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patio11's profile
Patrick McKenzie
Patrick McKenzie
Patrick McKenzie
@patio11

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Patrick McKenzie

@patio11

I work for the Internet, at @stripe, mostly on accelerating startups. Opinions here are my own.

東京都 Tokyo
kalzumeus.com
Joined February 2009

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    Patrick McKenzie‏ @patio11 27 Feb 2018
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    One of my favorite things to do is help SaaS companies with pricing. 10 Stripe Atlas companies let me redo theirs and publish the rationales underlying the recommendations https://stripe.com/atlas/guides/saas-pricing … Plus I've got some thoughts:

    10:26 AM - 27 Feb 2018
    • 124 Retweets
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    12 replies 124 retweets 508 likes
      1. New conversation
      2. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Pricing is the easiest lever to move in the fundamental equation of SaaS, since it is the only lever which is entirely within the company's control. It also gets the least amount of sustained effort applied to it. This is bonkers. (n.b. ARPU = average revenue per user)pic.twitter.com/BTbeNni4jt

        3 replies 6 retweets 33 likes
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      3. Patrick McKenzie‏ @patio11 27 Feb 2018
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        The right cadence of a project to look at pricing and packaging is approxiately quarterly. More typically, prices stay the same for *years at a time*, often after being thrown up onto the site with no more thought than a placeholder would get. Again, bonkers.

        1 reply 0 retweets 22 likes
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      4. Patrick McKenzie‏ @patio11 27 Feb 2018
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        In low-touch SaaS, the dominant way to display packaging has become the dominant way to think about packaging: the N-column SaaS pricing grid. That remains a good way to display pricing/packaging but it is a poor way to think about it.

        1 reply 0 retweets 12 likes
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      5. Patrick McKenzie‏ @patio11 27 Feb 2018
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        One of the subtleties is that a plan defines a billing relationship, a services relationship, and a marketing promise, and these three things do not necessarily have to sync with each other. This is very counterintuitive to most teams.

        1 reply 0 retweets 21 likes
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      6. Patrick McKenzie‏ @patio11 27 Feb 2018
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        For example: a lot of people think that the name of a SaaS plan is really important. It is, in precisely one place: the place where people can choose to adopt it or not. It's meaningless everywhere else. Invoices/settings page/etc? Who cares.

        1 reply 1 retweet 14 likes
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      7. Patrick McKenzie‏ @patio11 27 Feb 2018
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        No bookkeeper ever has sent a note to an employee "Excuse me, I can't process this reimbursement request for a Gilette Fusion razor. Your receipt shows a Gilette Fusion Powerglide razor." Someone at Gilette knows there is a good reason for both of those to exist, but who cares.

        1 reply 0 retweets 11 likes
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      8. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Accordingly, you only optimize your plan names so that they accomplish your desired goal when people are making a decision based on them. Your desired goal is almost always: 1) Allow people to correctly self-bucket without thinking too hard 2) Nudge them to the $$$ plans

        1 reply 1 retweet 22 likes
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      9. Patrick McKenzie‏ @patio11 27 Feb 2018
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        I have a great anecdote and I swear it happened: back when I worked at BigCo, we needed CrazyEgg for a project. I put in a reimbursement request for CrazyEgg Hobbyist, $9 a month. My boss read the paper request and redlined us up to Enterprise, $500 a month.

        1 reply 2 retweets 29 likes
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      10. Patrick McKenzie‏ @patio11 27 Feb 2018
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        I told my boss that I had done capacity planning and that the $9 a month quota was sufficient to our needs. "Nice job, Patrick. I am not putting Hobbyist on any piece of paper that I have to show *my* boss." Not first nor last company to spend $20k to avoid an eyebrow raised.

        2 replies 10 retweets 55 likes
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      11. Patrick McKenzie‏ @patio11 27 Feb 2018
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        All the meaty bits of the pricing table should, similarly, allow the user to easily bucket where they end up. Again, you can head off hard decisionmaking with good descriptive plan names. One variant of hard decisionmaking is capacity planning.

        1 reply 0 retweets 12 likes
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      12. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Geeks really, really love pay-per-use models or plans which are priced by e.g. "50,000 pageviews for $50, 250k pageviews for $200", but these are rough things to run by non-technical decisionmakers. Many good customers are not good at capacity planning.

        2 replies 3 retweets 23 likes
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      13. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Companies often value surety of pricing a lot more than they value lowest possible prices. It's easy to understand why this is the case if you've ever budgeted for one or done internal expense reporting; sometimes you're asking someone to do 12X as much work w/ variable pricing.

        1 reply 0 retweets 24 likes
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      14. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Also, when you have variable pricing or something which is priced off an axis which is opaque to the decisionmaker, you're forcing them to ask the permission of a business analyst to buy your software. Note that business analysts are not scored on giving permission to buy SaaS.

        1 reply 1 retweet 19 likes
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      15. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Worth noting, because it crops up very, very early in the life of B2B SaaS: The person who makes the decision to use the SaaS != The person who makes the decision to buy the SaaS != The person who pays for the SaaS

        5 replies 10 retweets 55 likes
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      16. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Very, very few SaaS companies have a really good understanding of user behavior when those three actors are different people. It breaks *all sorts* of assumptions which are baked deeply into e.g. metrics tracking, etc.

        1 reply 3 retweets 22 likes
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      17. Patrick McKenzie‏ @patio11 27 Feb 2018
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        The simplest complicated adoption case, of which there are many variants: Team lead has a business need for something. They ask around the office. An IC suggests your software and signs up for a free trial. They loop in team lead, who makes buying decision.

        1 reply 0 retweets 11 likes
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      18. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Team lead *probably* has a purchasing card (depends on your industry and geography) but very well might need to loop someone from IT or accounting in to actually buy the thing.

        1 reply 0 retweets 8 likes
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      19. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Annual discounts: great for cash flow, even better for churn; if you price month-to-month you should almost certainly have them. The easiest offer is "1 month free"; 10% off or 15% off are easy to communicate, too, but uptake on these offers is similar in A/B testing, so...

        3 replies 0 retweets 19 likes
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      20. Patrick McKenzie‏ @patio11 27 Feb 2018
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        Easiest two variants on annual discounts: a) Do them, but also send people an email after they've activated (achieved material use of software) saying "Hey want free money? Upgrade to annual; save $X." b) Do them, but also send an end-of-year promotion email about them.

        1 reply 2 retweets 21 likes
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      21. Patrick McKenzie‏ @patio11 27 Feb 2018
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        The incentive for the end-of-year promotion email is (for relatively small businesses) booking the expense before end of year saves them a bit of money on taxes and (for relatively more sophisticated businesses) "Your budget: use it or lose it. Why not use it?"

        2 replies 0 retweets 21 likes
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      22. Patrick McKenzie‏ @patio11 27 Feb 2018
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        "Patrick, are you assisting people in defeating their purchasing departments?" *cough* Never. *cough* Really: $249/$499 exist as price points specifically to do security research about the bounds for no-signature-required p-card limits while allowing $10k+ software sales.

        1 reply 3 retweets 41 likes
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      23. Patrick McKenzie‏ @patio11 27 Feb 2018
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        (In related news, enterprise purchasing departments and enterprise sales are basically in an uneasy state of codependent evolution with each other. Their iterated game is ultimately prosocial, and neither can exist without the other, but they have to be tactically adversarial.)

        0 replies 1 retweet 24 likes
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      24. End of conversation

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