Pricing Experiments

One of the things that Outseta itself is designed to do is make it really easy for founders to run pricing experiments—or even change their pricing model—without involving developers. The irony here is that one thing I’d undoubtedly do differently if I could start all over again is I’d run more pricing experiments than we have to date—nothing has had a more significant impact on our growth!

It’s worth note that the pricing experiments that we’ve run have had more to due with optimizing for revenue growth rather than optimizing for subscriber growth. In fact, our most successful experiments have consciously slowed subscriber growth while increasing revenue growth. But at the end of the day revenue growth is what we’re all after, so I’d be remiss not to discuss these experiments.

One of the challenges in growing Outseta has always been and always will be the market we’re targeting. We’ve chosen to sell to mostly bootstrapped start-ups—companies that by their very definition don’t have large budgets. We’ve heard the same message over and over from our target customers—I can't afford to spend much on software as I get my business off the ground, but I’m happy to pay you more as my business grows.

This sentiment has always guided our pricing strategy—we keep our subscription fees as low as we possibly can to give founders access to all of our tools, then we make money as a business by taking a 1% fee on successfully processed payments. This aligns our interests with our customers'—we grow when they do!

For almost 5 years we operated with the most customer friendly pricing structure I could think of—the goal was to build a customer friendly and lovable brand while exposing as many people to Outseta as possible.

Everybody started on a free “Onboarding” plan that gave them access to every feature, but you were limited to having only 25 contacts in Outseta CRM. What that meant, practically, was every user could take as long as they wanted to integrate with Outseta and make sure they liked the product—but whenever they started using it in earnest, they’d trip over the 25 contact limit and move onto our paid plans.

It was an amazing model—I still love it! But unfortunately it just wasn’t sustainable for us to continue to offer this plan as a business. As a small bootstrapped team, this meant that we had thousands of users each month on a free plan—most of whom were submitting support tickets and setting up onboarding calls. We were drowning in support, to the extent that we just couldn’t keep up with offering a freemium plan.

The make 'em pay pricing experiment

The first major pricing experiment we ran was really an effort to save our asses—we ditched our onboarding plan and only gave users the option of signing up for a paid plan. No freemium, no free trial, nada.

Our general thinking was that we needed to reduce support volume, and that at our $29/mo price point customers that were serious about Outseta would be willing to pay a modest fee to give our software a try. We were certainly right—paid sign ups tripled almost overnight, but churn increased fairly substantially too as some customers disqualified themselves shortly after getting into the product. In either case, this experiment effectively doubled our growth rate—you can read a full run down and report on this experiment here.

Finding a happy medium 

Our second major pricing experiment was a search for a happy medium between our original onboarding plan and our direct-to-paid pricing model. We increased our entry level price $39/mo and introduced a 7-day free trial, with a credit card required up front. 

We found a winner in this model—it’s still our pricing today. This was a big win for us on multiple dimensions:

• At $29/mo we were delivering a crazy amount of value for the cost of our software. While it’s important that we keep our entry level costs accessible, $39/mo is still a modest fee and makes it much easier for us to run a viable business.
• The 7-day free trial gives people the opportunity to get into the product and try it, but also creates some urgency. The goal here was really to allow customers the chance to disqualify themselves during the trial if they found that the product didn’t fit their needs. 
• By requiring a credit card up front, we introduced significant friction that largely screens out companies that aren’t serious about evaluating Outseta. And for those that are on trial, it sets the expectation that we’re working towards a paid subscription together.

While these experiments certainly played a pivotal role in the velocity at which we signed up new paying subscribers and optimized our revenue growth, it’s worth mention that freeing up our team’s time was equally as important. Since removing our freemium tier our product team has been able to ship features faster and I’ve freed up a lot of additional time to spend on marketing.

Key Takeaways

• Pricing experiments have had as large of an impact on our revenue growth as anything.
• Your pricing model needs to work in harmony with how you run your business.
• Consider how pricing affects support volume—changing your model can give you team time back to focus on marketing and product.
• Encourage customers to actively use their free trial period to evaluate your product—that’s what they are supposed to be for!