Pricing
Hey, folks. We're back. Bootstrapped web. Another episode. Jordan just got back from Europe from MicroConf.
Brian Casel:We'll we'll talk a bit about that. And today, we're welcoming back Ian Landsman to the show. You were just on a couple weeks ago, and Ian is one of our recurring guests. We've got a few more lined up over the next couple weeks. But Ian, good to have you back on.
Speaker 2:Hey. How's it going? Part of the family now.
Brian Casel:That's right.
Jordan Gal:Party party episode. Yeah. Uh-huh.
Brian Casel:So the thing that we planned for today is just the word pricing. And we figured that's enough for us to just talk probably endless amounts of time just talking Yeah. About pricing and all that goes into it. Whether it's an art, whether it's a science, who knows?
Speaker 2:Right. It's a
Jordan Gal:it's guess. Is it is it an average of your competitors? You know, all the the myriad ways you can you can get pricing wrong.
Brian Casel:So we'll we'll dive into that. But, know, before we get into it, Jordan, how was MicroConf Europe?
Jordan Gal:MicroConf was cool, man. It's always it's always cool. And this was my first European adventure for it. Barcelona is is is a great city. Most of the time was in the hotel obviously, but we did get a chance to get out a little bit.
Jordan Gal:It's a good vibe. Yeah. It was very interesting to, just come across like the European version. There's a lot of people from the DC, a lot of people who are really into travel, big mix of software services, some more niche stuff.
Speaker 2:It was cool.
Brian Casel:Is it a is it a big overlap between the DC and and microconf now? I know that there are some, but I I've never really noticed that in previous microconfs and I'm I just joined the DC earlier this year and I I really I've been to a couple of meetups, but I'd like to go out to their conferences too.
Jordan Gal:I'm I'm not sure. It could have just been the fact that I came across a few people from the DC just in conversation. Nice. It was also they have a big representation in Barcelona. Right?
Jordan Gal:One of
Speaker 2:the one of the
Brian Casel:Oh, that's right. They they've
Jordan Gal:got a big Right. And they have their they had at least one of the meet meet ups or conferences.
Brian Casel:Yeah. They they do like a major conference there.
Jordan Gal:So yeah. Right. So maybe that was part of it and the European thing. So there was definitely a handful of people there that I got to meet and that was cool. They have a slightly different perspective from the microconf regular crowd and the software crowd.
Jordan Gal:They're kind of on this in between of e commerce, Amazon, software services mixture, but always really focused on the location independence and freedom thing. It's good to just kind of soak it in.
Brian Casel:What I'm always interested in, last year I went to MicroConf Barcelona, which was amazing. I I really would like to get out there next year. What is the difference between Vegas and Barcelona or Vegas and Europe in general? Any any thoughts there?
Jordan Gal:It was very much the same crowd and same interests. I think maybe the intensity was toned down to one degree, right? Whereas Vegas, some of the speakers are just kind of ballers and it's just like a little bit more intense in terms of like how far along the companies are, who the speakers are. It felt very similar. It was just a fewer people.
Jordan Gal:So while the intensity level is kind of turned down by one notch, it also made for a really, just pleasant environment to just actually chill out and get to know people. So that part of it was good, you know, and everyone's just kind of hanging out in the same place for a few days. So you really just get to come across a bunch of people, have a beer with a few people, grab dinner, and just kind of lounge around talking. Then as you start these conversations, everyone makes connections of, oh, I just spoke to someone that you should speak to and then that starts to just naturally happen.
Brian Casel:Yep. Very cool. Ian, when are you going to make it out to a microcamp again?
Speaker 2:I know, I got to get back out there. I don't know. It's a every year it's been, I'm like, I gotta go. And then I've only been the year I spoke at. But, you know, a few years there, was like, you just couldn't get tickets.
Speaker 2:And then but even now, I think it's still kinda that way. But I know I'm on some list, I think, where I I could get in there, but it's just I don't I don't know. Know. Though it hasn't been aligning up with, like, either kids stuff or one year we had, like, a big launch thing going on. So I don't know.
Speaker 2:The European one, I that would be kind of cool to to head out to that one, I think, and get a chance to write off a trip to Europe. Yeah. Totally. Gonna hang out for a week or whatever, but just conferences in general, it's like used to hear more of them, but it's hard to find a ton.
Jordan Gal:They're never worth it.
Speaker 2:Yeah. Well, yeah.
Brian Casel:It's literally There's no, like, ROI. It's it's total, like Excuse to write something off and have some fun.
Jordan Gal:Well, at least with with MicroConf, you you go in, and this is almost the nature of MicroConf, You go in not looking for ROI. Right. You just go because it's fun and you wanna see people and the ROI just kinda happens. Whereas other conferences, there's a much more transactional and you're like, I literally need to make this worth my $3,000.
Speaker 2:Right. Right. Right. And Mike and Coffey kinda know everybody or I mean, at least us, you know, I I mean, the last Mike comment went to yeah. Like, I mean, I think I literally knew almost everybody or at least everybody knew me from the podcast or whatever.
Speaker 2:So that's a cool vibe to just be able to, you know, have conversations. A little it's a little good for the
Brian Casel:ego too. I think that's my whole approach to conferences is like Right. I only go There you go. I only go if I don't care about any sort of ROI from it.
Speaker 2:Yeah.
Jordan Gal:Right. And
Brian Casel:and I think if I do care about ROI, then it's probably a conference that's just gonna bore the out of me, you know.
Speaker 2:Well, I also think that I'm kind of big on now only going to conferences where the networking is kind of a given. So, like, where I'm not you know what mean? So, like, MicroConf, I know everybody. Everybody knows me. We support this Laravel conference, so everybody knows me and I know everybody, basically.
Speaker 2:And peers conf is another conference I do where a lot of people, like, I know a lot of people. And so I'll I'll meet people I don't know through the people I know. Or if you're a speaker at the conference, right, that's always great because then everybody's seen you speak and they'll come up to you and whatever. Kinda To go the back to where I was, like, fifteen years ago, and be like, I'm just at this conference with 3,000 people. I don't know anybody, and I gotta, like, make the networking happen.
