patrick campbell — how to build actual customer-driven product (turing festival 2016)
TRANSCRIPT
How to build actual customer drivenproduct
Turing Festival 2016
@PriceIntel
Building product is getting harder, not easier…and it’s going to increase in
difficulty.
@PriceIntel
The age of throwing shit against the wall and seeing what sticks is over.
@PriceIntel
Who in the world are you?
@PriceIntel
Happy customers big and small
ProfitWellSaaS pricing
software and tech enabled services
Free financial metrics for
subscription businesses
@PriceIntel
We’ve seen inside more software companies than anyone else on the planet.
@PriceIntel
The market is becoming saturated.
@PriceIntel
Our world is more competitive, making switching costs easier.
@PriceIntel
Competition is growing
N = 289 SaaS companies, +/- 3.44% MoE at 95% level
0
2
4
6
8
10
12
5 Years Ago 3 Years Ago 1 Year Ago Today
# o
f C
om
pet
ito
rsHow many competitors did you have during the following periods?
@PriceIntel
Competition is here
0%
10%
20%
30%
40%
50%
0 to 2 3 to 5 6 to 10 11+
% o
f R
esp
on
den
ts
How many competitors do you current have? (Companies around for less than 1 year)
N = 547 software companies
@PriceIntel
The relative value of features is declining, making a race to the bottom
for feature based pricing.
@PriceIntel
“Differentiation” isn’t what is used to be…
N = Varies by line, but minimum of 10,000 customer respondents per line
0%
25%
50%
75%
100%
125%
4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today
WT
P a
s %
of
WT
P 4
Yea
rs A
go
Willingness to pay over time relative to WTP 4 years ago
Core Features Single Sign On Integrations Analytics
@PriceIntel
CAC is increasing over time.
@PriceIntel
Acquiring a customer is getting pricier
N = Varies by line, but minimum of 453 companies per data point
-25%
0%
25%
50%
75%
4 Years Ago 3 Years Ago 2 Years Ago 1 Year Ago Today
CA
C a
s %
of
CA
C 4
Yea
rs A
go
Blended CAC relative to four years ago
B2B B2C
@PriceIntel
“Good”, “Customer driven” product is becoming exceptionally more
important
@PriceIntel
We’re really ill equipped for the transition.
@PriceIntel
We don’t really know our buyers
@PriceIntel
Buyer Personas
Table Stakes Tony
• Valued features: • SFDC Integration• Chrome extension
• Least valued features• Analytics• API access
• WTP = ~$10/month• CAC = ~$22• LTV: $160
Advanced Arnie
• Valued features: • Analytics• API Access
• Least valued features• Chrome extension• Premium support
• WTP = ~$25/month• CAC = ~$56• LTV: $325
@PriceIntel
We don’t know our buyers that well
0%
25%
50%
75%
100%
Thought about them Central document Quantified buyer personas
% o
f R
esp
on
den
ts
Which single category best describes your buyer personas?
N = 1,647 software companies
@PriceIntel
We don’t do a lot of cust devconversations
0%
25%
50%
75%
100%
Less than 10 11 to 25 26 to 50 51+
% o
f R
esp
on
den
ts
#ofcust dev conversations
How many cust dev conversations are you having per month?
N = 1,647 software companies
@PriceIntel
We don’t send any cust dev surveys
0%
25%
50%
75%
100%
0 1 2 3+
% o
f R
esp
on
den
ts
#ofcust dev surveys
How many cust dev surveys are you sending each month?
N = 1,647 software companies
@PriceIntel
We aren’t truly testing that much
0%
25%
50%
75%
100%
0 1 to 3 4 to 10 11+
% o
f R
esp
on
den
ts
#oftests/experiments
How many tests or experiments are you running each month?
N = 1,647 software companies
@PriceIntel
We’re obsessed with acquisition.Like stalker level obsessed.
@PriceIntel
Looked at 25,679 blog posts.
@PriceIntel
We love talking about acquisition
0%
25%
50%
75%
100%
Acquisition Monetization Retention
% o
f to
tal
art
icle
s
Category of growth articles written from 2014 to 2106
N = 25,679 blog posts written between 2014 to 2016
@PriceIntel
Looked at 6,324 B2B companies
@PriceIntel
We love building for acquisition
0%
25%
50%
75%
100%
Acquisition Monetization Retention
% o
f to
tal
com
pa
nie
s
Category of B2B SaaS companies
N = 6,324 companies currently active
@PriceIntel
These are just the acquisition companies
@PriceIntel
Asked Founders/Executives
@PriceIntel
What’s most important?
0%
25%
50%
75%
100%
More logos Making more money per customer
Keeping customers around longer
% o
f to
tal
com
pa
nie
s
C-Level/Founder Growth Preferences
N = 1,432 SaaS companies, +/- 2.19% MoE at 95% level
@PriceIntel
What’s most important?
N = 1,218 SaaS companies, +/- 2.61% MoE at 95% level
0%
25%
50%
75%
100%
Acquisition Monetization Retention
% o
f to
tal
com
pa
nie
s
C-Level/Founder Spend Their Time
@PriceIntel
If we improve each lever by the same amount, which lever causes the most
growth?
@PriceIntel
Impact of improving each growth lever
3.32%
0%
5%
10%
15%
Acquisition Monetization Retention
% i
mp
act
on
th
e b
ott
om
lin
e
Impact of improving each lever by 1%
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
@PriceIntel
Impact of improving each growth lever
3.32%
6.71%
0%
5%
10%
15%
Acquisition Monetization Retention
% i
mp
act
on
th
e b
ott
om
lin
e
Impact of improving each lever by 1%
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
@PriceIntel
Impact of improving each growth lever
3.32%
12.70%
6.71%
0%
5%
10%
15%
Acquisition Monetization Retention
% i
mp
act
on
th
e b
ott
om
lin
e
Impact of improving each lever by 1%
N = 578 SaaS companies, +/- 2.89% MoE at 95% level
@PriceIntel
Improving retention and monetization has 2-4x the impact of focusing on
acquisition.
@PriceIntel
What we find important
0%
25%
50%
75%
100%
More logos Making more money per customer
Keeping customers around longer
% o
f to
tal
com
pa
nie
s
C-Level/Founder Growth Preferences
N = 1,432 SaaS companies
@PriceIntel
What works for growth
3.32%
12.70%
6.71%
0%
5%
10%
15%
Acquisition Monetization Retention
% i
mp
act
on
th
e b
ott
om
lin
e
Impact of improving each lever by 1%
N = Data from 512 companies
@PriceIntel
This should be scary.
@PriceIntel
Everything aligns to the customer
Point of Conversion
Drive Customer #1
Offer Product #1
Offer Product #2
Drive Customer #2Drive Customer #3
Offer Product #3Justify price #1
Justify price #2
Justify price #3
@PriceIntel
How do we fix our customer development?
@PriceIntel
3 ways to better monetization
• Quantify your buyer personas
• Implement a customer development process
@PriceIntel
Persona-Product Fit
Table Stakes Tony
• Valued features: • SFDC Integration• Chrome extension
• Least valued features• Analytics• API access
• WTP = ~$10/month• CAC = ~$22• LTV: $160
Advanced Arnie
• Valued features: • Analytics• API Access
• Least valued features• Chrome extension• Premium support
• WTP = ~$25/month• CAC = ~$56• LTV: $325
@PriceIntel
If you don’t know who you’re driving to your product, how do you know what
build?
@PriceIntel
Let’s walk through an example…
@PriceIntel
ProfitWell
@PriceIntel
“Oh you’re like….”
@PriceIntel
“Oh you’re like….”
37 Other Competitors
(we know about)
@PriceIntel
Persona-Product Fit
Startup Steve
• Valued features: ••
• Least valued features••
• WTP = ~$/month• CAC = ~$• LTV: $
Miderprise Marty
• Valued features: ••
• Least valued features••
• WTP = ~$/month• CAC = ~$• LTV: $
@PriceIntel
Go to the customer!
@PriceIntel
For the love of God. Talk to your customer.
@PriceIntel
Great. How do we do that?
@PriceIntel
1
2
3
Your Process at a High Level
Buyer Personasand Design
1
Data CollectionAnd Segmentation
2
1
2
3
4
Data ConsolidationAnd Analysis
3
@PriceIntel
Persona-Product Fit
Startup Steve
• Valued features: ••
• Least valued features••
• WTP = ~$/month• CAC = ~$• LTV: $
Miderprise Marty
• Valued features: ••
• Least valued features••
• WTP = ~$/month• CAC = ~$• LTV: $
@PriceIntel
Experimental Design
@PriceIntel
What type of info do we want?
• Demographic Information– How often do you look at your metrics? Team size? Revenue?...
• Feature/Packaging Information– Which metrics? What features? Value props?...
• Pricing Information– How much are they willing to pay? What frequency do they want to
pay?...
@PriceIntel
Relative Preference AnalysisStatistical methodology to measure preferences for features, intention, and value propositions
Your Customer Development Toolkit
Price Sensitivity AnalysisProven model for gauging customer’s willingness to pay and price sensitivity
Experimental DesignProperly segmenting and breaking down the data.
How do we ask the questions?
@PriceIntel
What do people value?
@PriceIntel
“Please rank the following features on a scale of 1 to
10…”
0 0.2 0.4 0.6 0.8 1
Accuracyofyourmetrics
Actionabilityfromyourmetrics
BeautifulDesign
Depthofyourmetrics
@PriceIntel
@PriceIntel
What do your customers value the most?
More on: Relative Preference Analysis
@PriceIntel
What do your customers value the most?
More on: Relative Preference Analysis
@PriceIntel
What do your customers value the most?
More on: Relative Preference Analysis
@PriceIntel
Your Experimental Design
More on: Relative Preference Analysis
Main Category
Support• Phone• Live Chat• Email• …
@PriceIntel
Your Experimental Design
More on: Relative Preference Analysis
Main Category
Support• Phone• Live Chat• Email• …
Data in Integrations
Metric Types
Data out Integrations
Action Tools
@PriceIntel
Your Experimental Design
More on: Relative Preference Analysis
Main Category
Support• Phone• Live Chat• Email• …
Data in Integrations
Metric Types
Data out Integrations
Action Tools
All Demographics and Personas
@PriceIntel
Persona-Product Fit
Startup Steve
• Valued features: • Price • Design
• Least valued features• Actionabiltiy• Depth
• WTP = ~$/month• CAC = ~$• LTV: $
Miderprise Marty
• Valued features: • Accuracy • Uptime
• Least valued features• Price • Design
• WTP = ~$/month• CAC = ~$• LTV: $
@PriceIntel
Relative Preference AnalysisStatistical methodology to measure preferences for features, intention, and value propositions
Your Customer Development Toolkit
Price Sensitivity AnalysisProven model for gauging customer’s willingness to pay and price sensitivity
Experimental DesignProperly segmenting and breaking down the data.
How do we ask the questions?
@PriceIntel
How much are they willing to pay?
@PriceIntel
Basic Plus Premium
$49 $149 $299
Ionlyhaveonecoolfeature. Thesame coolfeature. Yup,sameone.
Oh!Youcanonlygetthis here. Well…andhere.
Huzzah!I’mtheplanwithabsolutelyeverything.
@PriceIntel
• At what (monthly) price point does [PRODUCT] become too expensive that you’d never consider purchasing it?
• At what (monthly) price point does [PRODUCT] start to become expensive, but you’d still consider purchasing it?
• At what (monthly) price point does [PRODUCT] a really good deal?
• At what (monthly) price point does [PRODUCT] too cheap that you question the quality of it?
More on: Relative Price Sensitivity Meter
How much are your customers willing to pay?
@PriceIntel
How much are your customers willing to pay?
More on: Relative Price Sensitivity Meter
@PriceIntel
WTP for SaaS Metrics
$0
$50
$100
$150
$200
$250
$300
$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+
WT
P
Size of Company (MRR)
WTP for a SaaS Metrics Solution
N = 234 companies
@PriceIntel
Persona-Product Fit
Startup Steve
• Valued features: • Price • Design
• Least valued features• Actionabiltiy• Depth
• WTP = ~$50/month• CAC = ~$• LTV: $
Miderprise Marty
• Valued features: • Accuracy • Uptime
• Least valued features• Price • Design
• WTP = ~$150-250/month• CAC = ~$• LTV: $
@PriceIntel
Persona-Product Fit
Startup Steve
• Valued features: • Price • Design
• Least valued features• Actionabiltiy• Depth
• WTP = ~$50/month• CAC = ~$500-600• LTV: $600
Miderprise Marty
• Valued features: • Accuracy • Uptime
• Least valued features• Price • Design
• WTP = ~$150-250/month• CAC = ~$3000• LTV: $1500
@PriceIntel
WTP for Churn Recovery
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+
WT
P
Size of Company (MRR)
WTP for a Recovering Churn
N = 234 companies
@PriceIntel
WTP for Rev Rec
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$0 - $50k $51k - $100k $101k - $250k $251k - $500k $501k+
WT
P
Size of Company (MRR)
WTP for a Revenue Recognition
N = 234 companies
@PriceIntel
A good entry point
Low CAC with constant
value
Creates the Requirement
Path to Share of Wallet
ProfitWellFinancial metrics for the subscription economy
100% accurate SaaS metrics for free integrating 1-click with your
billing system
Central fulcrum to cust success, sales, finance, marketing e-
team, and rest of stakeholders
Allows interface to clearly point
to problems and reinforce value of paid add-ons
@PriceIntel
Our current monetization path
ProfitWellFinancial metrics for the subscription economy
Retain Rec Revenue
Delinquent credit card recovery
through email, in-app snippet, and
optimization
Algorithmically solved 2-3 days
of work amongst accounting and
finance team
@PriceIntel
12 hours total.
@PriceIntel
12 hours total. $2089.
@PriceIntel
Implement a customer development process
@PriceIntel
Your Cust Dev Process
Customer/Market Research
Communication
Plan
Week: 1 2 3 4 5 6 7 8 9
Impact
Analysis
Customer Advisory
Panel
Implement
Changes
Step:
@PriceIntel
Customers matter.
@PriceIntel
Building a company is getting harder; make it easier on yourself.
@PriceIntel