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Hey everyone, I’m Patrick Campbell, Co-Founder and CEO of ProfitWell, the industry standard software for helping companies like Atlassian, Autodesk, Meetup, and Lyft with their monetization (through Price intelligently) and retention strategies. ProfitWell also provides a turnkey solution that powers the subscription financial metrics for over eight thousand subscription companies (it’s free and plugs right into your billing system). Prior to ProfitWell I led Strategic Initiatives for Boston based Gemvara and was an Economist at Google and the US Intelligence community.

I’m best for questions around:

1. SaaS Pricing (Price Intelligently)

2. SaaS Metrics/Unit Economics (ProfitWell)

3. Bootstrapping (We’re at 50 people now off $0 in funding and growing rapidly).

We think about SaaS pricing and metrics more than anyone else out there. That being said, love to talk about all the fun things about SaaS startup-land.

Don’t forget to connect with me on LinkedIn and Twitter. P.S. ProfitWell is hiring! Check out our openings here.

  • PH

    Pradyut Hande

    12 months ago #

    Hey Patrick,

    Great to have you here!

    Pricing models can often mean the difference between success and failure for SaaS businesses. Hitting upon what works best in this space and effectively communicating the same is paramount. In this regard, I have a few questions for you:

    1. Is it mandatory to always have a Pricing Page on a SaaS company's website? The industry findings are mixed - at best - on this.
    2. For a company looking to encourage free-sign ups to a freemium plan initially, especially in a price-sensitive market, how would you recommend gradually moving them to the enterprise plan? (this is with regards to the marketing automation platform SaaS space)
    3. Delinquent customers can be a major impediment to revenue growth. How does one go about boosting revenue recovery whilst preventing contract cancellations or churn?

    I look forward to hearing your thoughts on the same!

    Thanks!

    • PC

      Patrick Campbell

      12 months ago #

      Let's roooock. First question first around putting prices on your website:

      There are really only two reasons NOT to put your pricing on your website:

      1. When you're early with a product or company and really have no idea what you should be doing, so you're optimizing for higher touch, higher friction conversations for the people who want your product or offering so much that they're willing to get on the phone with you to figure it out. Ideally this is only the first few months of the product or business.

      2. When every single prospect that comes to you is so different that you're essentially falling into different products for each customer.

      A lot of think we're in category 2, but most of us actually aren't and just have anarchy on our sale teams with sales folks just randomly putting together different packages to try and get a deal over the line. Essentially, normally when I see pricing not on the website it's a sign that there's some laziness on the exec team for not understanding their customer and therefore not understanding their pricing.

      The reason it's problematic to not put your pricing up there is because people are doing their research more and more before actually speaking with you. Something like 60% of prospects that come to you are already through their main research phase (HubSpot data that needs to be checked, but it's very high). Because of this, if you don't have your pricing on there, you may end up losing out on that lead that basically wrote you off. Further, if you don't have your pricing up it's typically bad for your sales teams because they waste a bunch of their time dealing with not so great leads, as well.

      Even if you fall into category two above, we typically recommend putting some sort of anchor up on your pricing page - "start at $XXX", "From $XXXX", etc. This helps qualify the lead and at least give them something for the research process.

      There are exceptions to all of the above, of course. For instance, if all of your competitors aren't putting their pricing on the page, you can either just go with the pack and remain protected or win out by giving your prospects more context with more information on your pricing.

      Long story short, it does depend, but hopefully the above provides enough context. Here's also an article we wrote (bit old) on this concept: https://www.priceintelligently.com/blog/bid/180265/Why-Your-Secret-Pricing-Strategy-is-Overrated

      2 Share
    • PC

      Patrick Campbell

      12 months ago #

      Let's chat freemium! :)

      Your question: For a company looking to encourage free-sign ups to a freemium plan initially, especially in a price-sensitive market, how would you recommend gradually moving them to the enterprise plan? (this is with regards to the marketing automation platform SaaS space)

      I answered this a bit already in another question, but overall I think the main strategy here has to be understanding your buyer personas to a level that you know why and how they'll be interested in buying more/other features/other products.

      The best way to do this is by using a value metrics (per user, per 100 visits, etc.). This doesn't get you the benefit of forever free, but it does give you the ability to have a user go from $0 to $infinity depending on their size and usage of your product.

