Mastering SaaS Pricing - OpenView€¦ · SaaS Pricing Takeaways 1. Don’t be too cheap 2. The...

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Blake Bartlett and Kyle Poyar SaaStr Annual 2018 Mastering SaaS Pricing Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved. OPENVIEW

Transcript of Mastering SaaS Pricing - OpenView€¦ · SaaS Pricing Takeaways 1. Don’t be too cheap 2. The...

Page 1: Mastering SaaS Pricing - OpenView€¦ · 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

Blake Bartlett and Kyle Poyar

SaaStr Annual 2018

Mastering SaaS Pricing

Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved. OPENVIEW

Page 2: Mastering SaaS Pricing - OpenView€¦ · 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

Do you suck at pricing?

Page 3: Mastering SaaS Pricing - OpenView€¦ · 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

The only difference between 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.

Page 4: Mastering SaaS Pricing - OpenView€¦ · 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

We think deeply about pricing

Page 5: Mastering SaaS Pricing - OpenView€¦ · 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

Where are you in your journey?

Early

Expansion

Growth

Maturity

Page 6: Mastering SaaS Pricing - OpenView€¦ · 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

Founders who struggle to 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

Page 7: Mastering SaaS Pricing - OpenView€¦ · 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

8 8

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

Page 8: Mastering SaaS Pricing - OpenView€¦ · 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

You’re too cheap.

1

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Page 10: Mastering SaaS Pricing - OpenView€¦ · 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

’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)

Page 11: Mastering SaaS Pricing - OpenView€¦ · 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

’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)

Page 12: Mastering SaaS Pricing - OpenView€¦ · 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

’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)

Page 13: Mastering SaaS Pricing - OpenView€¦ · 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

’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)

Page 14: Mastering SaaS Pricing - OpenView€¦ · 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

Profit Impact of Different 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

Page 15: Mastering SaaS Pricing - OpenView€¦ · 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

2

You picked the wrong value metric.

Page 16: Mastering SaaS Pricing - OpenView€¦ · 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

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?

Page 17: Mastering SaaS Pricing - OpenView€¦ · 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

The right value metric can help you

differentiate against competitors and

generate more revenue

Page 18: Mastering SaaS Pricing - OpenView€¦ · 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
Page 19: Mastering SaaS Pricing - OpenView€¦ · 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

Expensify differentiates with ’active user’ pricing

Page 20: Mastering SaaS Pricing - OpenView€¦ · 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
Page 21: Mastering SaaS Pricing - OpenView€¦ · 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

VTS: new value metric 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

Page 22: Mastering SaaS Pricing - OpenView€¦ · 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

3

You make it hard to buy.

Page 23: Mastering SaaS Pricing - OpenView€¦ · 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

15 Months

10 Months

7 Months

Slow (<30%) Moderate (30-99%) FAST (>100%)

Self-reported CAC payback (Months)

Source: openview.vc/saas-benchmarks-2017

Fastest growers seamlessly land new customers

Page 24: Mastering SaaS Pricing - OpenView€¦ · 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
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26

Page 26: Mastering SaaS Pricing - OpenView€¦ · 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

Clearly states their

value proposition

Page 27: Mastering SaaS Pricing - OpenView€¦ · 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

Different messaging

for teams vs.

enterprise

Page 28: Mastering SaaS Pricing - OpenView€¦ · 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

Leverages

psychology by

highlighting the price

when paid annually

Page 29: Mastering SaaS Pricing - OpenView€¦ · 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

Crystal clear

about benefits,

not just features

Page 30: Mastering SaaS Pricing - OpenView€¦ · 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

Puts lingering

fears to rest

Page 31: Mastering SaaS Pricing - OpenView€¦ · 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
Page 32: Mastering SaaS Pricing - OpenView€¦ · 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

0

50

100

150

200

Subscription

PAYG

Jan-14 Jan-15 Jan-16 Jan-17

Sell to your customers the way they

want to buy

Page 33: Mastering SaaS Pricing - OpenView€¦ · 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

4

Your upsell path is broken.

Page 34: Mastering SaaS Pricing - OpenView€¦ · 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

82% 84% 89% 90%

97%

109%

Slow

(<30%)

Moderate

(30-99%)

FAST

(>100%)

Avg logo retention Avg net $ retention

Annua

l Rete

ntio

n

Source: openview.vc/saas-benchmarks-2017

Fastest growers see net negative churn

Page 35: Mastering SaaS Pricing - OpenView€¦ · 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
Page 36: Mastering SaaS Pricing - OpenView€¦ · 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

Value metric & expansion: usage > seats

123% net retention

Page 37: Mastering SaaS Pricing - OpenView€¦ · 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
Page 38: Mastering SaaS Pricing - OpenView€¦ · 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

Packaging: use features to drive expansion

Good

Page 39: Mastering SaaS Pricing - OpenView€¦ · 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

Packaging: use features to drive expansion

Good Better

Page 40: Mastering SaaS Pricing - OpenView€¦ · 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

Packaging: use features to drive expansion

Good Better Best

Page 41: Mastering SaaS Pricing - OpenView€¦ · 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

5

Your pricing is static.

Page 42: Mastering SaaS Pricing - OpenView€¦ · 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

Pricing should evolve as your

company evolves

Page 43: Mastering SaaS Pricing - OpenView€¦ · 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
Page 44: Mastering SaaS Pricing - OpenView€¦ · 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

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

Page 45: Mastering SaaS Pricing - OpenView€¦ · 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

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

Page 46: Mastering SaaS Pricing - OpenView€¦ · 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

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

Page 47: Mastering SaaS Pricing - OpenView€¦ · 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

The single most valuable 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.

Page 48: Mastering SaaS Pricing - OpenView€¦ · 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

What now?

Page 49: Mastering SaaS Pricing - OpenView€¦ · 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

Pricing & packaging is

super important.

Page 50: Mastering SaaS Pricing - OpenView€¦ · 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

But most people don’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

Page 51: Mastering SaaS Pricing - OpenView€¦ · 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

The price is not material enough to be a

factor in the decision.

It is not even a blip on the radar.

Page 52: Mastering SaaS Pricing - OpenView€¦ · 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

Who should own pricing?

Page 53: Mastering SaaS Pricing - OpenView€¦ · 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

Who should own pricing?

Marketing

Finance

Sales

Operations

Product

Page 54: Mastering SaaS Pricing - OpenView€¦ · 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

Who should own pricing?

Great for 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

Page 55: Mastering SaaS Pricing - OpenView€¦ · 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

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

Page 57: Mastering SaaS Pricing - OpenView€¦ · 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

See this deck: openview.vc/saastr-2018

Blake Bartlett | [email protected]

Kyle Poyar | [email protected]

Thank You!

Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved.