone can become a great entrepreneur. Find more info here: http://www.thefamily.co/

- By Patrick Campbell, CEO at Price Intelligently (http://bit.ly/2iPRkKK)
- You can watch the full talk here here: (http://bit.ly/2iPMZan)
- Join us IRL next time: https://www.meetup.com/TheFamilyBerlin/

Published in: Internet
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"SaaS Metrics, how does to leverage the subscription economy?" by Patrick Campbell, CEO at Price Intelligently

  1. 1. How Growth is Changing The Family - Berlin 2017 #TFBERLIN Brought to you by your friends at@PriceIntel
  2. 2. We live in a world where acquisition, as we know it, is dead. #TFBERLIN Brought to you by your friends at@PriceIntel
  3. 3. Who in the world are you? #TFBERLIN Brought to you by your friends at@PriceIntel
  4. 4. ProfitWell SaaS pricing software and tech enabled services Free financial metrics for subscription businesses Price Intelligently Happy customers big and small #TFBerlin Brought to you by your friends at@PriceIntel
  5. 5. We’ve seen inside more software companies than anyone else on the planet. #TFBERLIN Brought to you by your friends at@PriceIntel
  6. 6. The market is saturated, and unit economics just aren’t what they used to be… #TFBERLIN Brought to you by your friends at@PriceIntel
  7. 7. Competition is now rampant. #TFBERLIN Brought to you by your friends at@PriceIntel
  8. 8. Q: How many competitors did you have in your first year of business? A: Companies started more than a year ago had far fewer competitors in their space than companies started today. N = 1432 software founders and executives Average#ofCompetitorsintheirfirst yearofbusiness 0 3 5 8 10 5 years old 3 years old 1 year old 9.7 4.8 2.6 #TFBerlin Brought to you by your friends at@PriceIntel
  9. 9. Q: How many competitors do you have now? A: Older companies increased competition over time, likely due to attracting new entrants, as well as decreased barrier to entry N = 1432 software founders and executives CurrentAverageNumberofCompetitors 0 3 7 10 13 5 years old 3 years old 1 year old 10.25 11.7512.15 #TFBerlin Brought to you by your friends at@PriceIntel
  10. 10. The relative value of features is declining. All software is going to $0. #TFBERLIN Brought to you by your friends at@PriceIntel
  11. 11. N = Varies by line, but minimum of 10,000 customer respondents per line WTPas%ofWTP4YearsAgo 0% 30% 60% 90% 120% 4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today Core Features Single Sign On Integrations Analytics Q: How has software willingness to pay (WTP) evolved over time? A: Software willingness to pay has declined significantly over the past few years due to increased options and higher demands. #TFBerlin Brought to you by your friends at@PriceIntel
  12. 12. CAC is steadily increasing over time. #TFBERLIN Brought to you by your friends at@PriceIntel
  13. 13. Q: How has customer acquisition cost (CAC) evolved over time? A: Customer acquisition cost has increased significantly over the years due to market saturation of marketing vying for consumer attention. BlendedCACas%ofblendedCAC4 YearsAgo -15% 0% 15% 30% 45% 60% 4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today B2B B2C N = 437 companies per line #TFBerlin Brought to you by your friends at@PriceIntel
  14. 14. We make matters worse by focusing on the wrong fundamentals. #TFBERLIN Brought to you by your friends at@PriceIntel
  15. 15. Q: Which pillar of your business is the most important to your growth? A: Founders and software executives overwhelmingly put their support behind acquisition based growth. N = 1432 software founders and executives %oftotalrespondents 0% 25% 50% 75% 100% More logos Making more money per customer Keeping customers around longer #TFBerlin Brought to you by your friends at@PriceIntel
  16. 16. There are clear winners and losers in this environment. #TFBERLIN Brought to you by your friends at@PriceIntel
  17. 17. Q: What was the growth focus of companies that died in the past couple of years? A: Of 90 companies that died in the past 3 years, the majority of them were focused on acquisition based growth. N = 90 companies that went out of business or were fire sold in the past 36 months %ofCompanies 0% 25% 50% 75% 100% Less than $10M ARR $10.01M to $25M ARR $25.01M+ ARR Primarily Acquisition Growth Balanced Growth #TFBerlin Brought to you by your friends at@PriceIntel
