Paddle Billing
ProfitWell MetricsUserVoice, founded in 2008, like any SaaS business, was focussed on building a great product, growing their revenue and driving value for their customers. But they were facing serious acquisition and expansion revenue challenges. “Our pricing and packaging was all over the place.” That’s when they reached out to Price Intelligently.
UserVoice seamlessly gathers feedback, justifies decisions transparently, and fosters customer connections with their users.
The solution is designed to help product teams filter out the noise in their product feedback, contextualize it, and really focus on what's most important to the cohorts that are most relevant to them.
As a result, UserVoice’s product, acquisition and operations strategy was rooted deeply in data and analytics. Well, most of it was anyway.
“Data and feedback is a big component to our operations. So it felt very foolish to say, ‘Well, let's just kind of guess at the pricing’.” explains Chief Revenue Officer Andrew Morton.
Leaving pricing to a “feeling”
UserVoice had been experiencing challenges with their customer acquisition and expansion revenue, largely due to their pricing and renewals strategy. Or lack thereof.
“Our pricing and packaging was all over the place, so it made it very difficult to consistently price for new customers. There were huge pricing discrepancies both in new business sales and in our renewals,” says Morton.
This made it difficult to quote customers on renewals. More importantly, it made it difficult to create and deliver on value with no clear definition of what customers expected.
We knew what the jobs to be done were with our product, but we didn't know how the market perceived ROI relative to our product. I don't want to say we were totally going finger in the air around the pricing structure, but we kind of said, ‘well, we found some momentum and we've kind of figured out how to price this a little bit’, but we don't feel like we had a real answer to the pricing question,”
The team knew there was a pricing obstacle to be solved. Pricing was based on competitors, with each part of the product priced depending on how different it was compared to competitors. But this approach only led to more questions - Which part of the product did customers value? How do we price this value?
Morton says they eventually realized they needed to invest appropriate research into pricing because they hadn’t done it until then.
UserVoice is not alone. He says pricing is not spoken about nearly enough as a growth lever in the industry. SaaS leaders don’t understand their perceived value and how to align that with their product, which fundamentally impacts how they expand within that customer base.
To illustrate the point, Morton says he never, until that point, had a comprehensive pricing model.
“Even [for] companies with hundreds of millions of dollars in ARR, it's just always been a guessing game. They don't dive enough into the segmentation of the different cohorts and the different value propositions for [each cohort],” explains Morton. “The pricing we see is so surface level, so you're not going to be able to break it down into more comprehensive packages.”
Morton, VP of Sales at the time, and the UserVoice exec team set out to find someone to help them take a more data-driven approach.
Enter the Price Intelligently team
UserVoice didn’t need to look very far, having seen a lot of the content Price Intelligently (PI) shared in the pricing and packaging space.
“It was pretty clear from the beginning, [Price Intelligently] was the right partner based on who they've helped, the results they've produced in the past and the content we had seen and digested from them,” explains Morton.
UserVoice partnered with PI to discover their true value metrics, understand how to charge for their value, and ultimately figure out the best way to bundle features together. The PI team spent time getting to know UserVoice, their challenges, and their hypotheses around pricing.
Next up, data. PI strategists pulled market data unique to UserVoice’s products and customer base, derived from custom research work. They were able to ask how much customers are willing to pay or what features they value. For each series of research, the team then produced a set of recommendations, turning data into actionable insights that would ultimately go on to make improvements to UserVoice’s bottomline.
Morton says they soon realized that their work with PI wasn’t just a simple pricing exercise, it was a value proposition, packaging, value articulation, and ROI alignment exercise. From the very first set of research, UserVoice could see that they were undercharging their products despite thinking they were in fact, overcharging.
We were trying to implement that stuff immediately because we felt that what we were learning was so valuable.”
They took insights about perceived value and made changes to their outbound marketing messaging and value proposition.
Morton adds, “It was really easy to implement the change and we were pretty transparent in talking about it from the beginning.”
When asked if the UserVoice team could have produced the same results in-house, Morton says there is “no way” they would have had the capacity.
“If you look at the extent to which the team did this, did the research, and went out and analyzed these cohorts and actually procured these results, there's no way we could have ever accomplished this.”
What’s more, Morton says the team needed an external party to get the best, most transparent results with unbiased analysis of their perceived value.
“I think that outside perspective is absolutely critical if you want to do this process effectively, because otherwise you're just going to have all these biases that are going to influence your research.”
The far reaching impact on UserVoice
Within the three months of the original work with PI, Morton says they were seeing immediate value.
“We've pushed our average customer value (ACV) up probably $10 or $11K over what it was, almost immediately. There was a gigantic gap. So our annual recurring revenue (ARR) was pushed up. Our average value on new business is through the roof. Our win rate has improved since then, particularly in higher tier packages. Our momentum, our velocity, our closed-won rate on the top tier all improved substantially.”
What surprised the UserVoice team was the far-reaching impact the report and recommendations had on the business, beyond just pricing. The research data has gone on to inform how the team packaged tools, how they have communicated value to customers, marketing messaging and beyond.
It really gave us a better understanding of the perceived value in the marketplace, not just for our product, but relative to the problems we solve and how people are benchmarking it, how they talk about it and what the different value levers are for the different stakeholders.”
Morton adds that teams have unlocked additional revenue because they’re better aligned to their customers expectations and value metrics. This had a far-reaching impact on their product strategy, giving them the direction they needed to invest in when it comes to product development for certain segments.
“We've actually built a more specific product for a specific group of users that resonates more with them, aligning more to their problems that they want to solve.”
Morton admits this is not something that they were thinking about before their work with PI. Previously, their product features were rolled out to everybody.The report and expertise from PI has helped the product team reframe how they think about product releases.
“We think about each feature now - How does it align with the other features and different sets of packaging? Is it something we want to expose to the whole user base because we think it'll improve retention versus an upsell opportunity? Are we trying to monetize? Is it a retention play? And those are things that we didn't think about as effectively before.” says Morton.
Initially, Morton and his team expected the project to be “just a pricing thing”. But he says UserVoice got to partner with “fantastic people”
“We expected them to be very analytical, which I think aligned very well with our values. But I think what was also really maybe unexpected, but equally valuable, was the relationship and the humanizing experience that we had with the team. It felt like we were doing stuff in partnership.” explains Morton.
How UserVoice raised their prices
When asked if he is concerned about raising their prices, given the current macroeconomics in the industry, Morton says no.
“Not wanting to raise your prices is competing on price, and there's no long-term value in that. There's no long term retention strategy there. You're perpetuating price sensitive customers by focusing on that as the core piece of the platform. If you increase your price, will you lose some customers? Yes, absolutely. But what is the top line revenue impact? What is the positive impact on your revenue retention? What kind of new customers do you get out of that?”
Morton says what really matters is that their CAC to LTV ratio has improved phenomenally by closing higher value customers and proving that they are better able to deliver value to the customers who matter.
So, what’s next?
Will UserVoice continue to iterate their pricing and packaging, given the information they have now?
“We’ve already started talking to the team at Price Intelligently about this.” says Morton. Their next steps will be to investigate how much their perceived value might have shifted, do they need to articulate it differently, what packages do we need to tweak or introduce. Where are the accelerators in the higher tiers?
Morton says he’s excited to iterate with the PI team. Watch this space…