One of the biggest challenges I’ve found with running a SaaS business is the lack of real data put out there about how mechanics changes to the sign up funnel impact key conversion metrics. For my UnSexy Conf talk last year I wanted to do what I could to contribute what we’ve learned at UserVoice over the various changes we’ve made, to both our sign up process and to our pricing model itself.
I’ll be giving a follow-up to that talk this year but I wanted to catch everyone up on what was covered last year. In part 1, we covered the impact of usage limits, introduction of paid plans, and things like not requiring credit cards on sign up. Here in Part II we’ll cover what’s proved to be the biggest, and most fruitful, change we’ve ever made and more. So without further ado, here is the final chapter from my 2012 UnSexy Talk:
By far the biggest change we made was when we launched our Helpdesk product back in 2011.
We saw this as an opportunity to address what was the biggest issue with our feature-based pricing plans: that the pricing gaps between the plans limited upgrades (which is why we attempted our failed foray into usage limits).
We would do this by switching to a per-seat pricing model that’s common with Helpdesk software. This meant lower base prices but a much greater opportunity to grow the account value over time. This works well for Helpdesks because the relationship between support agents and support load is pretty linear. It was a risk for us because we’re more than a Helpdesk – a lot of what made UserVoice valuable is that the relation between people reviewing feedback (usually product managers & community managers) and people giving feedback scales exponentially (you could administer a UserVoice forum with 100K people with one user and 1MM people with potentially only two). However we felt it was worth the risk (and because we also valued the engagement / brand awareness that our feedback product offered for us).
It was a smashing success. Our goal was to increase upgrades and we did to the tune of 242%. What we didn’t count on what that downgrades decreased by 22% and account retention (at 14 months post sign up) was up 26%.
We still handed out discounts (14% of accounts) but because the base prices were lower these discounts now averaged only 31%. However under these new plans we only saw at 3% reduction in LTV but a 24% increase in retention for these discounted plans.
TAKEAWAY: Pricing is all about integrating the area under a curve: the more discrete points you have the better job you’ll do of maximizing the value (revenue) you capture. However there’s only so many points you can have if you have plan/featured based pricing. The holy grail of any SaaS service is finding a usage vector (or two) that allows you to increase those points while maintaining a pricing simplicity customers can understand.
Though we saw that most accounts would get setup in the first week of their 30 day free trial there were always some folks that needed extra time. We formalized a process to enable our customer team (account reps & support) to give anyone trial extensions if they had a real need (more time for testing, or integration, or billing authorization). This was a pretty successful policy as folks that received a trial extension were 2.5X more likely to convert and 5X more likely to upgrade at some future point. This is likely because the accounts that take the longest to setup are often those from large companies (who have more internal hurdles to jump over).
TAKEAWAY: Being flexible with trial extensions pays off in a big way.
Another successful change was to change how we handled existing paid accounts that had a billing issue and were to be downgraded. In the past we would just downgrade those accounts to a Free plan, send an email and that was it. From talking to some customers we realized that some people would get downgraded and not notice that their functionality had changed.
Thus we changed to putting accounts into a “deactivated” state that acted much like a Free plan downgrade but had a big banner at the top of the page to let the customer know that functionality had been lost and gave them a single click to “reactivate” back to their original plan. This one change increased reactivations from billing related downgrades by 50%!
TAKEAWAY: Make it obvious when people are auto-downgraded and make it more than easy for them to recover (duh, I know).
The saga (and the data) will continue at this year’s UnSexy Conf on August 9th where I’ll be diving into changes from this last year including:
Migrating $5 plans to free
Not running billing on the weekends
Even bigger pricing changes (see uservoice.com/plans for a sneak preview)
… and much more
I hope to see you there!
PS Here are all the slides from both Part I and II of this talk: http://www.slideshare.net/uservoice/pricing-for-conversion-data-on
Richard White is founder and CEO of UserVoice, the complete software solution for understanding users and keeping them happy with great support. Prior to founding UserVoice, Richard served as the lead designer on Kiko.com, a Y-Combinator-funded calendaring product that drew praise for its clean design. Passionate about building simple productivity tools that delight users, Richard’s expertise lies in UI design and UX, but in a past life he graduated with a BS in computer science from North Carolina State University.