  18. 18. Q: How does growth compare between acquisition based companies and their balanced counterparts? A: Acquisition based growth companies grow at a smaller rate than those with a balanced growth approach (growth from all three pillars of growth). N = Minimum of 512 companies per segment pulled from the middle 2/3 of companies in terms of growth rate. This, along with a dampening model was used to control for outlier spikes in growth rate. YoYGrowthRate 0% 14% 28% 41% 55% 2012 2013 2014 2015 Primarily Acquisition Growth Balanced Growth #TFBerlin Brought to you by your friends at@PriceIntel
  19. 19. Q: If we improve each area of a software business equally, what’s the relative impact on revenue? A: Monetization and retention based growth far outpaces acquisition based growth. %impactonrevenue 0% 2% 5% 7% 9% 12% 14% Acquisition Monetization Retention 3.32% N = Data from 734 software companies #TFBerlin Brought to you by your friends at@PriceIntel
  20. 20. Q: If we improve each area of a software business equally, what’s the relative impact on revenue? A: Monetization and retention based growth far outpaces acquisition based growth. %impactonrevenue 0% 2% 5% 7% 9% 12% 14% Acquisition Monetization Retention 6.71% 3.32% N = Data from 734 software companies #TFBerlin Brought to you by your friends at@PriceIntel
  21. 21. Q: If we improve each area of a software business equally, what’s the relative impact on revenue? A: Monetization and retention based growth far outpaces acquisition based growth. %impactonrevenue 0% 2% 5% 7% 9% 12% 14% Acquisition Monetization Retention 6.71% 12.7% 3.32% N = Data from 734 software companies #TFBerlin Brought to you by your friends at@PriceIntel
  22. 22. Q: If we improve each area of a software business equally, what’s the relative impact on revenue? A: Monetization and retention based growth far outpaces acquisition based growth. %impactonrevenue 0% 3% 6% 9% 12% 15% 18% Acquisition Monetization Retention 9.32% 15.89% 2.35% 6.71% 12.7% 3.32% 2008 - 2012 2013 - 2016 N = Data from 734 software companies #TFBerlin Brought to you by your friends at@PriceIntel
  23. 23. The root cause is we don’t know our buyers. #TFBERLIN Brought to you by your friends at@PriceIntel
  24. 24. Q: What are quantified buyer personas? A: Quantified buyer personas are data driven profiles of the customers you’re targeting or choosing to ignore. Table Stakes Tony • Valued features: • SFDC Integration • Chrome extension • Least valued features • Analytics • API access • WTP = ~$10/month • CAC = ~$22 • LTV: $160 Advanced Arnie • Valued features: • Analytics • API Access • Least valued features • Chrome extension • Premium support • WTP = ~$25/month • CAC = ~$56 • LTV: $325 #TFBerlin Brought to you by your friends at@PriceIntel
  25. 25. Q: Which single category describes your buyer personas internally? A: When asked, SaaS founders and executives indicated that their company’s buyer personas weren’t well defined or centralized. %ofrespondents 0% 20% 40% 60% 80% 100% Thought about them Central document Quantified buyer personas 6.6% 36.6% 56.8% N = 1,647 SaaS Founders and Executives #TFBerlin Brought to you by your friends at@PriceIntel
  26. 26. Q: How many customer development conversations (non-sales) are you having per month? A: SaaS founders and executives indicated that their companies are primarily only talking to less than 10 customers in a cust dev capacity per month. %ofrespondents 0% 20% 40% 60% 80% 100% 10 or less 11 to 25 26 to 50 51+ 3.9%10.1%17.7% 68.3% N = 1,647 SaaS Founders and Executives #TFBerlin Brought to you by your friends at@PriceIntel
  27. 27. Q: How many experiments are you running per month (including marketing experiments)? A: SaaS founders and executives indicated that their companies are overwhelmingly running less than 10 experiments per month. %ofrespondents 0% 20% 40% 60% 80% 100% 0 1 to 3 4 to 10 11+ 2.7%12.1% 37.8% 47.8% N = 1,647 SaaS Founders and Executives #TFBerlin Brought to you by your friends at@PriceIntel
  28. 28. The is should be scary. #TFBERLIN Brought to you by your friends at@PriceIntel
  29. 29. Point of Conversion Offer Product #1 Justify price #1 Offer Product #1 Justify price #1 Offer Product #1 Justify price #1 Drive Customer #1 Drive Customer #2 Drive Customer #3 Buyers are the central tenet of your business #TFBerlin Brought to you by your friends at@PriceIntel
  30. 30. Too many of us build first, and find our true customer later. That doesn’t work. #TFBERLIN Brought to you by your friends at@PriceIntel