      You can learn a lot from the open source space, as well. Companies there have plenty of experience moving people from free to paid and the secret there is typically taking care of the context that you do have an enterprise plan. The biggest mistake we mzade with ProfitWell (currently fixing) is that people who are larger do devalue the product because it's free. It's something we fight daily, but we're going to be positioning ProfitWell a bit differently soon learning from the enterprise open source movements.

      Here's the freemium book we wrote again: https://www.profitwell.com/blog/freemium-manifesto

      Here's the pricing book we wrote with heavy chapters on value metrics and buyer personas for you to chase down those concepts, as well: https://www.priceintelligently.com/saas-pricing-strategy-ebook

      2 Share
    • PC

      Patrick Campbell

      12 months ago #

      Favorite question so fare: Delinquent customers can be a major impediment to revenue growth. How does one go about boosting revenue recovery whilst preventing contract cancellations or churn?

      Delinquencies are this lurking monster beneath your churn that everyone likes to think isn't a problem. In reality, 20-40% of your churn is typically from delinquencies - credit cards failing. You'd think it'd be lower, but credit cards are mechanical devices subject to failure, because they were developed decades ago and have billions of transactions per minute.

      We built a product - ProfitWell Retain - that handles these for you and has the best recover rate on the market. We have a bit of an advantage because we're sitting on the meta data from over 500M credit cards, but here's some things you can look at in your own business to recover these folks:

      1. Treat these customers as a marketing channel. Too many of your emails that follow up to these folks sound like bill collection emails, which come off spammy and also just problematic for a number of reasons. You need to reinforce the value proposition whilst also collecting the credit card information for these users.

      2. Pre-dunning emails are problematic. For most companies pre-dunning emails don't work, or rather they work, but they actually invite more voluntary churn than they solve. Use pre-dunning in-app messages more than anything before the point of failure, because processors will typically recover some of these for you anway.

      Lots of other lessons here from recovering our first $5M a while back: https://www.profitwell.com/blog/lessons-from-sending-millions-of-delinquent-churn-emails

      Here's an overview with some benchmarks, as well: https://www.profitwell.com/blog/involuntary-delinquent-churn-failed-payments-recovery

      1 Share
  • AB

    Alli Blum

    12 months ago #

    Hey Patrick, big fan of your work and benchmark reports.

    My (many) questions are about how you built your offerings for Price Intelligently.

    Today, you have two tightly scoped offerings on the Pricing Intelligently page (link for people following along: https://www.priceintelligently.com/plans-and-pricing)

    -How did you arrive at those particular packaged services?
    -Did they start off more general and become more specific? Or was it always the plan to have those two specific offerings?
    -What (if anything) made you realize that "now" would be the time to package your services that way?
    -One of the biggest benefits of hiring your firm is to "stop guessing"--how did you arrive at that positioning? Do your customers know that they're guessing? Or do they discover that they have been guessing only after they start talking with you?

    Thanks for dropping by, Patrick!

    • PC

      Patrick Campbell

      12 months ago #

      You want me to tell you all of our secrets?!?!?!

      So the shortish answer is that this was a 6 year process and that's the biggest thing when it comes to pricing is it has to be iterative. There's no way in hell you can do great with your pricing by just putting it out there and not adjusting over time.

      We fall into the "every customer is a little bit different, but 80% the same category" so our packaging was largely driven by the deep fissure between how people work with us. Most work with us on a continual basis to make monetization work for them, while some want to start off with a toe in the water around pricing, so we have the one time option.

      If I can remember correctly (we're all really good at post hoc rationalization), these started off much more general 5 years ago, because we didn't really know the best way to serve our customers and the best way to make sure they supported our business. These two specific offerings now are actually 20+ different offerings, because what we do for each specific customer depends on their needs, so for some we may focus on packaging and positioning. For others it's a focus on localization first. Essentially our sales team qualifies and then makes sure we can push things properly forward.

      In terms of why now - this really came down to a few things. When we worked with folks on a one time basis it wasn't great for our margins and it was terrible for our customers. We'd use our software and deliver data and then they wouldn't implement for a whole host of reasons, much of which were out of our control. So the partner path was really applied to make sure we put our customers in the best position for success. This is a good lesson in value metric/packaging, because a lot of times it's not going to be exactly how your customer wants it - most folks think pricing is a one time thing, which it isn't, so we need to break that cycle for them a bit.

