Overview
We hadn't touched our pricing in over 4 years and wanted to adapt our current model to drive better retention and outcomes in the long term. After leveraging segment data analysis, competitive research, sales research and revenue forecasting, we settled on a good/better/best pricing model for customers to come on board, and grow with us over time.
Our final result: Launch, Grow, Elevate in action
The Challenge
As we had a two-plan model, we saw limited traction with the entry plan, and in the sales pipeline we were losing deals for those who were not looking for a full-suite solution but still wanted to use the tool. We also saw the lowest retention rates in our small business segment, a key segment for our target ICP, as many small companies do not have basic compliance and look for a solution to solve for this. We knew a change was needed to help drive retention in the long term.
Challenge Point 1
Low retention rates in core small business segment: we saw the worst retention rates in customers who were on the existing entry model. We hypothesized that this meant that return on value was not being experienced in this segment.
Challenge Point 2
Limited choice and feature sets on two-plan model: we hypothesized that limited choice meant that prospects were being forced to chose between only two options, one being out of budget and the other lacking core feature value.
Challenge Point 3
Friction in the sales process: we saw opportunities in the sales process to empower conversations towards faster conversion, if the value proposition and choice was clear, and a better fit to value for prospect budgets.
My Approach
I led our research, strategy, and execution for us to solve these challenges. We established a cross-disciplinary team of product, engineering, data science, sales, and design. We wanted to explore different aspects of the problem: LTV, conversion rates, friction points in the process, and time to conversion across both sales-led approaches and self-serve customers.
Research & Discovery
We investigated long term retention rates like LTV, MRR, NRR, and conversion timelines across different key cohorts. We looked at patterns in feature usage across these cohorts. We further analyzed competitor offerings that had led to lost deals, and did a longer scale dive on discounts leveraged during the sales process, and interviews with customers who didn't convert.
Analysis & Strategy
We saw strong patterns across cohorts that led us to hypothesis we could offer a lower cost entry model, and that with an optimized strategy with a good/better/best pricing model, we could empower sales to convert faster. Our strategy additionally leaned on a clear value proposition with our customer facing messaging. It was key to highlight outcomes customers could achieve with each plan option.
Implementation
We built the new model, which required a feature inventory, detailed upgrade paths, cohort analysis, usage measurement, and clear value proposition. Challenges included how to approach existing customer packaging, risks around downgrades, and how changes to the overall strategy would impact both our brand and long term conversion rates. Obtaining buy-in early on from key stakeholders, and along the way, ensured that when we were ready to launch that there were no surprises for the team and they felt ready to speak about the pricing changes.
Measurement & Iteration
We saw early friction in usage patterns (limits to plan offerings) and adjusted accordingly. The first 1-2 months post release involved iterations to the feature offerings. This involves close monitoring of the feature activation rates, conversion in trial (first 7, 14, 30 days) and then monitoring how these conversations also occured with customers success during renewal conversations. We worked closely with sales and support to be notified and track request for discounts, plan changes, customization.
The Solution
Our solution as to implement a tiered model with a clear upgrade path from Launch to Elevate, where the Grow plan sits in the middle. Specific changes included ensuring that the most valuable features were available earlier on, before a customer would scale with us.
The previous pricing structure before changes were implemented. This lacked a differentiation option, and the value obtained in the higher level plan was not associated with higher LTV, which made it a less attractive offering overall. As a result, we had less users entering the first phase of the funnel to grow as their headcounts grew with us.
The new pricing structure showing improvements and clearer value proposition. This plan model encourages early launch, growth, and later maturity along the usage process as a company onboards and has repeated usage over time. This also is priced per ICP, a recommended method in SaaS pricing.
Early time to value
Value delivered earlier on, including Reviews at a lower entry cost point.
Upselling
Value builds over time, to encourage growth between plans.
ICP focused
Only enterprise teams would benefit from the Elevate plan, which is intended.
Results & Impact
This solution resulted in a faster sales cycle, less friction in the procurement process, and faster conversion in self-serve trial.
Increased conversion rates by 30% within 6 months of implementation.
Achieved 250% increase conversion through sales-led customers.
Customers who had no touchpoint in sales converted 55% faster
"Sarah's innovative approach to our pricing model transformed not just our conversion rates but how our entire team thinks about value proposition and customer segmentation."
— Jesper Oskarsson, Senior Staff Engineer
Lessons Learned
We gained insights on the buying process that empowered our approach to onboarding, marketing efforts, and sales growth.
Don't stall: iterate
Learning by doing: we were able to pivot and adjust based on early feedback and usage of the new plans. This meant making a bet on usage limits, and then analyzing them in real time at a larger scale - directly during the conversion and onboarding process.
Sales partnership
Sales is a key partner in packaging, primarily sales lost data - customers who said "No". Working closely with sales managers and sales team members on the ground puts you at the right place in the customer journey to understand how they are evaluating the pricing as part of their budgeting and procurement process.
Early buy-in
Organizational wide buy-in is essential for packaging changes. I worked closely to update and gain key feedback across the organization at different levels of the process (early research, implementation, pre and post launch). This allows for greater shared insight, and also less surprises for key stakeholders later on.