  31. 31. How do we quantify our buyer personas? #TFBERLIN Brought to you by your friends at@PriceIntel
  32. 32. Let’s walk through an example…. #TFBERLIN Brought to you by your friends at@PriceIntel
  33. 33. ProfitWell: Eating our own dog food #TFBerlin Brought to you by your friends at@PriceIntel
  34. 34. “Ohhh…you’re like…” #TFBerlin Brought to you by your friends at@PriceIntel
  35. 35. Stop building. Start talking. #TFBERLIN Brought to you by your friends at@PriceIntel
  36. 36. For the love of God. Talk to your customer. #TFBERLIN Brought to you by your friends at@PriceIntel
  37. 37. Cool? Awesome - here’s how to do that. #TFBERLIN Brought to you by your friends at@PriceIntel
  38. 38. Q: How do we collect the right data to quantify our buyer personas and set our pricing up correctly? A: The data collection isn’t rocket science at a high level, but the devil, as per usual, is in the details. 1 2 3 Buyer Personas and Design 1 Data Collection And Segmentation 2 Data Consolidation And Analysis 3 #TFBerlin Brought to you by your friends at@PriceIntel
  39. 39. Startup Steve • Valued features: • • • Least valued features • • • WTP = ~$X/month • CAC = ~$XX • LTV: $XXX Miderprise Marty • Valued features: • • • Least valued features • • • WTP = ~$X/month • CAC = ~$XX • LTV: $XXX Customer development process #TFBerlin Brought to you by your friends at@PriceIntel
  40. 40. Details: What’s our experimental design look like? #TFBERLIN Brought to you by your friends at@PriceIntel
  41. 41. Our Experimental design - the details • We want to focus on a core research question and then expand out utilizing three types of data: • Demographic data • Feature value/relative preference data • Pricing data 1 2 3 Your Customer Development Toolkit Price Sensitivity Analysis Proven model for gauging customer’s willingness to pay and price sensitivity Experimental Design Properly segmenting and breaking down the data. Relative Preference Analysis Statistical methodology to measure preferences for features, intention, and value propositions #TFBerlin Brought to you by your friends at@PriceIntel
  42. 42. What do people value? #TFBERLIN Brought to you by your friends at@PriceIntel
  43. 43. Q: Why do traditional survey collection methods fail? A: We’re bad at collecting the right data, because we don’t focus enough on forcing decisions or asking the right questions. 1 2 3 “Please rank the following features on a scale from 1 to 10” Depth of your metrics Beautiful Design Actionability from your metrics Accuracy of your metrics 0 0.25 0.5 0.75 1 #TFBerlin Brought to you by your friends at@PriceIntel
  44. 44. Q: How should we ask a preference or value questions? A: Utilize a methodology that forces the respondent to make a decision. We believe that the Max Diff methodology gets you the best bang for your buck. 1 2 3 #TFBerlin Brought to you by your friends at@PriceIntel
  45. 45. Q: What type of feedback will you get with max diff? A: When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. 1 2 3 #TFBerlin Brought to you by your friends at@PriceIntel
  46. 46. Q: What type of feedback will you get with max diff? A: When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. 1 2 3 #TFBerlin Brought to you by your friends at@PriceIntel
  47. 47. Q: What type of feedback will you get with max diff? A: When utilizing Max Diff, you get both rank order and magnitude, which allows you to save yourself from costly false positives on preferences. 1 2 3 #TFBerlin Brought to you by your friends at@PriceIntel
  48. 48. Startup Steve • Valued features: • Price • Design • Least valued features • Actionability • Depth • WTP = ~$X/month • CAC = ~$XX • LTV: $XXX Miderprise Marty • Valued features: • Accuracy • Uptime • Least valued features • Price • Design • WTP = ~$X/month • CAC = ~$XX • LTV: $XXX Customer development process #TFBerlin Brought to you by your friends at@PriceIntel
  49. 49. How much are people willing to pay? #TFBERLIN Brought to you by your friends at@PriceIntel
  50. 50. Our Experimental design - the details • We want to focus on a core research question and then expand out utilizing three types of data: • Demographic data • Feature value/relative preference data • Pricing data 1 2 3 Your Customer Development Toolkit Price Sensitivity Analysis Proven model for gauging customer’s willingness to pay and price sensitivity Experimental Design Properly segmenting and breaking down the data. Relative Preference Analysis Statistical methodology to measure preferences for features, intention, and value propositions #TFBerlin Brought to you by your friends at@PriceIntel