      In terms of positioning, this is a bit tough - we found this mainly qualitatively - everyone guesses or near guesses when it comes to their pricing. They aren't doing much, so that mixed with a little bit of "shock value" really drove our current positioning. This is being actively tested and may change very soon, as well.

      Hopefully that's deep enough. Email me at pc@profitwell.com if you'd like to go deeper.

  • WB

    Wes Bush

    12 months ago #

    Hey Patrick! :)

    Thanks for doing this AMA. I'd love to know more about what metrics each of your teams are responsible for. For example, is the marketing team responsible for just the visitor-signup rate and the sales / support team responsible for the signup-PQL rate? Would love to know how you break it down and where teams collaborate on improving a specific outcome.

    • PC

      Patrick Campbell

      12 months ago #

      What up Wes. One day we will be more than internet friends. :)

      Outcome based marketing teams are the future imho - at least that's what we're experimenting with here at ProfitWell (formerly Price Intelligently). What this means (and I think we're going to publish more on this later) is that we have four main teams that attack each part of the funnel - leads, demos, sales, CX. These teams have a quality metric and a quantity metric and then mitosis down into many other teams, so our zero to lead team has content, demand gen, community, etc. and so on and so forth.

      The quality/quantity metrics are the important innovation here, because it allows you to basically track predicted/actual on a weekly basis and the team is all driving towards where they should be.

      I know that's not super in-depth, but this worked so well for us so far that I don't want to go too wide yet until we nail it and can teach folks. Email me for the deeper preso if you'd like. :)

      2 Share
      • WB

        Wes Bush

        12 months ago #

        Haha, yes! One day we'll meet IRL! ;)

        I love the focus on having a quality metric in place for each team.

        Generating leads doesn't mean much if it doesn't turn to sales.

        For outcome-based marketing teams, would you be able to expand on that? How would it be different than traditional marketing teams, @patticus ?

  • CT

    car trans

    12 months ago #

    Hey Patrick,

    I wanted to know about bootstrapping pricing based on the number of users that can utilise it.

    Thanks for spending your valuable time with us.

    • PC

      Patrick Campbell

      12 months ago #

      Great question - typically per user pricing is pretty terrible, because it's a relic of the perpetual license age of selling products. In actuality, your value metric should more closely align with where the customer is getting value.

      Most of the time per user isn't where the customer is getting value and a good litmus test for this is if a user can login and get the same experience as another user logged in, then per user isn't the best. On the other hand, CRMs, Help deskds, chat products, etc where the user has a different experience than another logged in user are typically really good candidates for per user pricing.

      As such, and long story short, I'd take a look at the chapter on value metrics in here: https://www.priceintelligently.com/saas-pricing-strategy-ebook and make sure you're understanding where your product is actually providing value.

      For a bit more of an expose on per user pricing, check this out: https://www.priceintelligently.com/blog/bid/198499/stop-per-user-saas-pricing-you-re-killing-growth

  • DS

    Dan Smith

    12 months ago #

    Hi Patrick

    Curious your thoughts on the cryptocurrency industry and pricing? Any background or experience in that? For context, our startup is looking to build a consumer application for data feeds using Lightning Network as payment and execution for delivery of data. This opens up a world of micro-transactions otherwise not available previously. Traditional API models are fairly well-known. Was just curious if you had any insights to share or offer around APIs and crypto. Love all the content you put out. Thanks. - Dan

    • PC

      Patrick Campbell

      12 months ago #

      Hey Dan - I'm fascinated by crypto, but I'm definitely not the person to answer your question, because I just am not versed enough in the industry to give credible context.

      I will say that the beauty of technology (and micro-transactions) is we now live in a world or are close to one where we can properly price for actual value, meaning we can have the "Black Mirror" future where you only pay for each dab of toothpaste or for actual usage of what you find valuable.

      Crypto/blockchain open up the ability to do that even further, especially in the world of APIs. As such, I'd just keep the fundamental sound when it comes to pricing - your price is the exchange rate on the value you're providing and therefore needs to be reflective of that value. The technology will eventually fade in the face of measuring that value, which is great for bringing producers/consumers into a healthy equilibrium.

  • ES

    Emil Shour

    12 months ago #

    Hey Patrick, thanks for doing an AMA here!

    Which SaaS metric do you see a lot of companies overvalue? How about undervalue?

    Why have you guys decided to remain bootstrapped instead of taking on funding?

