a tale of two pricing journeys: evolving to usage models

A Tale of Two Pricing Journeys

Evolving to Usage-Based Models

Todd KrautkremerVP Marketing

Joe HamletSenior Manager,

Business Systems

@tkrautkremer @jhamlet

#Subscribed14 @tkrautkremer

Todd KrautkremerVP Marketing

#Subscribed14 @tkrautkremer

About Pertino – What We Do

Cloud Network Service that lets anyone build a secure network in minutes, connecting everyone

with everything IT, from anywhere.

• GA Launched in Jan 2014

• 5,000+ Freemium customers

• 130 paying customers in 5

months

• Targeting SMB IT

organizations

• Inbound marketing model

• Consumption-based pricing

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About Pertino – Current Pricing

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Changing Buyer LandscapeLosing control of the audience• Attention economy• Wealth of information is creating a poverty of knowledge

Losing control of the message• Customers seek out and trust other sources• Can’t control what is said, who’s saying it, how fast it travels

Losing control of the brand• Brand affinity based on experience, instinct and feels right• People don’t like to be sold, they like to buy, and they buy in

tribes

Losing control of the sales process• 98% of all IT buying processes start with a search• 57% of the buying journey is complete before sales enters the picture

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What Does It All Mean?

Customer preference is driven by third-party Influence and

hands-on experience

Buying process is increasingly driven by customer’s “compelling events”

It’s essential tointimately understand customer’s buying journey

Product movingupstream in sales process,

packaging/pricing are enablers

Buyer’s Journey Map – The Path to Purchasing

Engage Product

Engage Process

Engage Content

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Which Free-mium is Right For You?

High Reach

Millions

Low Affinity

High Affinity

Collaborative Value(more users drive more users, user-perpetuating)

High growth, highly viral

Low Reach

100K’s

Alternative Value(give away product to build community)

Lower growth, higher value

Experiential Value(facilitate buyer’s journey, offset marketing expense)

Lower growth, higher conversion

Usage Value(value increases with usage, self-perpetuating)

High growth, faster CAC recovery

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Common Pricing Misconceptions

Two wrongs don’t make a right, but three lefts do!

1. Everyone should be happy to pay for your product

2. There’s some mythical “perfect” price

3. Pricing can never be changed once chosen

4. Delaying charging indefinitely due to 1, 2 or 3

How Do You Determine Pricing?

Slide 9

== + =+

Relational Value Analysis(+/= indicates perceived value of Pertino from Spiceworks Community)

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How Do You Determine Pricing?

Local Maxima

Consumer Surplus

Demand Curve

Demand Curve mapped to profit

Bronze Silver Gold

Demand Curve Analysis

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Evolving To Usage PricingP

ricin

g

Product Maturity

GB/month

Hybrid

Devices

Users

Freemium

Support enterprise (e.g. pooling)

Support multi-device

Starting point

Support new use cases (e.g. DR)

We are here

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Pricing In Context of SaaS Metrics

LTV > 3X CAC

CAC back < 12 mo.

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Platform Considerations

• Best-of-breed approach

• End-to-end automation

• Deep SaaS platform Integration

• Facilitates buyer’s journey at every waypoint

• Agile, scalable billing platform

• Swapping out systems while scaling is difficult

SaaS Operational & Automation Platform

Build For the Business Your Building

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Summary• Pricing as strategy, not pricing strategy

• Buying landscape has changed, deal with it

• Understand your customer’s buying journey

• Pricing and packaging play a role in the buyer’s journey, not just the destination

• Balance market factors with SaaS metrics

• Choose your platforms wisely, billing can be a boon or bane

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Joe HamletSenior Manager,

Business Systems

#Subscribed14

A Snapshot of SendGrid

Denver, CO

Boulder, CO

Orange County, CA

Providence, RI

Romania

Key Customers

Founded 2009210 Employees160K Customers13 Billion Emails SentDeveloper Focused

of the world’s wanted email does not reach the inbox

20%

Imagine if 1 out of 5 emails you sent just disappeared!

We get mail to the inbox.

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Value Proposition

Best in class deliveryScalabilitySupport Reliability AnalyticsEase of use

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SendGrid Pricing Story

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Make it Simple, Make it Scale

Freemium

Volume based

Monthly

Simple product and pricing

Self-service

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Package Changes

Mid-month package changes Risk of revenue loss Operational overhead

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Package Changes

Solution

Load usage daily

Queuing

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Usage Volatility

Overage based pricing

Revenue volatility

Decreased predictability

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Solution

Reduce usage based pricing model Volume based packages choicesTiered + Recurring usage model

Usage Volatility

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What’s next

Tiered usage + MRR charge models

New usage types

More package options & add-ons (MRR)

More frequent usage loading / rating

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Q&A

Todd KrautkremerVP Marketing

Joe HamletSenior Manager,

Business Systems

@tkrautkremer @jhamlet