Monetizing Subscription

Services

Monika Saha

GM Finance Product Line, ZuoraPatrick Campbell

Founder & CEO, Price Intelligently

Agenda

Topic

Lessons, Observations & Suggestions

○Designing growth journeys

○Selecting pricing metrics

○Maintaining a healthy pace of innovation

john doesales director @ smart team

“Aenean nec lorem. In porttitor. Donec

laoreet nonummy augue. Suspendisse

dui purus, scelerisque at, vulputate

vitae, pretium mattis, nunc. Mauris eget

neque at sem venenatis eleifend. Ut

nonummy. Fusce aliquet”

Full scale image background

(please change the image)

john doesales director @ smart team

“Aenean nec lorem. In porttitor. Donec

laoreet nonummy augue. Suspendisse

dui purus, scelerisque at, vulputate

vitae, pretium mattis, nunc. Mauris eget

neque at sem venenatis eleifend. Ut

nonummy. Fusce aliquet”

Full scale image background

(please change the image)

john doesales director @ smart team

“Aenean nec lorem. In porttitor. Donec

laoreet nonummy augue. Suspendisse

dui purus, scelerisque at, vulputate

vitae, pretium mattis, nunc. Mauris eget

neque at sem venenatis eleifend. Ut

nonummy. Fusce aliquet”

Full scale image background

(please change the image)

Lessons, observations, suggestionswhen designing pricing and packaging

01Designing “growth

journeys”02 Single vs. multiple value

metrics

03Maintaining a healthy

pace of innovation

Healthy upsell revenue is critical

% of bookings from upsells

Source: 2016 Pacific Crest SAAS survey

Cost of new business vs. upsell, expansion,

renewals

Challenge : Balancing acquisition vs. lifetime value

B2B

Pressure to meet

quotas

Higher bookings

numbers

Lower net dollar

retention

B2C

Race to acquire a

high volume of

subscribers

Higher subscriber

growth rates

Lower post-

promotion retention

Use A Data Driven Approach To Inform Your Design

Identify The “Pricing Profiles” For Your Target

Market

Questions to consider:

Do you want/expect customers

to go through natural “growth

journeys”?

Are there natural “tipping points”

that will drive customers from

one profile to another?

If customers stay on within a

single profile, what avenues do

you have to grow ARPU?

A packaging framework often emerges for each pricing

profile

EDGE NEEDSIdentify new capabilities customers

may want as their needs begin to

extend beyond baseline needs of

their profile

Map this to

baseline

packages

Map this to

capability

driven growth

(tipping

points,

cross/up

sells)

Map this to

consumption

driven growth

(add-ons)

COMMON NEEDSDefine the most common pricing

profiles and

the “baseline needs” of those

profiles

ADOPTION

SIGNALSIdentify signals that indicate higher

adoption of the same set of

capabilities over time

⇊

optimal packaging

When possible, design for 2 factors to drive

upsells/expansion

Current

ARR/M

RR

Capability

driven

growth

levers

Consumptio

n driven

growth

levers

New

ARR/M

RR

a.Capability-driven: The need for an

expanded set of product capabilities

(cross/upsell)

a.Consumption Driven: Higher use and

adoption of a base set of capabilities

that a customer has bought (add-on)

Suggestions for incentivizing the right outcome

● Identify the right attainment metric

○ ARR/MRR

○ TCV

○ Compensating on one-time components (services, physical goods)

○ Compensating for renewals

● Determine the appropriate sales model for your business

○ Hunter/farmer

○ Account owner

● Identifying the key stakeholders in the organization

Challenge : maintaining compelling “tipping points”

Benefit A $10

Benefit B $5

Add-On

Creep

Weak

Tipping

Point

Benefit A

Benefit B

Benefit C

GOLD

PLAN

$150/user/yr

BRONZE

PLAN

$100/user/yr

Compelling

Tipping

Point

BRONZE

PLAN

$100/user/yr

GOLD

PLAN

$150/user/yr

Benefit A

Benefit B

Benefit C

You might start here …. But over time you could end up here

….

