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Matching Price to Value: 3 Lessons in Monetization from Menlo Ventures

SaaS is about creating long-term value for your customer, and being compensated appropriately for that value as a business. Learn actionable monetization tips from a Product/Growth operator turned VC.

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Matching Price to Value: 3 Lessons in Monetization from Menlo Ventures

  1. 1. Professional Background 201 1 2002 2006 2018+ 2013+ naomi@menlovc.com @npilosof Started growth function at Evernote & Invoice2go • Evernote: 10M to 100M users • Invoice2go: Top-grossing business app worldwide Began career in engineering New product development Partner at Menlo Ventures focused on SaaS & consumer Advising on product growth/monetization with companies + communities (Reforge) Naomi Pilosof Ionita
  2. 2. SaaS is a long-term value exchange between you and your customers... ...it’s about creating value for them, and being compensated appropriately for that value
  3. 3. 3.32% 6.71% 12.70% 0% 2% 4% 6% 8% 10% 12% 14% Acquisition Retention Monetization Source: Price Intelligently; n= data from 512 SaaS companies Monetization is 4x More Efficient than Acquisition Impact on Bottom Line by Improving Each Lever by 1%
  4. 4. Goal = >130% revenue retention
  5. 5. How did you decide on your pricing ?
  6. 6. “ Honestly, it was pretty arbitrary. We just picked something. ”
  7. 7. “ We made it artificially low; we didn’t want price to get in the way of people using it. ”
  8. 8. “ We wanted to position ourselves as Premium. One prospective customer told us: ‘ You’re the Apple of your category. I need to save budget to afford you ’ — and that was fine by us! ”
  9. 9. Know Who You’re Building for Lesson 1 : Segment Users by Needs and Willingness-to-Pay
  10. 10. : Customer Segmentation Lowest WTP Value speed Value extra space Highest WTP Uber Pool Uber X Uber XL / SUV Uber Select / Black “ I need to get from A to B ”
  11. 11. Value does not automatically translate to Perceived Value
  12. 12. Feature Shock
  13. 13. Who are your customers ? Why do they pay you ? How much are they willing to pay you ?
  14. 14. Establish a Pricing Process Assign an owner ● Product Growth (SMB/Self-serve) ● Sales (Mid-Market/Ent) Talk to customers ● Internal feedback loops ● Survey methods: - Conjoint Analysis - Gabor-Granger - van Westendorp Be willing to experiment ● Don’t be afraid to raise prices ● Isolating by geo can help ● This work is never done
  15. 15. More Effective Survey Questions Distribute 100 points across the features below. Rate features “must have”, “nice to have”, or “not necessary”. Which features would you include in an ideal package? What annual price would you consider acceptable? What price would you consider expensive, but still willing to pay? Below is a list of features – check off the ones you want. [No conversation about price] ValueWTP
  16. 16. Lesson 2 : Align Pricing & Packaging with Building Accretive Value
  17. 17. : Rebalancing Pricing & Packaging Increased upgrade rate by 108% While increasing upgrade price by 33% Without impacting customer sentiment
  18. 18. • Increase prices / use a smart natural escalator • Rebalance sticks & carrots • Upsell / cross-sell users to higher-priced plans / additional products How ?
  19. 19. You’re Probably Underpriced : “ It’s $20… I mean, $200 per month ”
  20. 20. Upgrade Levers : Sticks & Carrots New features unlocked with upgrade Quota limit forces upgrade
  21. 21. Contextual upsells are effective – user is in high-intent state and no additional education required Sticks are Your Value Metrics
  22. 22. # Admin Seats # Equity Grants Disincentivizes usage # Shareholders Revenue scales with value Cap Table Management Revenue doesn’t scale with value : Picking the Right Value Metric
  23. 23. SMB Mid-Market Enterprise Public Formations Financings Liquidity: Tenders, Secondaries HR & Payroll Integrations Board Management: Resolutions, Docs $ As customers grow, they derive more value from Carta $$$$ Support for International Employees : Picking the Right Premium Features
  24. 24. : Rapid Revenue Growth 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 8 9 10 11 12 13 $inARR(Millions) Years *Year 1 is from time Carta began selling recurring software. Source: Bessemer Venture Partners
  25. 25. : Healthy Revenue Retention 100 90 80 70 60 50 40 30 20 10 1 2 3 4 5 6 7 8 9 10 11 12 13 $inARR(Millions) Years Goal Achieved Year 1 revenue retention: 125% Year 2 revenue retention: 140+% *Year 1 is from time Carta started selling recurring software. Source: Bessemer Venture Partners
  26. 26. Lesson 3 : Personalize Monetization with Predictive Data
  27. 27. Very High High Low Very Low Predictive Analytics – Customer Propensity to Renew Input Variables Most Predictive Propensity Segments
  28. 28. Targeted upgrades for high propensity Renewal experience for very low propensity : Personalized Experiences by Segment • Reinforce value of core features • Build awareness of premium features • Offer targeted promotions/discounts
  29. 29. Create predictive audiences — past actions inform who is likely to perform a future action Target personalized messaging & dynamic offers based on propensity to convert, upgrade, or renew : AI-Driven Marketing
  30. 30. : Upgrade Campaigns with ClearBrain Facebook : Retargeted free users with high propensity to upgrade: Conversion up from 4% to 10% Braze : Displayed popup for users with high propensity to upgrade 10% lift in upgrade CTA
  31. 31. SMB Self-Service Product Team : - Drives self-service revenue - Targets businesses < 250 employees : Data-Informed Hand-Offs Sales Team : - Upsell leads into higher ACV customers Mid-market / Enterprise Qualified leads based on data
  32. 32. Wrap-Up 2. Align Pricing & Packaging with Building Accretive Value 3. Personalize Monetization with Predictive Data 1. Know Who You’re Building for — Segment Users by Needs and Willingness-to-Pay
  33. 33. THANK YOU… …NOW GO MAKE MORE MONEY :)

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  • GauravSood7

    Feb. 17, 2019

SaaS is about creating long-term value for your customer, and being compensated appropriately for that value as a business. Learn actionable monetization tips from a Product/Growth operator turned VC.

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