    • PC

      Patrick Campbell

      12 months ago #

      Oh great questions. Let's take the overvalue/undervalue one first.

      Overvalue - conversion rate/volume/acquisition based growth. Before you get the pitchforks ready, here me out. Acquisition is becoming table stakes - you need to be good at growth just to survive. Every data cut we look at indicates this, so the hypergrowth all of us want is going to come from making sure our retention is in check and ultimately making sure we get our monetization model in gear. We see this repeatedly when it comes to businesses that just throw all their cash at acquisition only to see it go out the backdoor because of poor retention. All of these are crucial, but the amount of time and money you spend on your acquisition is not even comparable to the amount you spend on your pricing/retention. You don't need to flip the scales, but even taking 10% of your acquisition time and focusing it on retention/monetization will breed very high outcomes.

      Another thing to think about here is that the subscription model means the relationship is baked right into the revenue model. Why in the world would you spend all of your time just at the first part of the relationship?

      Undervalue - ARPU. I think too many companies just keep ARPU static, which means you're basically not taking advantage of the most effective lever in your growth toolkit - your pricing. Your ARPU should be going up every quarter and to do that you need a better packaging mix, need to be looking at your pricing, or adjusting your mix of customers in the context of a value metric.

    • PC

      Patrick Campbell

      12 months ago #

      Why have you guys decided to remain bootstrapped instead of taking on funding?

      So for those who don't know, we're 50+ people in Boston and haven't raised any funding. We don't have a chip on our shoulder about it like some companies (eg. "Screw VCs"), but we're pretty proud of what we've done.

      We remained bootstrapped because we never had a point where money was the problem. We were fortunate enough to have decent ARPU and LTV and also fortunate enough to make sure we could properly scale and solve our problems without cash.

      Funding is a tool, a very poweful tool if deployed correctly, and this just wasn't the biggest lever for us to pull yet. I say "yet", because I think there will be a time where that's a big level for us to pull. For instance, we just last week got marketing leadership on board. When that team gets to a point where it need X amount of dollars for the next echelon of growth (mixed with Y amount of dollars for team across the board), then it probably makes sense to raise cash.

      Personally, I don't know if I want to raise cash, because I/we really like our optionality with the business. We're at a point where if we want to keep growing moderately and just sit on our hands and make a ton of cash we could raise everyone's salaries substantially tomorrow and just chill. We have bigger aspirations though. If we can do that without raising cash, great, but the likelihood that the obvious answer to an opportunity in the future isn't raising cash somehow is pretty low, especially since we have some big, capital intensive dreams around how to grow ProfitWell.

      Hope that's helpful. Always happy to go deeper here to help other companies with the funding predicament.

      2 Share
  • JP

    Jane Portman

    12 months ago #

    Hey Patrick, thanks for all your wisdom! So we run Userlist.io — an email automation tool for SaaS companies. Our plans are based on the number of users tracked in the system (see https://userlist.io/pricing) — a pretty traditional model.

    However, some businesses have a large number of "second-level" users. E.g. our customer's app targets doctors, but each doctor has multiple patients. Or each teacher has multiple students. These patients/students also need to receive automated messages, but way less than the core users. They might also be somewhat temporary (with fast turnover).

    The question is, how do we charge for such second-level users? If we calculate them as normal users, our pricing grid quickly becomes unreasonable.

    • PC

      Patrick Campbell

      12 months ago #

      Jane I owe you so many emails at this point. Forgive me. :(

      This is a really great question. The agile/project management space struggles with this a lot.

      The answer is typically not perfect, but involves one of the following:

      1. Give these second order users away for free. This "unlimited" model works pretty well if these second level users are more "lurkers" or passive users of the product.

      2. Make these a separate value metric, meaning doctors in your case are a different class of user than the patients and you get so many doctors and so many patients for each plan.

      The problem you're running into is that these aren't "users" per se, they're more passive users of the product, meaning a customer/patient isn't necessarily opting in like a manager would be signing in to review some sort of project management plan.

      As such and given the little context around Userlist, I think the instinct is to actually maybe flip your value metric - unlimited users and then charge based on emails. There are arguments against this (and I'm sure you've had those internally :)), but that's where the actual value is, and typically when you're dealing with folks like teachers and dentists/doctors, they actually are more apt for this type of pricing because it feels "fair" and they don't really value "unlimited" because they know they are never going to need unlimited.