Suggestion: carefully consider the “value-optics” of add-ons

Benefit A

Benefit B

Benefit C

GOLD

PLAN

$150/user/yrBRONZE

PLAN

$100/user/yr

(A + B) $50Tipping point

advantage

This solves for a need to offer add-ons A & B with the bronze plan, without eroding the

price-value tipping point of the Gold Plan

Lessons, observations, suggestionswhen designing pricing and packaging

01Designing “growth

journeys”02 Single vs. multiple value

metrics

03Maintaining a healthy

pace of innovation

presentationagenda

page

018

about us

09:00

Lorem ipsum dolor sit amet,

consectetuer adipiscing elit.

Maecenas porttitor congue

massa.

our works

Lorem ipsum dolor sit amet,

consectetuer adipiscing elit.

Maecenas porttitor congue

massa.

10:00

We are seeing an increasing number of value metrics

Source: 2016 Pacific Crest SAAS survey

Challenge : selecting the right value metric

You might be leaving money on the table

Buyers will have a hard time aligning price to value

delivered

✕

✕

A single value metric is ideal, but sometimes not every product innovation will map to this

value metrics

Without the right value metric:

# Of Sales Quote Users$100M $10M$1M

CFO : Transactions processed VP Sales : Users Creating Sales

Quotes

Suggestion: one value metric per persona

Impact on operations and deal desk

● Can you internally and externally measure progress towards capacity?

● Are your systems flexible enough to allow quick amendments to your

primary pricing metric?

● Does your pricing metric make the customer feel like they own the

relationship?

Impact on operations and deal desk

● What do you do when customers exceed capacity?

○ Prevent customer from extending use

○ Charge the customer an overage

○ Allow the customer continue use, and upgrade them upon renewal

● Upgrading the customer:

○ small sales (e.g. 1-2 seats or incremental volume)

○ material upgrades (new 12 month term with increased volume)

Lessons, observations, suggestionswhen designing pricing and packaging

01Designing “growth

journeys”02 Single vs. multiple value

metrics

03Maintaining a healthy

pace of innovation

Pricing Innovation Is Not Keeping Up With Product Innovation

Pricing Innovation Is Not Keeping Up With Product Innovation

Pricing Innovation Is Not Keeping Up With Product Innovation

Pricing Innovation Is Not Keeping Up With Product Innovation

Challenge : keeping up with a continuous innovation cycle

Lack of alignment on process and expected

outcomes

Systems Challenges

✕

✕

Pricing/Packaging decisions have to be made at a faster, more frequent pace

These are the common challenges that hold companies back:

Suggestion: A pricing council/committee that has a well defined and regular operating cadence

Items to consider:

• Market research (incl. historical

analysis)

• Impact Analysis

• Revenue Recognition

Considerations

• CAB Input

• Communication/Training

• Systems Implementation

Sales

Leadersh

ip

CSM

Leadersh

ip

Finance

Leadersh

ip

IT

Product

Leadersh

ip

Sales

Strategy

Legend

Stakeholder

sCore Team

Coordination/Alignment

Suggestion: An innovation alignment framework

PRIMARY PRICING GOAL

Product

Innovation

Benefits

Competitive

play

Reduce

sales/acquisiti

on friction

Generate new

business

revenue

Generate

upsell/expansi

on revenue

Increase

package

differentiation

Benefit name 1 +

Benefit name 2 +

Benefit name 3 +

Benefit name 4 +

Benefit name 5 +

Force yourself and your primary stakeholders to attach ONE primary pricing goal to each

benefit

Suggestion: De-couple pricing offers from packaging to give you the most flexibility to iterate on pricing

PRODUCT

Storage

OFFER A

$10 per month CAPABILITIES

BENEFIT 1

BENEFIT 2

BENEFIT 3

BENFEIT 4

….

....

BENEFIT N

OFFER B

$100 per year

OFFER C

Pay-as-you-go

OFFER N

Custom pricing

thank you.