  51. 51. Core pricing questions - taking advantage of human psychology • Human beings think about value as a spectrum. We can take advantage of this phenomenon by asking pricing questions in a ranged manner: • At what (monthly) price point does [PRODUCT] become too expensive that you’d never consider purchasing it? • At what (monthly) price point does [PRODUCT] start to become expensive, but you’d still consider purchasing it? • At what (monthly) price point does [PRODUCT] a really good deal? • At what (monthly) price point does [PRODUCT] too cheap that you question the quality of it? 1 2 3 #TFBerlin Brought to you by your friends at@PriceIntel
  52. 52. Q: Why is asking in ranges the most effective way to ask pricing questions? A: Ranged questions allow your to get the best answers from respondents, but also ensure you’re able to properly segment and measure elasticity. 1 2 3 #TFBerlin Brought to you by your friends at@PriceIntel
  53. 53. Q: Why is asking in ranges the most effective way to ask pricing questions? A: Ranged questions allow your to get the best answers from respondents, but also ensure you’re able to properly segment and measure elasticity. 1 2 3 WTP for a SaaS Metrics Solution WTP $0 $75 $150 $225 $300 Size of Company (MRR) $0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+ #TFBerlin Brought to you by your friends at@PriceIntel
  54. 54. Startup Steve • Valued features: • Price • Design • Least valued features • Actionability • Depth • WTP = ~$50/month • CAC = ~$XX • LTV: $XXX Miderprise Marty • Valued features: • Accuracy • Uptime • Least valued features • Price • Design • WTP = ~$150-200/month • CAC = ~$XX • LTV: $XXX Customer development process #TFBerlin Brought to you by your friends at@PriceIntel
  55. 55. Startup Steve • Valued features: • Price • Design • Least valued features • Actionability • Depth • WTP = ~$50/month • CAC = ~$500-$600 • LTV: $600 Miderprise Marty • Valued features: • Accuracy • Uptime • Least valued features • Price • Design • WTP = ~$150-200/month • CAC = ~$3000 • LTV: $1500 Customer development process #TFBerlin Brought to you by your friends at@PriceIntel
  56. 56. Q: Why is asking in ranges the most effective way to ask pricing questions? A: Ranged questions allow your to get the best answers from respondents, but also ensure you’re able to properly segment and measure elasticity. 1 2 3 WTP for a Churn Reduction Solution WTP $0 $1,250 $2,500 $3,750 $5,000 Size of Company (MRR) $0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+ #TFBerlin Brought to you by your friends at@PriceIntel
  57. 57. Q: Why is asking in ranges the most effective way to ask pricing questions? A: Ranged questions allow your to get the best answers from respondents, but also ensure you’re able to properly segment and measure elasticity. 1 2 3 WTP for a Rev Rec Solution WTP $0 $1,000 $2,000 $3,000 $4,000 Size of Company (MRR) $0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+ #TFBerlin Brought to you by your friends at@PriceIntel
  58. 58. Putting it all together. #TFBERLIN Brought to you by your friends at@PriceIntel
  59. 59. Q: How do you start to put this all together? A: This is where you earn your paycheck on making hedged decisions based on your research question. 1 2 3 Low CAC with constant value Creates the Requirement Path to Share of Wallet ProfitWell Financial metrics for the subscription economy 100% accurate SaaS metrics for free integrating 1-click with your billing system Central fulcrum to cust success, sales, finance, marketing e-team, and rest of stakeholders Allows interface to clearly point to problems and reinforce value of paid add-ons #TFBerlin Brought to you by your friends at@PriceIntel
  60. 60. Start small. You can always test more. #TFBERLIN Brought to you by your friends at@PriceIntel
  61. 61. 12 hours. #TFBERLIN Brought to you by your friends at@PriceIntel
  62. 62. 12 hours. $2,089. #TFBERLIN Brought to you by your friends at@PriceIntel
  63. 63. Implement a customer development process. #TFBERLIN Brought to you by your friends at@PriceIntel
  64. 64. patrick@priceintelligently.com #TFBERLIN Brought to you by your friends at@PriceIntel

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