      Hopefully that makes sense. Email me (I know, I know) if you want to go deeper. I definitely owe you a response on multiple levels. :)

      • JP

        Jane Portman

        12 months ago #

        Thank you so much for this detailed answer, Patrick! You don't really owe us anything, everyone can get busy. Meanwhile, have been enjoying your consistent flow of top-notch content!

        Your advice on this "users" situation is hugely helpful (and also nice that it aligns with our own thoughts). Hard to predict the balance of sending costs and tracking costs for each user, but I'm sure we'll figure something out and adjust with time :)

  • AA

    Anuj Adhiya

    12 months ago #

    Hey Patrick - super to have you on (again!).

    A couple of questions for you:

    a. What are the biggest exceptions to any of the pricing "rules" in your book and under what circumstances should they be considered

    b. How do you measure the impact/success of "Protect the Hustle"?

    • PC

      Patrick Campbell

      12 months ago #

      What are the biggest exceptions to any of the pricing "rules" in your book and under what circumstances should they be considered

      Great question, but super broad. :)

      The biggest concept to keep in mind when it comes to pricing is that you have to realize it's a process that requires a framework like every other aspect of your business. As such, most of the rules we write about are likely applicable to 80% of the companies out there, but we all think we're in the 20% for a whole host of reasons. Ideally this means you need to make sure you're following the framework we teach (or one you come up with) in order to make sure you are in the 20% or follow the 80% we've found to be true.

      Here are a few exceptions we've found though:

      1. Per user pricing is typically not great for your business, but if a user logs in and has a different experience than another user, then you probably can and maybe should use per user pricing.

      2. Localization - If you don't have 10-15% of your user base outside of your home region, you shouldn't waste your time with localization until that's true

      3. Early stage - If you're in the early stages, you should really only care about your value metric and getting that right than anything else

    • PC

      Patrick Campbell

      12 months ago #

      How do you measure the impact/success of "Protect the Hustle"?

      Awesome question. For those of you who don't know, Protect the Hustle is our new podcast. In terms of success, we have a few metrics:

      1. Brand lift, as measured through qualitative indicators, brand search, etc.

      2. Attribution on any level for customers

      Frankly, when it comes to a new show, we've done so much research on it, we typically "let it breathe" for a few months before even looking at it and asking if it's a success or failure. We then look at it from a bunch of angles, including those above, and basically make a judgement call.

      A good example is our show Pricing Page Teardown - it doesn't have the reach/audience as our other show ProfitWell Report, but it's been more revenue generating for us, which we found via measuring engagement and attribution.

      Super tough, because I wish there was a god metric (as we all do), but the cycle is more helpful for us in terms of success.

  • RS

    Rajandeep Singh

    12 months ago #

    Hi Patrick,

    Great to have you here.

    I wanted to know your opinion on multi-tiered pricing based on number of users especially when done with a big organisation.

    When company doesn't know the total number of users upfront. Is Price reducing after a certain number of users are reached a viable option nowadays?
    For ex if 40 users price is 20$ per user, if 100 users 41-100 th user pays 15 and if more than 100 users they pay 10$ per user from 101th onwards.
    Does it confuse more, especially the purchase deptt or finance deptt.?

    Or should it be based on number of users like if 40 users 20$ or 70 users 17$per user and 100 users 15$ per users. With transitions from one slab to other being managed by negotiation(Mostly going down)?

    Thanks for spending time with us.
    Cheers.

    • PC

      Patrick Campbell

      12 months ago #

      Great question. I think like a lot of things, it depends. :)

      Here's what I'd think about though - depending on your product, the price does not have to go down with volume. A whole host of products are actually perfectly ok to the buyer to either keep their per user price or to actually go up in price with more users.

      Typically the category you fall into is dependent on the sales model. When I go buy slack, I'm buying on an incremental basis. With each new seat, there's more value and when I get over a certain number of seats I'll want to upgrade everyone. The incremental nature of the sale allows you to make sure there isn't a ton of negotiation and the value is just evident as you add more folks.

      If I'm selling every person in a company a license all at once, then the finance or procurement person will typically want a discount, because they're looking at the invoice total value.

      Ultimately this all comes down to your customer viewpoint and the sales model therein, so I"d spend some time studying that sales process and then backing into the model that works best for you for your pricing strategy.

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