Speaker 2:I don't know if I have the bandwidth for that at this point. Yeah. Those are the kind of conferences too where it's like, gotta see the seven sessions on AdWords optimization and come away with a takeaway and all those kind of stuff.
Brian Casel:It's Yep.
Speaker 2:It's harder mentally anyway on me. I don't know.
Jordan Gal:The the the advantages of podcasting.
Brian Casel:Right? Definitely. The advantage of having a podcast and even if you don't and I mean, it's definitely a benefit of having a network and growing an audience, but what I always try to do especially with MicroConf is just reach out to people like Jordan, you and I have kind of organized a dinner. Try to plan something before you even get there with with folks and get a crew together so that you can a couple years ago, I went to a few conferences where I was just a conference goer, basically knowing nobody and I hated it. Didn't didn't have a good time and I was like, screw conferences.
Brian Casel:I'm done. Yeah. I'm I'm done with all conferences.
Jordan Gal:And then
Brian Casel:Well, then I went to microcosm.
Jordan Gal:Situation where you're like, you're forced to social climb. Yeah. And if if you're not that into that, then it's kind of like this, really? Is this what I should be doing with myself?
Speaker 2:Plus, for so many of us, I feel like now the conferences, we all not we all, but many people, especially in our circles, are working from home. And so, you know, this is like our chance to get out the house and be with people, like, every day, all day I'm with people. And so if it's just me going somewhere and being by myself, I could do that at home or whatever, like or if I have to really push it like that or it's also gonna be a lot of corporate people, those kind of things. So you're also in little bit of a different place where they're, you know, there for their job, and it's kind of a different vibe to it. Yes.
Speaker 2:I think I did go to Saster last year or earlier this year.
Jordan Gal:How how was that? That sounds like an in between almost Yeah.
Speaker 2:It was kinda in between. Like, knew some people, but I didn't you know, there's a lot of people there and I definitely didn't know everybody. It was nothing like a microconf situation, but it was like I knew enough people that I was fine, like, and we had some fun and all that. It was it's hard to say, you know, they're so focused there on, like, a different level, like, getting to a billion dollars. Right?
Speaker 2:Like, they're focused on the getting to a billion dollars, and so some of those lessons are hard to internalize at kind of our bootstrap level here. But there was some good stuff. And they had, like, Atlassian there, which is bootstrapped, the the CEO was talking. And so there was definitely some good stuff. If it's like you have a tight budget, I don't know if it's worth the money to go.
Speaker 2:But it was it was alright. I'd say it was pretty good for that kind of conference for what it is. It was it was some couple cool things there that that were I learned and all that. And going I I I never been to San Francisco, so it was also a reason to go to San Francisco.
Jordan Gal:Yeah. That's awesome.
Brian Casel:I I've become much more of a fan of, like, small meetups and and even just like getting together with a group of people for dinner or whatever. But like, I like the idea of small meetups, especially the way that the DC does it all over the place. Like every city you can find a DC meetup. I would love to see Rob and Mike, you know, spin off MicroConf to, you know, into some sort of like smaller meetup style of MicroConfs.
Jordan Gal:We we do it ourselves here in Portland. We we have a MicroConf lunch once a month.
Brian Casel:Oh, nice.
Jordan Gal:Just a bunch of people because if you ever go to microconf and you start asking me where they're from, there are like 30 people
Brian Casel:from I know, like half the conferences from Portland.
Speaker 2:Yep, so we
Jordan Gal:just do it ourselves. We just have, you know, second Wednesday of the month, We just, you know, email out where we're going to lunch and everyone who can join joins. We usually have somewhere between eight and fifteen people.
Brian Casel:Yeah. I've been I've been kind of forming monthly drinks and dinner meetups around here, kinda like that with, you know, business owners, entrepreneurs, but the scene in in Suburban Connecticut is not the same as Portland.
Speaker 2:No. I tried to do the same. I just started this, like, last month. I was trying to do it like a business software kinda meetup in Poughkeepsie here, but it's really hard. Like, so far we have and I and I put some limits on it, because I really didn't want people who weren't already selling software.
Speaker 2:Because otherwise, I could definitely get a group of people who just wanna be in software, and there's already a couple groups like that. But I was, know, I wanted people who are more like, yes, I have $50,000 in revenue at least. So just like a baseline of revenue so that you can have a conversation about like marketing or hiring or like all the Yeah. Different things that
Brian Casel:proms. Come Well, yeah. You you and I are what, like less than less than two hours away.
Speaker 2:Yeah. We should do that.
Brian Casel:We gotta we gotta get the word out to some folks here in
Speaker 2:the Northeast. Well, the only two people no, there's three people signed up. One is in my town. He's a mobile app guy. So he's he's a good fit.
Speaker 2:And the other two people are like, one's in Connecticut somewhere, and one is on Long Island, Bhuttov, who doesn't even count, basically. And so, yeah. So other than that, I've I've literally found nobody. So, yeah. Maybe we could consult Northeast Regional, but
Brian Casel:We're only near like the we're only near like the biggest city in the world, and we can't find anybody.
Speaker 2:You go down in there, but some of the stuff in New York is crazy. It's like 800 people. Yeah. And then that's like its own thing.
Brian Casel:Yeah. Yeah. Exactly.
Speaker 2:Like, eat up is like, well, we max out a thousand people per, you know, per thing. There's 13,000 people on the wait list or whatever.
Brian Casel:I I would like whatever this is to not happen in New York City.
Speaker 2:But Yeah. Somewhere true. But it does make yes. That's true. It is a it's a central meeting spot with trains and everything, which is kinda handy.
Speaker 2:But, yeah, we should talk about that. It's a good idea.
Jordan Gal:I'll just say one thing about the about the conference thing and and the differences between microconf and others. You need people at the conference that you can look to for inspiration. Yeah. That are further ahead, that are more successful, whatever. You're just looking up toward them being like, want to be in that position.
Jordan Gal:I want to strive for that. But you don't want that many people so far above that it makes you feel like shit.
Speaker 2:Right.
