Pricing is a SaaS company’s most efficient profit lever, but also one of the easiest to screw up. OpenView's Kyle Poyar explains the top 5 pricing mistakes companies make and how to avoid them in your own business.

1. Kyle Poyar
Industry Global 2018
Mastering
SaaS Pricing
Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved. OPENVIEW

2. Do you suck at
pricing?

3. 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.

4. We think deeply about pricing

5. Where are you in your journey?
Early
Expansion
Growth
Maturity

6. 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

7. 88
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

8. You’re too
cheap.
1

10. ’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)

11. ’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)

12. ’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)

13. ’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)

14. 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

15. 2
You picked the
wrong value metric.

16. 25%
26%
44%
45%
28%
23%
8%
15%
17%
23%
32%
15%
0% 20% 40% 60% 80% 100%
Infrastructure
Vertical app
Horizontal app
User or seat-based Usage-based Company size Other
Source: saasbenchmarks.com
Are seats the right metric for you?

17. The right value metric can help you
differentiate against competitors and
generate more revenue

19. Expensify differentiates with ’active user’ pricing

21. 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

22. 3
You make it
hard to buy.

23. 15 Months
10 Months
7 Months
Slow (<30%) Moderate (30-99%) FAST (>100%)
Self-reported CAC payback (Months)
Source: saasbenchmarks.com
Fastest growers seamlessly land
new customers

25. 26

26. Clearly states their
value proposition

27. Different messaging
for teams vs.
enterprise

28. Leverages
psychology by
highlighting the price
when paid annually

29. Crystal clear
about benefits,
not just features

30. Puts lingering
fears to rest

32. 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

33. 4
Your upsell path is
broken.

34. 82%
84%
89%90%
97%
109%
Slow
(<30%)
Moderate
(30-99%)
FAST
(>100%)
Avg logo retention Avg net $ retention
AnnualRetention
Source: saasbenchmarks.com
Fastest growers see net negative churn

36. Value metric & expansion: usage > seats
123% net
retention

38. Packaging: use features to drive expansion
Good

39. Packaging: use features to drive expansion
Good Better

40. Packaging: use features to drive expansion
Good Better Best

41. Packaging: use features to drive expansion

42. 5
Your pricing is
static.

43. Pricing should evolve as your
company evolves

45. 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

46. 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

47. 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

48. 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.

49. What now?

50. Pricing & packaging is
super important.

51. 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

52. The price is not material enough to be a
factor in the decision.
It is not even a blip on the radar.
“
”

53. Who should
own pricing?

54. Who should
own pricing?
Marketing
Finance
Sales
Operations
Product

55. 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

56. 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

57. See this deck: openview.vc/industry-2018
Kyle Poyar | kyle@ov.vc
Thank You!
Proprietary and Confidential ©2018 Copyright OpenView Venture Partners. All Rights Reserved.