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Mastering SaaS Pricing - SaaStr Annual 2018
1) The document discusses common pricing mistakes made by SaaS companies, including being too cheap, using the wrong value metric, making purchases difficult, having a broken upsell path, and having static pricing. 2) It provides examples of companies like StatusPage and Salesforce that successfully evolved their pricing over time to increase revenue and better align with customer value. 3) The key takeaways are that pricing is important but often overlooked; the right value metric helps differentiate and increase sales; usage-based pricing and feature packaging can reduce churn; and pricing should be regularly tested and iterated as the company and products evolve.
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Mastering SaaS Pricing - SaaStr Annual 2018
- 1. Blake Bartlett andKyle Poyar SaaStr Annual 2018 Mastering SaaS Pricing Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved. OPENVIEW
- 2. Do you suckat pricing?
- 3. The only differencebetween companies that succeed and fail is that the winners figured out how to make money. The winners thought deeply through the revenue, price, and business model.“ Steve Ballmer CEO, Microsoft 2000 - 2014 “This thing called ‘price’ is really, really important.
- 4. We think deeplyabout pricing
- 5. Where are youin your journey? Early Expansion Growth Maturity
- 6. Founders who struggleto raise capital are… 3x More likely to say they monetized too late 2x More likely to say they picked the wrong business model 40% More likely to say their burn rate was too high Pricing can make or break your business Source: First Round Capital 2017 State of Startups
- 7. 88 Top 5 pricing mistakes 1. You’re too cheap 2. You picked the wrong value metric 3. You make it hard to buy 4. Your upsell path is broken 5. Your pricing is static
- 8.
- 10. ’13 ’14 ’15‘16 $400 $300 $200 $100 $0 Starter Plan Growth Plan StatusPage Pricing Evolution, 2013 - 2016 Source: Wayback Machine; “3 Steps to Increasing Our Average Revenue Per User by 2.4X” (Nov 27, 2015)
- 11. ’13 ’14 ’15‘16 $400 $300 $200 $100 $0 Starter Plan Growth Plan Corporate plan StatusPage Pricing Evolution, 2013 - 2016 Source: Wayback Machine; “3 Steps to Increasing Our Average Revenue Per User by 2.4X” (Nov 27, 2015)
- 12. ’13 ’14 ’15‘16 $1,500 $400 $300 $200 $100 $0 Starter Plan Growth Plan Corporate plan Enterprise plan StatusPage Pricing Evolution, 2013 - 2016 Source: Wayback Machine; “3 Steps to Increasing Our Average Revenue Per User by 2.4X” (Nov 27, 2015)
- 13. ’13 ’14 ’15‘16 $1,500 $400 $300 $200 $100 $0 Starter Plan Growth Plan Corporate plan Enterprise plan • Raised highest price point 30x • Grew ARPU by 2.4x • Minimal impact to conversion • Hit $2.5M ARR in 2 years • Acquired by Atlassian StatusPage Pricing Evolution, 2013 - 2016 Source: Wayback Machine; “3 Steps to Increasing Our Average Revenue Per User by 2.4X” (Nov 27, 2015)
- 14. Profit Impact ofDifferent Growth Levers 3.3% 6.7% 12.7% Customer Acquisition Retention Pricing & Packaging Pricing is a Powerful Growth Lever Source: Price Intelligently study of 512 SaaS companies 4x More Powerful
- 15. 2 You picked the wrongvalue metric.
- 16. 32% 30% 54% 39% 41% 24% 6% 11% 3% 23% 19% 18% 0% 10% 20%30% 40% 50% 60% 70% 80% 90% 100% Infrastructure Vertical app Horizontal app User or seat-based Usage-based Total employees Other Source: openview.vc/saas-benchmarks-2017 Are seats the right metric for you?
- 17. The right valuemetric can help you differentiate against competitors and generate more revenue
- 19. Expensify differentiates with’active user’ pricing
- 21. VTS: new valuemetric increased revenue Before – Per Building After – Per Square Foot Problem One-size-fits-all left money on the table Solution Price aligned with customer value
- 22. 3 You make it hardto buy.