Jordan Gal:Right. So I feel like the saster thing is like, I don't know, there's one thing to be inspired, another thing to just make you feel bad.
Speaker 2:Yeah. And there's also the idea that, like, they're talking about stuff that's not practical in any way. Oh, we put these 100 kids out of college on cold calling 3,000 businesses a day. Well, like, that's not like a realistic thing I can implement, you know? So so you end up with some stuff like that.
Speaker 2:Or they have like, obviously, like a lot more employees, so there's, you know, they're already specialized and things like that. And so Right. A lot of that stuff isn't yeah. It's just hard to and some of it's interesting. Like, there were definitely talks that I thought were, you know, just interesting, but they weren't applicable really to me.
Jordan Gal:Yeah. You end up you end up listening to it and saying, what tidbits from this can I take? Most of it is not applicable to people. What lessons can I learn and translate into my version of what you're talking about?
Speaker 2:And my rule I have for myself of conferences is if I could just learn one thing, like my only goal really is to get one thing that's worth doing. So instead of having like I mean, I'll often have the notebook full, where you're writing down, it's a whole big thing, but then the reality is if you can just get one thing that you take away that does anything for you at all Yeah. That's probably successful. Because most conferences, you don't actually take away a win out of them.
Jordan Gal:It's it's funny when you get it. Right. When you come across that thing, you're like, oh, shit. That's the thing right there. That's it.
Jordan Gal:I I I had at this time while on stage, were doing a panel. Mhmm. And someone else on the panel is three of us. It was myself, James Kennedy from rubberstamp.io, and Greg Mercer from Jungle Scout. And Greg from Jungle Scout was answering someone's question and he gave the thing that I took away as that I looked at him was like, holy shit.
Jordan Gal:That's it. Right there.
Brian Casel:Very nice.
Speaker 2:I got it on stage.
Brian Casel:Yep. Yep. And it's all about the mindset that you have going into the conference or or whatever you're wherever you're currently at in in your business and, know, that you you you like listen to talk to, you listen to conversations differently than than you would another year, you know?
Jordan Gal:Yep. Yeah. Yeah. So what are we talking about today?
Brian Casel:Let's talk about pricing. How do you do it?
Speaker 2:I could tell my my origin story of my pricing. Awesome. Funny. Will so this is like twelve years ago, whatever. And I'm gonna price HubSpot.
Speaker 2:It was, you know, owned license at the time and it was I was like, alright, $99 a user. And like a couple days before we started like talking about the pricing and I guess when we released it, I guess. And my model for that was just like Spolsky and FogBugs, and FogBugs was $99 user. And even though it's a bug tracker and a help desk, I was like, Spolsky's doing it, it's it's alright.
Jordan Gal:Per user per month?
Speaker 2:No. This was just per user owned.
Jordan Gal:Okay. Cool.
Speaker 2:Yep. So it's just the own license, $99, you own it, and then, know, whatever, $49 a year with the support, which is optional. So and then the last minute, I was like, you know what? 99, I don't know. That seems awfully cheap.
Speaker 2:So I just doubled, I went to like $1.79. Just like no reason at all, I just made it $1.79. And I guess it works. Like, we're still here, and like we made enough money the first year till like, my wife quit her job, and everything. So like, it all worked out, but at the same time, I have no idea if the if, like, maybe I would have sold triple at 99.
Speaker 2:I don't know. Or maybe I would have only made half the money. But that's kind of my philosophy of pricing. It's like, who the hell knows? Like
Jordan Gal:Just look at someone you admire and if they're doing it somewhat
Speaker 2:right. Yeah. I think as you get farther along, you get more data of your own customer base or whatever, but early on pricing is so hard.
Brian Casel:Yeah. Early on, exactly. It's it's such a gut feel, at least it has been for me as well. Yeah. The thing that scares
Jordan Gal:me is all that data gets based on what you chose originally.
Speaker 2:Yeah. It's
Jordan Gal:true. So you you don't actually get an indication of, like, if your starting point was right. You get an indication on what the reaction is to your starting point at at that point in time.
Speaker 2:Right.
Jordan Gal:Yeah. And it's like, that that could just be that could just derail you in completely the wrong direction.
Speaker 2:And especially if you're not a big company, it's hard to run these pricing tests for a long time because you could take a beating and that beating, like, might put you out of business or, you know, mean you have to let somebody go or whatever because you you're doing this pricing test and, yeah, if you wanna run it for six months, that that could be a hard test to run there.
Brian Casel:So Yeah. So I mean, like, you're just starting out, and right now, you know, I'm I'm actually working on a few new ideas for new products from audience ops. So I'm thinking through pricing from like like a starting fresh standpoint as well. What are the big factors that we should take into account? So that you've got competition.
Brian Casel:What what what are if you make a list of of competing companies, what are they charging? You've got the value of the product itself or, you know, try to do like some sort of value based pricing.
Jordan Gal:I think those two should be flipped.
Brian Casel:Yeah. No. I'm not ranking them, you know.
Jordan Gal:I'm just
Brian Casel:I'm just kinda listening. Listening. I think that if you're, like, if you're scratching your own itch to a certain extent, you could think about like, well, would I pay for this? Right. You also have to look at the cost structure.
Brian Casel:Right? Like, how much does it cost to deliver the service and and all that. I guess those are the factors that come to mind. And when I think through that stuff, I usually I weight those a little bit differently. Like, right now, I'm going through this process as I as I said, and I definitely put competition down on the list.
Brian Casel:Like they're not a top priority for me. They they really never have been. What I do think about in terms of competition is like, what is the person probably going to compare this to? And that may not necessarily be a competing company, but, like, for instance, the audience ops done for you service, I always think in my mind, like, what does it compare to hiring somebody full time to do this? Like, that's really the competition that we're Yeah.
Jordan Gal:That's that's that's closer to the value thing. The cost structure should basically be ignored entirely. Like, how much it costs you to deliver the software? Delivering the service is is is more relevant. But if it's if it's software, I don't think that the cost it it it takes to provide it, I I think that's completely beside the point.
Jordan Gal:The the competition thing, feel like is is hard it's hard to ignore.
Speaker 2:I'm more into the comp competitive kind of analysis end of it. But I think there's also a distinction between AudientOps, which is, you know, a productized service kind of offering and has a heavy service component, versus, you know, help desk software, is borderline commodity, and there's a lot of competition there.
Brian Casel:I was gonna say, it depends on on the market you're in and how how competitive it is, but also how aware your your customers are. I mean, thinking about Restaurant Engine, I was very aware of, like, five or six exact definite competitors. They do restaurant websites, like, you know, absolute competitors. And I almost knew for a certainty that 80% plus of our customer base had no idea that they existed. Yeah.
Brian Casel:You know?
Speaker 2:Yep. Yeah. That that's that's a good spot to be in. Especially if you wanna focus on value based pricing because then you know they're not coming at you with, well, talked to these three other firms and they are gonna do it for x. You know, you don't have any of that.
Speaker 2:Or do they just discount you out of hand because you're more expensive? Those kind of things. We, you know, at HubSpot, we definitely get a lot of like, hey, you're one of seven we're looking at. We got charts and graphs and committees and, you know, it's all factored in there. And for some people, the price is a huge thing and for other people, the price isn't.
Speaker 2:And a lot of times, there's it's weird, like you'll have a company that's got 200 people who are gonna use this thing, and they have so that's what? $20,000,000 in payroll or whatever? And but they're upset that it's gonna cost, you know, $12,000 instead of 10,000. You know, like, you'll they'll be heavy on the kind of cost end, but then you have other people, right, who are like, we would have paid triple for it. We don't care at all.
Speaker 2:And it might be a small company.
Brian Casel:So Yeah. And there's also a point, I think, in most products or most markets where being being the lowest or being one of the lowest disqualifies you from some buyers. Like, they they want us they wanna spend more or they need to spend more in in terms of the to spend a budget or,
Brennan Dunn:you know.
Jordan Gal:Yeah. The the assumption that being the cheapest will will help you win in that scenario when people are comparing is not not a good assumption.
Speaker 2:I know we've traditionally been kind of low to mid tier on our price. And not the cheapest, which is I mean, there's just open source, right, which is a straight up free. And then there's definitely cheaper. But we tend to not be much above middle of the pack, generally, historically. I like that spot because it appeals to the people who don't have a lot to spend, but it also doesn't out of hand disqualify you as being nonfunctional.
Speaker 2:I don't know. I think going upmarket is tricky for Bootstrapper. Like, there are people doing it right. But this is one of the things I worry about when you talk about, like or, like, patio 11. Right?
Speaker 2:Well, often be, like, charge more, and people are very big on charge more. But charge more, especially b to b, will often require a lot of things around that that you aren't gonna be able to provide. So can you really run a sales process for something that you're trying to sell for $50,000?
Brian Casel:At least once you once you hit a certain threshold. Right. Like, you you can increase the price, but at a certain point, that is gonna change the whole way you sell it.
Speaker 2:Yeah. It gets into, like, they're gonna need a lot more of everything. They're gonna need professional service, you know. And and sometimes it might be lower than you think, I think something you know what mean? It's not always a 6 figure deal.
Speaker 2:Like, there can be deals that are lower than that that need those things, and so we, like, we do some of those things, but we we also don't go all the way to, you know, we're not flying out to see you. We're not gonna give you, you know, that kind of in person presentations, or do a full implementation generally, things like that.
Brian Casel:The way I tend to think of it is in terms of like being like low to mid tier or or or where is my place in within a certain tier. I mean, my approach when I buy products, whether it's SaaS products or services or whatever, it's like, I usually have a just a really loose ballpark budget and if I'm comparing three products and they're like $10 apart from one another, in my mind they're they're equal. Like it I'm not gonna buy on price at that point. If I'm like a little 510% above the mid Right. The middle tier
Speaker 2:like kill you.
Brian Casel:What's the difference?
Jordan Gal:That that's actually an interesting thing to to dive into. It's from the other perspective, what is it that makes someone's mind up? If if you are not significantly, cheaper or more expensive, then what is it that pulls someone in and what is it that pulls you into making it? You know, for me, it's like this weird combination of features and affinity for the company and product and the feel of it and what they're saying and how they say it and the founder is like this crazy mix.
Brian Casel:A big one for me on that is how confident am I that this company is gonna stick around for at least another year?
Speaker 2:Right. That's the big one, you know.
Jordan Gal:I I think I ignore that.
Speaker 2:I just assume Flounders ignore that. Yeah. A buyer Wouldn't want anyone to judge me. There there
Brian Casel:are things that I've that I think about that. I'm just trying to think of examples like well, first of all, any any product that I'm buying to then build into for my customers, like like, for for example, on Restaurant Engine, we I I bought several premium plugins, which I gave access to for my customers.
Jordan Gal:Oh, I see.
Brian Casel:I can't have those products go out
Pippin Williamson:of business.
Jordan Gal:That's that's scary.
Brian Casel:You know? And even, I don't know, like core things like now, like if I'm looking at web hosting providers or or even like email marketing tools, even even help desk stuff, like, it wouldn't be the end the complete end of the world to have to switch providers, but it would be a huge pain for my whole team to learn a new system.
Speaker 2:Yeah. You don't wanna have to do that. Yeah. That trust thing is huge. I mean, I think especially b to b is like the money they're not paying with their money, but they care about their job.
Speaker 2:And if they pick wrong, that's gonna reflect really poorly on them having made a bad choice. Do you know I mean? And so they're, like, they're worried about their career. They may be worried about the money or they may not be, but there's a huge trust factor there where I feel like when you deal with founders sometimes, they're the one making the call, and then they can switch if they have to. There's less of that they're not gonna get in trouble for making the wrong calls.
Brian Casel:Yeah. But a lot of founders don't wanna have to deal with
Speaker 2:it again. Of course. They don't
Brian Casel:wanna have deal with and be done it. At least that's how I am.
Speaker 2:I mean, getting to the point where you've been in business a long time is is definitely an awesome thing you should need to take advantage of if you've accomplished that, to let people know that you've done that. That's the thing we use a lot. Like when people do ask about our size, because I'm worried about that we're kind of small compared to, you know, obviously other help desk solutions. But, you know, we've been profitable for, you know, a hundred and forty months in a row or whatever, you know. So like, you can bring out some of those things that are are valuable and like, have a slide I use in some of my talks that I've given where, like, HelpSpot profit, you know, is, you know, millions of dollars and Zendesk is zero, which is true, you know.
Speaker 2:They've never made any money. And Zendesk is probably not going out of business at this point, but there are a ton of other help desk mean, I've seen a million help desk apps, right, come and go over the years. So there is something to be said for being profitable and stuff. So that ends up being something you kind of leverage at times.
Jordan Gal:So your company, your product has been around a lot longer than both Brian and myself. Even being in business for a short amount of time with with CartHook, with the cart abandonment thing, I still look back and I say, if I screwed up pricing, how much did that cost me? Yeah. Right? Do you ever look at it and say, you know, it really could have changed the trajectory of your whole company if you had done something differently?
Jordan Gal:Just pricing wise,
Speaker 2:obviously It's not okay pricing wise. Like, in we kind of like set that pricing and then we raised it a little bit, you know, every couple years and it was alright. I think the things I end up thinking about are not the things we did right, but the wrong things we've done, so just historically. And there's two big ones, and one was pretty recent. The other one was, like, maybe six years ago, we or five years ago, we offered unlimited with the idea that, like, we would bring people up into unlimited who are maybe just had a lot of licenses, but not you know, we could bring them up to a higher tier and make it like a regular, every year you just pay us this, it was $8,000.
Speaker 2:And it was a horrible idea, because we had all these customers with hundreds of licenses that moved to unlimited, and it cost us a bunch of money, because now they were getting it for way cheaper. These are all the people willing to pay us $20,000 a year, and instead they're only paying us 8. So that was kind of brutal. So we killed that after like two years or so, but I mean, we still honor those and all those people still have them. And it's fine.
Speaker 2:It's like regular $8,000, so it's not bad. But it's just that you know you didn't maximize that there, so that that was bad. And then the other thing is recently we we had our just so kind of same owned license model for a long time, and then we moved to subscription. And what we did first for about six months, we did just per user, kind of like every other app out there, was like $25 a user. And that was a bad move because we hit a lot of trouble with like we do deal a lot of larger installations, but we're kind of like on the value end of that.
Speaker 2:And so at $25 a user, you get into really expensive costs there and it just wasn't working out for us. And we also just lost a lot of trial users even because I think it just was like, they were like, well, it's gonna be too expensive. Even though we would have negotiated with them or whatever, that kind of burned us a little bit. So we switched our pricing again and instantly had a huge effect upwards.
Brian Casel:So That's a that's a big question. Right? It's like per user or not per user. I know there's some talk about this in MicroCon Vegas. I I tend to see too many SaaS going with the per user model when it when it just does not apply to to their product.
Brian Casel:But other products, it definitely does apply. So I guess, how do you think about that?
Speaker 2:Well, my new thinking on that is so I what happened here is that we had this big benefit that I think we didn't realize how important it was. So some of it is just the surface that's too expensive. But then also longer term, I think it was starting to hurt us. And after six months or so, it wasn't wasn't killing us yet. But in the old owned license model, you so it was per user, but we also had five packs and 10 packs that were pretty heavily discounted, and people tended to buy those.
Speaker 2:That was the vast it was very rare for people to buy, like, individual licenses. They normally would buy into the packs, and they might add individual licenses later, or if they just need a person or whatever. But they would buy these packs. And even if they added people, very often they would buy at least five pack or a 10 pack or 20 pack. And what happens is they end up having extra.
Speaker 2:And so it actually works out really nice because they need to add somebody. Most of the time, they have a slot just free, and then occasionally, they don't. Okay. They buy some more packs. But when you go per user, now they have to come back to you every single time.
Speaker 2:And that's a big burden for them to always be thinking of that buying decision every single Yeah. Yeah. And you also don't get we have a lot of serendipity where, okay, we have, hey, we have five extra licenses in our install. Let's let HR use it. They say they need a ticketing kind of thing.
Speaker 2:Let's just put them in there. Right? And so now you're exposing it to other parts of the organization. But again, if you're strictly per user where there's no kind of overflow there, then HR buying a ticketing system becomes like a whole thing with a committee and a discussion and everything, because there's not any extra capacity. So you can't just, like, let them try it.
Speaker 2:Yeah. So that hurt us. And what we did is we moved to more of a tiered model now. So it's subscription, but it's, like, up 10, up to 25, up to 50.
Brian Casel:Yeah. Tend I tend to like the like the tiered or the packed approach because, you know, because then what happens is what I've seen with some products is that they're they're charging base per user and per per feature or by by feature set. Mhmm. So it's
Jordan Gal:like That's too much.
Speaker 2:Yeah. And It gets complicated.
Brian Casel:So I think that you run into problems when you're combining those things because I wanna upgrade just to get x x feature, but I don't care about having multiple users, you know. So so there's that kind of conflict. The other conflict that I see is freemium and then charging per user, which I just don't think there may be exceptions to this, but I just don't think that that really works. And I think the company that that I'm thinking of here is Slack. Audience Ops is still a free user of Slack and and we've got over 20 people in our in team Slack chat room.
Speaker 2:Right. And for you to move to paid would be a big Yeah.
Brian Casel:For us to move to paid, it would be per user. So that'd be going from zero to over, you know, it'd be over a three digit every month. And so I was looking at that the other day, was like, know, I really want the groups feature. That would just make things a little bit easier for us. We we can communicate with and and just tag groups rather than having to tag like six different people when when we won't only wanna tag certain department or whatever.
Brian Casel:And, you know, that's a premium feature. So just I I actually emailed their support. Was like, just charge me $40 a month just for that feature. And and they're like, no. Like, you'd you'd have to sign up for a $160 a month, you know.
Jordan Gal:Yeah. They're they're also a different thing because the only thing they're focused on is users, just the number of users. Yeah. They just think, because look, Brian, you know, between you and Slack, let's be honest, you're be paying them sometime over the next twelve months.
Brian Casel:Probably.
Jordan Gal:Right. So they they kinda know that. Ian, the one thing I have to comment on, I'm looking at your pricing, you guys are doing something that most software companies do not have the balls to do, which is only offer annual. Yes. You guys you guys have no monthly option, which is which is so much better than monthly, but still something that, I mean, nobody not I I can't think of that many software companies that
Brian Casel:It's common in the WordPress product space, although WordPress tends to be way underpriced to to a fault.
Jordan Gal:Really? Right. Like Right. Like like like plugins where it's like $79 for the year.
Speaker 2:And I think that's a function of your market pretty much. So when we first moved to the subscription, the $25 a user, we did opt monthly. I hate everything about monthly. I I don't think I'd ever do monthly again under any scenario. And or maybe not any is too strong a word, but I really dislike the monthly.
Speaker 2:In our particular space, anyway, people tend to be making a commitment to this thing for a serious amount time. Like Brian just said, like, for him to switch help desk tools now, it would be a heavy burden. And you guys aren't even like a kind of traditional help desk Right. With, you know, a very
Brian Casel:formal Or reason it's like email inbox.
Speaker 2:Right. Exactly. So so for somebody who's gone through the whole process of looking at eight tools and narrowing that down and spending months on it, they're already ready to pay they're committing to you annually. They they are making that commitment. So we have, you know, and we've honored these people who are on monthly still, and we have a a handful of them, and that's fine, and we'll take their money monthly.
Speaker 2:But I think those users are not I don't think they were as good at customers for us. Let's put it that way. I think the people who've done the work upfront and made the commitment and are putting their money down annually are just a better customer for us. So, yeah, I like the annual a lot. I do think it won't work everywhere, but but for us, it's been it's been fun.
Speaker 2:And we haven't gotten any pushback on it, to be honest with you.
Jordan Gal:Yeah. That's amazing. I would my business would be completely different and and healthier for it if we only offered annual. I I think what what I've seen, let's say, card abandonment, for our our CardHook tool, it wouldn't work to only offer annual, but what I have seen people do and and have seen work is to make the annual such a ridiculous no brainer that it basically just forces the logic into the annual option.
Speaker 2:And that's what it's
Jordan Gal:like a $100 a month or $400 for the year. It's where it's kind of like, what, why would I do monthly?
Speaker 2:Right? And that's kind of what we're doing. So we're at this point, we're
Brian Casel:just gonna But then, how much are you lowering your price?
Speaker 2:But where are
Jordan Gal:you lowering your price, though?
Speaker 2:Our price is a lot lower, but there's a couple of things in that. So first is that if you're at the top of a tier and you bust it out per user per month, it's like under $10. So it's a lot cheaper than most competing systems. But that's balanced with you are committing to us annually, which is a huge plus for us, because now we get that $3,000 today or whatever it is instead of, you know, sprinkled out over the whole lifetime, which is rough. Which works out great, right, if you if you keep them for three or four years.
Speaker 2:But I even think it hurts you in keeping them for three or four years because there's not that commitment on their end to learn the system and implement it and train people and Right.
Jordan Gal:All that teaches you to to get out.
Speaker 2:Yeah. It's like, it didn't instantly do the thing I wanted to do. Forget it. I'll move over to this other tool. Maybe that'll instantly do the thing I wanted to do or whatever.
Speaker 2:And so I don't know. It just worked a lot better for us. So it's cheaper, yes, but also it captures that value right now instead of down the road. And then also I just think, do think with subscriptions that there is this kind of pushback. I feel like you have to be a little bit cheaper than with the owned license model.
Speaker 2:Like, we had owned licenses, it worked out to be a little bit more, essentially. But even in the B to B, I feel like people are hesitant on the subscription. Like, even like Brian was saying that paying Slack. Right? It's like, 160, know, it's coming every month.
Speaker 2:And that just feels like Yeah.
Brian Casel:I mean big commitment. Always buying a subscription is is tougher. Like, buying a $50 a month subscription is harder than a $500 one time. Exactly.
Speaker 2:You know? But
Brian Casel:I I mean, you know, to what you're saying, Jordan, I mean, I think typical is what around like 25% off for the annual, but I'm seeing companies do like 40% off, 50% off. And yeah, that's a total no brainer, but I mean, how much are you lowering your your average revenue per user?
Jordan Gal:Well, I I don't know if you really are. I mean, all you have to do is is increase your monthly and and keep the annual where you want it.
Brian Casel:Yeah. It can do it that
Jordan Gal:it it's definitely optics. It's really the the the big thing that we find internally that would make us prefer the annual is there's something that changes in the interactions between ourselves and prospects, people who are asking questions about trialing, people who are currently trialing, because we don't know how much they're gonna be worth to the company, we don't know what type of attention to pay them. If if every deal we talk to was minimum $11,000, we it would definitely be a different relationship with the prospects and the people trialing. Yeah. But because you don't know if this person's worth zero, fifty dollars, or $5,000, you kinda can't give everyone the same attention as if they're worth $5.
Jordan Gal:So that's it's almost like where are we wasting our time with this person or is this person an amazing customer? It's really, really hard to tell. Whereas if you know for certain, if this person signs up, it's worth a significant amount of money, you you kind of treat the whole relationship differently.
Speaker 2:And I think you could probably look back, and this will give you some of it, but I just think in general, the idea of the annual customer, especially it's a little bit muddied if you have the monthly and then you're upselling them into annual or whatever. But I just feel like you're you're you could even be turning potential bad customers into good customers. Because the annual just brings a whole different approach from people. They're more thoughtful with it, and again, they're
Brian Casel:gonna Yeah. Be They're little more committed to making it work.
Speaker 2:Yeah. I just think it I don't know. I know. In our time in monthly, I did not like it. The the whole thing of it was bad.
Speaker 2:The doing we do a lot of one on one sales demos. So you know, I have a person who's just doing sales demos, and it could be for $32, you know, $50 for
Jordan Gal:two That's what I mean. It drives you nuts.
Speaker 2:So that's a hard thing to do, when I know now that the baseline minimum is $600. Like, that's the least we're gonna get off of any of these sales. That's And most of them are more. So it's worth that. And and yeah.
Speaker 2:I don't know. I I don't like the monthly myself.
Brian Casel:With the audience ops done for you service, we've been doing quarterly pricing. Like monthly or quarterly. And we, you know, we offer the quarterly as an option. I mean, I feel like at our price point, the annual just would be a little bit too high. But the the quarterly, you know, you get a little bit of a discount and what I find there is most clients who go for the quarterly, Well, we have a higher percentage of quarterly clients than like than what I've seen in in other SaaS.
Brian Casel:But the other thing is that they they tend to be more committed to it because they, you know, it's it's not just getting a discount. It's it's like actually giving it at least, you know, a few months to to start working and get into the workflow and then they tend to stay on. So it's kind of like a I I see it as like kind of like a best of both worlds. It's like offer a value pricing option and solve the problem of, okay, they're not just treating treating this as like a one month trial. It's they're actually kind of committing to it.
Speaker 2:Yeah. And it's always a combination of things. Right? It's like, for us, there's certain flexibility that HealthSpot has, like it's downloadable and things like that where we have, you know, most of our competitors at this point are not downloadable, for example. So that's a unique thing we offer that you can't find everywhere.
Speaker 2:And same with audience ops, like, it's not always gonna be apples to apples if they're looking at other solutions because you have specific people who have advantages there. You can show them content in different markets you've written that is applicable to them. And so, you know, other options can't offer them those same things. And so it's like that it's always that combination, which will make the pricing tricky. It's like the price, but then it's also where it fits in with the rest of your offering and and the value there.
Brian Casel:So so one question. I know Jordan and I have talked about this in previous episodes. If you're just starting up something new, how should you think about pricing so that the business can actually be viable for you as a as a bootstrapper? Or or like what are the different scenarios, you know, where you need to make different considerations into pricing just to just to ensure the survival of this of a startup? Because I I just feel like way way too many people that I speak to are talking about these like $9 a month.
Brian Casel:Yeah. That's impossible.
Speaker 2:It is possible.
Brian Casel:You know, and it's
Speaker 2:I mean, I think those were I know a few people have done those successfully, but the thing is, then you to me, that's your whole strategy has to be completely different. And it has to be entirely based on you're gonna build a huge audience. You have some type of, you know, advantage that's gonna allow you to have a 30 or 40,000 person audience, and then you can sell those people $10 a month things. Because if you get enough of them to buy it, that's fine. Because day one, you could get to that baseline of, hey, $2,000 a month.
Speaker 2:We're already there day one because I had this big audience and I was able to sell this $10 a month thing into that.
Brian Casel:But Right. And you've you've gotta have that mind or that that game plan of, okay, we're we're going big with this. We're we're going, you know, investment or or we're gonna put lots of dollars into just growing this audience fast.
Speaker 2:Yeah. Or not even I mean, I know all the people I know have done it are bootstrapped, but they had unique either skills or, you know, some type of advantage that they were able to leverage. And then it wasn't even about the code. Like, the code is now secondary to you built this big audience either on purpose or by accident, because sometimes by accident, and then you're gonna leverage that. And that and so, okay, now I could think up a cheap product to sell into this large audience.
Speaker 2:Like, you know, I've seen that. Or, you know, most of us in this you know, like, we come at it a lot of us come at it kinda tech first, and like, oh, I wanna build out this idea for this thing that does something. And that's not really going to work at that $10 a month range because you're just never going to get enough customers. It's impossible. You know, it's very rare to be able to do that.
Jordan Gal:Yeah. It's a top down math verse verse bottom up. If if you have an audience of 50,000 people on your email list, then maybe you can take the top down approach of I know a subset of my list is gonna be interested in this, and if that subset is 10,000 people, then I will be able to convert x percent of those. That's you can do the top down math. But most people, you gotta do it bottom up.
Jordan Gal:You you can't say if it's gonna be $29 a month, then you're gonna get a thousand people. How how are you gonna get a thousand people one by one?
Speaker 2:Yeah. I don't know. If I was starting today, it would be really scary because I feel like it's a lot harder than it was when I started. I just think there's so much more competition. I think SaaS is so much harder to start up than owned software, speaking in terms of software.
Speaker 2:Because you can just get all that money upfront with own software and just having to take it over months and months just makes the cash flow situation so much harder. Like, you can't get that spike in sales early on your prelaunch list and be like, bam, we're good to go. We're we're rolling like I did. Well It's it's so much harder to do that.
Jordan Gal:Well, I I think I think you're you're on the money in terms of what to be fearful of.
Speaker 2:Right.
Jordan Gal:But I do think people can challenge themselves to be creative and find ways around that.
Speaker 2:Yeah. You have to. You have to.
Jordan Gal:Yeah. I think you have to. I I I'm in the exact same position right now. We've got a brand new software product.
Speaker 2:Right.
Jordan Gal:We're gonna charge somewhere about a $100 a month.
Speaker 2:I'll schedule you. Yeah. I I thank you. I appreciate that. I you're with me Right.
Jordan Gal:On this on this journey.
Brian Casel:Yeah. But, know, Jordan, I I I think that you have established CartHook as as a company and a brand and and a presence in the ecommerce world. So you have that leverage to build on, and you have the team in place, and you have investors, and you have, some runway to to do that. And and I think that's that's where the not that all those things are necessarily required,
Jordan Gal:but Pretty much ignore all of those. If if you wanna call those advantages, I don't actually think those are gonna make or break.
Brian Casel:No. But I I think you have a few essential pieces. I well, it's about buying time. Essential is the wrong word, but you you yeah. Exactly.
Brian Casel:It's about buying time, and it's, you know, it's it's the stair step approach. Right? It's it's getting to this, like, positioning yourself for that success and it takes, you know, laying a lot of groundwork over a number of years, you know, before you're ready to so I guess what I'm saying is even when you have the pricing in a workable model, like $99 a month, couple $100 a month, you know, whether it's per user or whatever, When you start to forecast your first year of making this thing viable, you know, there there are other, challenges when it comes to profitability and the types of resources that you'll need in order to actually grow it to a number of people that that gives you traction and then support those people and then grow it further.
Jordan Gal:Yeah. But I'm still trying to defeat that reality that Ian laid out, where if you just go monthly off the bat, it's really, really hard. So we have a new product. I'm I'm literally just looking at a page right now because, this this conversation made me think of it. I saw a product recently.
Jordan Gal:They came out with a new software product and they did not offer monthly at all. They said, this is our launch period, get in early for a reduced annual amount. And after this launch period, we will then be opening it up for $67 a month. So they were offering it for, think $397 a year. And that's the only way you could get it.
Jordan Gal:You had to buy for $397 and then they forecast, they kind of foreshadowed. They said after this launch period, we're going to close the doors. You won't be able to get in and then we'll release it in a few months for $67 a month. At least at least it's trying to kinda beat that those first six months where if you just go monthly, your cash flow is screwed, man. It's so it's so hard.
Jordan Gal:So at least they're trying to say, no. Let's make a chunk of money upfront, get early users, get established, get a base of cash flow, and then open it up for for the regular kind of grind of of the the monthly price.
Brian Casel:I mean, what I've been what I've written about before and what I'm trying to do now in audience ops is use the productized service as the initial way to, you know, build up the cash flow, but also establish the company and and the space where you're you know, the market that you're in and your audience, and then use that that cash flow to then self fund, you know, expanding the product line. Right? And that's kind of what, you know, where I'm kinda transitioning right now over the next couple months into next year is like, okay, I've I basically have, you know, my salary covered, audience ops is profitable and growing, got those systems in place, got people in place. Now, I need to kinda focus on the next offering from audience ops or at least and we talked about it in a previous episode, but but I I feel like now I have way more flexibility and time, like my own personal time of what I should what I can spend my time working on, you know, exploring new new product ideas, talking to people, designing wireframes, talking to developers, doing training products, things like that, that I I would not have had this kind of leverage a year ago or two years ago, you know, just starting something from the ground up.
Jordan Gal:Yeah. It's it's breathing room.
Speaker 2:Yeah. Building any kind of unfair advantage you can get. Right? Whether it's a steady cash flow from some other product or whatever or the big audience. I mean, for us, sorry, we moved to subscription, but still the vast, vast majority of our revenue is from existing customers from the past decade who are just paying us support on their own licenses, and who are adding more owned licenses because we still have them all grandfathered in.
Speaker 2:So that's still, you know, the majority of revenue that runs everything as we kind of transition to the long, slow SaaS ramp of death, even though it's not pure SaaS, sort of model there. So it's even like, you know, CartHook is kinda like that too. It's like that baseline revenue. Even if it's not enough to maybe cover everything on its own, it's still it's still kind of a way to buy that time so that you can have that year, eighteen months, or twenty four months to to build up kind of the new big thing. And and maybe you should try going annual with it.
Speaker 2:Know? Everybody doesn't do it. Maybe that's maybe they maybe who knows? You know? There's so many people who just follow the leader here, and nobody really tries other things a lot of the time.
Speaker 2:You know? So
Jordan Gal:No, this we we we are. We are proactively running webinars with the only offer being annual.
Brian Casel:That's Yeah. That's what I like about the what you guys are doing. We talked about it on on the previous episode, like, only the only way to get the the annuals through the webinar.
Speaker 2:And you could see that too if that's popular. Maybe it just means that your only pricing should be annual. Like, you know what I mean? It's possible that that's what that means. It's that it could be that it's the offer and it's just the sell and you get people convinced on that.
Speaker 2:Or it could be that those people are really more dedicated and that if you've got more people in the door on that baseline, that people are fine with that because they're gonna take the time to integrate this cart, which is a big expensive thing for them to do and is, you know, burdensome to switch away from, and they're gonna make that commitment to you, and that would be fine.
Jordan Gal:And I wouldn't be surprised if those those are better customers too.
Speaker 2:Right. For sure they'll be better customers. And, yeah, and you get those long term customers. And we have so many long term customers, and you know them, you know you know their issues, you you know they refer people to you, and you know kind of where they're coming from right from the beginning. So there's so many advantages to having built up those long term relationships with your customers and people who've used you for six, seven, eight years.
Speaker 2:Obviously, it's a little bit down the line, but even for one year or two years, it's a huge advantage to have those people kind of in the fold and exposing your product to to other people directly and indirectly. So there's that commitment level there. But, yeah, it's hard to so when when all your competitors are per month, it can be scary for sure.
Brian Casel:Well, did we cover everything there is to cover about
Jordan Gal:Yeah. It's almost like we talked we talked about pricing repercussions.
Speaker 2:Right.
Jordan Gal:You know, more more so than, like, coming up with pricing, but I guess I'll close out by by referring to MicroConf. One of the really big themes that came out of MicroConf Europe was that SaaS can be a grind. Even success in SaaS can look like a grind because as revenue goes up, you you need to support more. You need more servers. You need you need to spend more.
Jordan Gal:So revenue very closely excuse me. Expenses very closely mirror revenue. They go up together. And it looks at least what I was trying to take away from it as I heard the same scenario over and over and over again, this grind of SaaS was that one of the few levers you have is pricing. That's one of the few levers you have that can change the equation of revenue and expenses being so closely tied together.
Jordan Gal:So it's like it's really worth exploring and looking at and making sure you feel good about it and kind of doing that math of is this gonna work out for me if it goes right.
Brian Casel:Well, that wraps it up for today. Let's, let's reconvene maybe next week. I we might need to take next week off. We'll see. But,
Jordan Gal:you slacking again, going on vacation?
Brian Casel:Yeah. I'm gonna be traveling next week with family.
Jordan Gal:So Ian, thanks for coming on.
Speaker 2:Hey. Thanks for having me, guys.
Brian Casel:Yeah. Good to have you on here. Cheers. We'll talk soon. Later.
