Lessons from the SaaS Metrics of 1500 companies – Patrick Campbell – MicroConf Europe 2016

The MicroConf Europe 2016 Talk Recaps can be found on the central hub page.

Website: priceintelligently.com
Twitter: @patticus
Slides: http://www.priceintelligently.com/microconf

• Premise: “Building a software company is getting harder, not easier… and it’s going to increase in difficulty.”
• LTV/CAC Ratio:
  • less than 2 results in 4-12% churn
  • 2-5 results in 3-6% churn
  • over 5 results in <3% churn
• What % of total sales is expansion revenue: 10-15%
• How much should you be growing YoY: As much as possible
  • no fixed growth target set by VC, because we are bootstrapped
  • Your growth rate goes down the bigger your annual recurring revenue (ARR) is
• Our world is more competitive, making switching costs easier.
  • 5 years ago: Average of 1.5 competitors per surveyed SaaS app
  • Today: Average of 8 competitors per surveyed SaaS app
• The value of features is declining over time
• CAC is increasing over time
• You need to know your buyers on a granular basis
  • valued features
  • least valued features
  • WTP (Willingness To Pay)
  • CAC (Customer Acquisition Cost)
  • LTV (Lifetime Value
• Problem: We don’t do a lot of cust dev conversations
  • 75% of companies have less than 10 customer development conversations per month
  • 78% of companies are sending 0 customer development surveys per month
  • 50% of companies do 0 marketing experiments/tests each month
• Looked at over 25,000 growth blog posts
  • 80% are written about Acquisition
  • less than 10% are written on Retention!
• Looked at 6,324 companies
  • 90% are building for Acquisition
  • <5% are building for Retention
• C-Level/Founder spend their time on
  • 85% getting more logos (Acquisition)
• Impact of improving each growth lever by 1% results in the following growth in your bottom line:
  • Acquisition: 3.32%
  • Monetization: 12.7%
  • Retention: 6.71%
• We want customers, but don’t know what to do when we get them!

How do we fix customer development and focus on monetization

• 3 ways to better monetization
  • Quantify buyer personas
  • Implement a pricing process
  • Utilize a multi-price mindset
• Example: ProfitWell
  • Noticed that one of their consulting clients about to IPO were calculating MRR the wrong way
  • ==> We can build a product that will calculate everything correctly
  • Immediately got compared to Baremetrics and Chartmogul
  • We noticed there are 37 other competitors…
  • We went back to the playbook: Persona-Pricing Fit
    • Startup Steve vs. Miderprise Marty
    • For the love of God. Talk to your customer.
      • set a target – e.g. “we talk to 10 customers each month”
  • Right way to set prices: Value-based pricing influenced by cost-plus pricing & competitive pricing
  • have multiple tiers of your product – differentiated by enabled features
  • “Please rank the following features on a scale of 1 to 10” will show you that every feature is important
    • Better: “Of the following options, which is LEAST and MOST important to you”
    • can be used in conversations, not just surveys
    • much better data quality
    • correlate answers to size of business of your customers ==> tells you what small customers care about vs. what big customers care about
  • How much are your customers willing to pay?
    • “At what price point does PRODUCT become too expensive that you’d never consider purchasing it?”
    • “At what pp does PRODUCT start to become expensive, but you’d still consider purchasing it?”
    • “At what pp does PRODUCT become so cheap you question the quality of it?”
    • WTP for enterprise customers was $150-$250/mo
    • CAC ~ $3,000
    • LTV: $1,500
    • ==> “Oh shit!”
  • WTP for Churn Recovery for enterprise customers: $3,000 / month!
  • WTP for Revenue Recognition for enterprise customers: $2,500 / month
• Implement a pricing process
  • Timeline for changing your pricing (repeat every quarter)
    • week 1-4: Customer/Market Research
    • week 5-7: Communication Plan, Impact Analysis, Customer Advisory Panel
    • week 8-9: Implement changes
• Utilize a multi-price mindset
  • you want to have growth both from new and existing users
  • use a value metric (e.g. Wistia differentiates along “# of videos”)
    • do NOT use # of users
  • value metrics should:
    • Align to your customer’s needs
    • Grow with your customer
    • Be easy to understand

-Christoph