Lessons Learned When Monetizing Subscription ServicesMonika Saha : VP Product Marketing,

Zuora

Topic Lessons, Observations & Suggestions - 30

mins○ Designing growth journeys○ Selecting pricing variables○ Maintaining a healthy pace of innovation

Audience Q/A - 15 mins

Agenda

Lessons, observations, suggestionswhen designing pricing and packaging

01

Designing “growth journeys” 0

2Single vs. multiple value metrics

03

Maintaining a healthy pace of innovation

Healthy upsell revenue is critical to growth

% of bookings from upsells

Source: 2016 Pacific Crest SAAS survey

Cost of new business vs. upsell, expansion, renewals

Challenge : Balancing acquisition vs. lifetime value

B2B

Pressure to meet quotas

Higher bookings numbers

Lower net dollar retention

B2C

“Blind” discounts/pr

omotions acquire a

high volume of

subscribers

Higher subscriber

growth rates

Lower post-promotion retention

Suggestion: Design for 2 factors to drive upsells/expansion

Current ARR/M

RR

Capability driven growth levers

Consumption driven

growth levers

New ARR/M

RR

a.Capability-driven: The need for an expanded set of product capabilities (cross/upsell)

b.Consumption Driven: Higher use and adoption of a base set of capabilities that a customer has bought (add-

on)

Suggested packaging framework

EDGE NEEDSIdentify new capabilities

customers may want as their needs begin to extend beyond baseline needs of their profile

Map this to baseline packages

Map this to capability

driven growth (tipping points,

cross/up sells)

Map this to consumptio

n driven growth

(add-ons)

COMMON NEEDSDefine the most common

pricing profiles and the “baseline needs” of those

profiles

ADOPTION SIGNALS

Identify signals that indicate higher adoption of the same set of capabilities over time

⇊optimal packaging

Challenge : maintaining compelling “tipping points”

Benefit A $10

Benefit B $5

Add-On Creep

WeakTipping Point

Benefit ABenefit BBenefit C

GOLD PLAN

$150/user/yr

BRONZE PLAN$100/

user/yr

Compelling Tipping Point

BRONZE PLAN$100/

user/yr

GOLD PLAN

$150/user/yr

Benefit ABenefit BBenefit C

You might start here …. But over time you could end up here ….

Suggestion: carefully consider the “value-optics” of add-ons

Benefit ABenefit BBenefit C

GOLD PLAN

$150/user/yr

BRONZE PLAN$100/

user/yr

(A + B) $50Tipping point

advantage

This solves for a need to offer add-ons A & B with the bronze plan, without eroding the price-value tipping point of the Gold Plan

Lessons, observations, suggestionswhen designing pricing and packaging

01

Designing “growth journeys” 0

2Single vs. multiple value metrics

03

Maintaining a healthy pace of innovation

We are seeing an increasing number of value metrics

Source: 2016 Pacific Crest SAAS survey

Challenge : selecting a value metric for complex, mature, cross-departmental products

You might be leaving money on the table

Buyers will have a hard time aligning price to value delivered

✕

✕

A single value metric is ideal, but sometimes not every product innovation will map to this value metric

Without the right value metric:

Value Metric : # Of Sales Users

100M 10M 1M

CFO Value : Transactions automated

VP Sales Value : Quotes streamlined for users

Suggestion: map one value metric per persona

Value metric : transaction volume

Lessons, observations, suggestionswhen designing pricing and packaging

01

Designing “growth journeys” 0

2Single vs. multiple value metrics

03

Maintaining a healthy pace of innovation

Challenge : keeping up with a continuous innovation cycle

Over-loaded add-ons

Eroded price-value differentiation

✕

✕

Pricing/Packaging decisions have to be made at a faster, more frequent pace

The pitfalls of not aligning the pace of pricing/packaging innovation with product innovation:

Suggestion: create an innovation alignment framework

PRIMARY PRICING GOALProduct

Innovation Benefits

Competitive play

Reduce sales/

acquisition friction

Generate new

business revenue

Generate upsell/

expansion revenue

Increase package

differentiation

Benefit name 1 +Benefit name 2 +Benefit name 3 +Benefit name 4 +Benefit name 5 +

Force yourself and your primary stakeholders to attach ONE primary pricing goal to each benefit

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