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A Tale of Two Pricing Journeys: Evolving to Usage Models
The document discusses the transition of pricing strategies towards usage-based models in SaaS, highlighting the changing landscape where customer influence and buying processes have evolved. It emphasizes the importance of understanding the customer journey and the value of strategic pricing in competitive markets. Additionally, it addresses common pricing misconceptions and explores different freemium models suitable for various business growth scenarios.
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A Tale of Two Pricing Journeys: Evolving to Usage Models
- 1. A Tale ofTwo Pricing Journeys Evolving to Usage-Based Models Todd Krautkremer VP Marketing Joe Hamlet Senior Manager, Business Systems @tkrautkremer @jhamlet
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- 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. #Subscribed14 @tkrautkremer About Pertino– Current Pricing
- 5. #Subscribed14 @tkrautkremer Changing BuyerLandscape 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. #Subscribed14 @tkrautkremer What DoesIt 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. #Subscribed14 @tkrautkremer Which Free-miumis 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. #Subscribed14 @tkrautkremer Common PricingMisconceptions 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. How Do YouDetermine Pricing? Slide 9 == + = + Relational Value Analysis (+/= indicates perceived value of Pertino from Spiceworks Community)
- 10. #Subscribed14 @tkrautkremer How DoYou Determine Pricing? Local Maxima Consumer Surplus Demand Curve Demand Curve mapped to profit Bronze Silver Gold Demand Curve Analysis
- 11. #Subscribed14 @tkrautkremer Evolving ToUsage 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. #Subscribed14 @tkrautkremer Pricing InContext of SaaS Metrics LTV > 3X CAC CAC back < 12 mo.
- 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. #Subscribed14 @tkrautkremer Summary • Pricingas 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. #Subscribed14 @jhamlet Joe Hamlet SeniorManager, Business Systems
- 16. #Subscribed14 A Snapshot ofSendGrid 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. of the world’swanted email does not reach the inbox 20%
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- 20. #Subscribed14 Make it Simple,Make it Scale
- 21. #Subscribed14 Package Changes Mid-month packagechanges Risk of revenue loss Operational overhead
- 22. #Subscribed14 Package Changes Solution Load usagedaily Queuing
- 23. #Subscribed14 Usage Volatility Overage basedpricing Revenue volatility Decreased predictability
- 24. #Subscribed14 Solution Reduce usage basedpricing model Volume based packages choices Tiered + Recurring usage model Usage Volatility
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- 26. #Subscribed14 Q&A Todd Krautkremer VP Marketing JoeHamlet Senior Manager, Business Systems @tkrautkremer @jhamlet
Editor's Notes
- #2 Session: Innovative Pricing and Packaging Strategies Tuesday, June 3 - 11:15 to 12:30 Format: Presentation and Panel Opening presentation by Matt Johnson, Managing Partner, Simon-Kucher Moderator: Joe Andrews, Sr. Director, Marketing, Zuora Carecloud - Joe Sawyer ,VP Marketing Fuzebox - Eran Shtiegman, VP Products Axciom - Andrew Landrum, Director of Finance Topics/Agenda: There are a number of pricing models to choose from in the Subscription Economy. The key is to know where to start and how to test and iterate over time. Learn how to use pricing and packaging as a strategic weapon to increase customer acquisition and value per customer as well as reduce churn.
- #3 1 speaker
- #18 According to McKinnsey & Co, email is 40 times more effective than Facebook and Twitter combined as a way to acquire new customers. Application-generated transactional emails including social alerts, promotions, receipts and password resets - fuel customer engagement and drive sales IF they make it to the inbox. Lost emails means lost customers and revenue. Users get frustrated when they cant reset their passwords leading to poor customer service Emails are the transactional records for order history, billing (uber) Email is a powerful retention tool for marketers (pinterest) Email drive sales through daily deal notifications
- #19 We deliver value through: Best in class delivery– “whitehat sender” Incredibly Scalable Architecture World Class Support (24/7) Reliability - high up-time, cloud services Actionable, real-time Analytics Ease of use – integrate in min, not weeks
- #20 Freemium Most Customers Self-Purchase Usage based on email volume Lots of volume – 13B/m Month to Month – no contracts Simple pricing (MRR + Overage)
- #21 Freemium model Monthly subscriptions based on email usage Simple product and pricing Self-service sign-up, purchases, upgrades, downgrades Scalability & Predictability
- #22 Charge for upgrade immediately (bill run / rate usage) Load usage after upgrade for prior day Potential Revenue Loss Manual billing work (invoice adjustments) Added overhead to monthly bill runs
- #23 Charge for upgrade immediately (bill run / rate usage) Load usage after upgrade for prior day Potential Revenue Loss Manual billing work (invoice adjustments) Added overhead to monthly bill runs
- #24 Volatility in revenue Unpredictability in Revenue Customer satisfaction – customers can’t predict their costs, like to have known variable
- #25 Created more high volume packages to reduce package tier stepping – smooth out Removed (restricted use) features that were purely volume based pricing / changed to recurring revenue Smooth out tiers
- #26 Tiered usage + MRR: High volume options – fixed MRR with tiered usage rates (decrease volatility) Usage Types: Newsletter vs. infrastructure API calls Application X action (load tests, etc.) List Sizes Package options: Al a cart – addons and partner apps (app store) Usage Loading: Load multiple times a day Ability to rate hourly to reduce risk