Subscribed Podcast: Patrick Campbell on SaaS Pricing

Subscribed Podcast: Patrick Campbell on SaaS Pricing

Select Excerpts from Subscribed Podcast with Patrick Campbell

Patrick Campbell is the CEO of ProfitWell (formerly Price Intelligently), the software for helping subscription companies with their monetization and retention strategies. ProfitWell also provides free turnkey subscription financial metrics for over eight thousand companies. Prior to ProfitWell, Patrick lead Strategic Initiatives for Boston based Gemvara and was an Economist at Google and the US Intelligence community.

Select Excerpts:

If you had to distill it down, what’s your top one or two pricing advice in terms of what should you absolutely do and what should you absolutely avoid? 
I’m going to give you one that’s a little bit more ambiguous but really important and one that’s super tactical. The first part is what not to do – placing pricing on a pedestal like it’s something apart from the natural business and kind of a “customer and marketing development” process. You have to treat it as an incremental piece of growth, and an incremental piece of your process. Your price is the exchange rate on the value that you’re providing. If you’re providing the right amount of value, that’s the price you’re going to be able to demand and pricing basically becomes measuring that value.

The tactical piece is using what’s called a value metric. It doesn’t matter if you’re a startup, a scale up, or a public company. When you’re dealing with subscriptions, you need to have a value metric and that’s what you charge for. It could be per user, per hundred visits, per thousand whatever, per dollar…however you’re actually going to be pricing. The reason it’s so crucial is that even if you get the number wrong and you’re charging the customer wrong, the packaging is wrong, etc…even if you get all these other things incorrect, the value metric will save you. If you get that right, you’re essentially making sure that you have expansion revenue baked into your pricing model and ultimately as your customers grow and use more of the product, they’re going to pay you more. In the worst case scenario, they’re paying you less than they should but at least they’re expanding that revenue and saving you overtime.

Can you take us through the thought process around why companies should be investing in their monetization or pricing strategy rather than just hiring a bunch of new salespeople or spending marketing dollars?
I think it really starts with the DNA of most SAAS and subscription companies right now. If you’re a high growth company or even a startup, a lot of what you’re doing is acquisition. It’s a logical mindset – I need to acquire more customers and that’s the only way I’m going to make more money. The issue is that five to ten years ago that was actually a really good strategy because there wasn’t a lot of competition out there for most of our products. It wasn’t easy but it was certainly a lot easier then.

That acquisition growth is starting to trend towards being “dollar in, dollar out” or to put it another way, you need to be good at acquisition just to survive. And most of us, we don’t want to just survive. We want to grow. You have to have really, really good growth and acquisition, really good sales teams, and really good marketing teams.

But in order to kind of get these gains on growth, now you have to look at these other two levers and interestingly enough, while the impact of acquisitions has gone down, the impact of monetization and retention have gone up. There’s so much noise out there that all of a sudden if I can keep a customer around even three months longer on average, then before I’m getting so much more gain because I’m basically not gaining any cash by bringing on additional customers.

We really need to practice these other growth levers, particularly pricing. The issue is is that most product or marketing leaders have never done pricing before. Fortunately, it’s a process. It’s not terribly difficult, but it’s one of those things that is definitely new to a lot of people.

Which are a few of your favorite SaaS pricing pages and what makes a good one?

From a functional standpoint, I think the best pricing pages out there are typically the ones that align to a persona I.e. when you’re that particular person that comes to a particular pricing page, it’s easy for you to make a decision. That alignment is really important.

To give you some really good examples that I think everyone can learn from, one of my favorite on the B2C or the D2C side of the world is BarkBox. What I really love about their pricing page is that they have it simple upfront. That’s really important to the consumer, Just keep it really simple to get someone through the door. But as you step through not only the checkout process but that first, second month, third month, etc., they have these little steps of upgrading. It really displays the point that having a simple design and user experience and having some complexity that gives you better revenue from a pricing perspective aren’t mutually exclusive concepts. On the B2B side, there are a lot of really good examples. I’m a big fan of Bitbucket from Atlassian because it’s a pricing page that has a lot of different options, but the options all funnel into basically the same flow. And very similar to the Bark Box example, they essentially allow you to upgrade over time.

For more on all things subscriptions, check out previous episodes of the Subscribed Podcast here

Subscribe in iTunes | Favorite us on Stitcher

Recommended for you

Key features and capabilities to look for in revenue automation software
How revenue automation can support your business initiatives
Why you need to incorporate AI into your payment fraud protection