- 23. 15 Months 10 Months 7Months Slow (<30%) Moderate (30-99%) FAST (>100%) Self-reported CAC payback (Months) Source: openview.vc/saas-benchmarks-2017 Fastest growers seamlessly land new customers
- 25.
- 26. Clearly states their valueproposition
- 27. Different messaging for teamsvs. enterprise
- 28. Leverages psychology by highlighting theprice when paid annually
- 29. Crystal clear about benefits, notjust features
- 30.
- 32. 0 50 100 150 200 Subscription PAYG Jan-14 Jan-15 Jan-16Jan-17 Sell to your customers the way they want to buy
- 33. 4 Your upsell pathis broken.
- 34. 82% 84% 89%90% 97% 109% Slow (<30%) Moderate (30-99%) FAST (>100%) Avg logo retentionAvg net $ retention AnnualRetention Source: openview.vc/saas-benchmarks-2017 Fastest growers see net negative churn
- 36. Value metric &expansion: usage > seats 123% net retention
- 38. Packaging: use featuresto drive expansion Good
- 39. Packaging: use featuresto drive expansion Good Better
- 40. Packaging: use featuresto drive expansion Good Better Best
- 41.
- 42. Pricing should evolveas your company evolves
- 44. Salesforce pricing evolution,1999 - 2017 ’99 ’01 ’03 ’05 ’07 ’09 ’11 ’13 ’15 ’17 $300 $250 $200 $150 $100 $50 $0 Source: Wayback Machine; Salesforce.com; Salesforce press interviews *Price per user per month Pro
- 45. Salesforce pricing evolution,1999 - 2017 ’99 ’01 ’03 ’05 ’07 ’09 ’11 ’13 ’15 ’17 $300 $250 $200 $150 $100 $50 $0 Pro Enterprise Unlimited Source: Wayback Machine; Salesforce.com; Salesforce press interviews *Price per user per month
- 46. Salesforce pricing evolution,1999 - 2017 ’99 ’01 ’03 ’05 ’07 ’09 ’11 ’13 ’15 ’17 $300 $250 $200 $150 $100 $50 $0 • Top price point increased by 6x • Enterprise is now the most popular plan • Additional revenue from add-on features Source: Wayback Machine; Salesforce.com; Salesforce press interviews *Price per user per month Pro Enterprise Unlimited
- 47. The single mostvaluable lesson I’ve learned is that you have to be ready to constantly iterate on both your pricing and packaging. Successful companies are those that think of pricing in the same way they think about product development – their pricing is in a constant state of evolution. Monika Saha General Manager, Finance Product Line Zuora It’s never 100% done.
- 48.
- 49. Pricing & packagingis super important.
- 50. But most peopledon’t take it seriously No, 45% Yes, cursory research, 48% Yes, in-depth research, 8% No, 64%Yes, 1 round, 15% Yes, 2+ rounds, 22% Have you done pricing research? Have you done price testing? Source: openview.vc/saas-pricing-study
- 51. The price isnot material enough to be a factor in the decision. It is not even a blip on the radar. “ ”
- 52.
- 53.
- 54. Who should own pricing? Greatfor positioning and messaging Already own TOFU & website Best grasp of product and roadmap Already doing customer development May overly focus on features vs. value Analytical and data-driven Best handle on costs and profit Tend to take a cost plus vs. value-based approach Closest to the customer Constantly hearing about needs and pain points May be too close – want too many options Best grasp of the data Great at processes and technology Less customer-focused Marketing Product Finance Sales Operations
- 55. SaaS Pricing Takeaways 1. Don’t be too cheap 2. The right value metric helps you differentiate & sell more 3. Sell to customers the way they want to buy 4. Usage-based pricing & feature packaging drives net negative churn 5. Experiment and iterate on pricing
- 56.
- 57. See this deck:openview.vc/saastr-2018 Blake Bartlett | blake@ov.vc Kyle Poyar | kyle@ov.vc Thank You! Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved.