# The Three SaaS Growth Levers that Keep You From Plateauing – Lars Lofgren – MicroConf 2016

Channel: Rob Walling
Video: https://www.youtube.com/watch?v=Cwv-NbWYanc
Duration: 42 min
Language: English
Words: 7188
Transcript page: https://viewrankai.com/tools/youtube-transcript/Cwv-NbWYanc

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[0:00] [Music] [Music] so today to wrap up the event we're gonna talk about the three levers or the three really the foundational engines for building a SAS business to make sure that it keeps growing well beyond any goal you might have and most importantly doesn't stall out and Plateau so here's where you can find me on the Twitter's if you guys want to hit me up with questions later but here's who I am this is what I've been doing the last couple years I currently run the growth team and I will teach you to be rich built the grow team over at KISSmetrics and that's how I learned a lot of these

[0:47] these frameworks so the three foundational growth levers when I'm trying to build a SAS business this is what I obsess about more than anything else it's not tactics it's not landing pages it's not necessarily even a/b tests I start here three lowers our world class churn the revenue expansion from your cohorts and accelerating acquisition at the right time the timing is actually really critical and we'll get into this at the end so here's what you need to know if you don't get these three things working together you will Plateau it might be a 30 K M RR might be a 50 K might be 100 might even be 500 K

[1:31] and M RR but if you don't get this thing running smoothly you will Plateau it's just a matter of time not if but when also you got to get these things working in the right order you have to tackle them in the right order if you do this out of sequence you're basically trying to grow a SAS business it has some deep fundamental problems and again then you'll Plateau so first let's talk about sure this is number one now I know Patrick gave some benchmarks to be honest I don't know who's saying five percent monthly churn is a good benchmark I think that's a horrible tripling but here's the the

[2:12] baselines of the benchmarks that I use okay your target should be two to three percent monthly churn if not more than that okay threes a little on the high side if you're in that three to five percent range monthly true honestly you don't have product market fit yet your product isn't good enough you need to double down and keep working if you're in the five to ten percent range especially if you're early on that might not seem like a lot but your business is basically on fire okay you have a major product market fit gap you're not delivering anywhere near the value that you think you are and you

[2:52] need to focus really heavily on closing that gap in your product market fit if it's over ten percent then you should probably get out of the subscription game because it's not gonna work now let's say your church isn't where it needs to be you'll get your team in the room and you guys will start brainstorming a bunch of ideas on how to fix that problem here's the ideas that come up very frequently you know let's go ahead and remove the cell service cancellation so people have to call us to cancel why don't we try to fix product donburi why don't we push annual plans why don't we force annual plans we

[3:30] can reach out to inactive accounts and re-engage them before they finally turn out we can do down cell campaigns we can prioritize support for our largest customers so only the small customers cancel or if we have you know a large enough price point we can build a really robust customer success team with onboarding programs and 30 60 90 day goals and a lot of structure to really make sure people get integrated and set up there's a lot of options only a couple of them are good ones so here's how I break them out bad versus marginal versus major the major wins are the ones you want to focus on marginal they'll

[4:09] help what they'll help at the margins okay these are small tactical things you can do they're not gonna cut your churn in half the bad ones you really want to stay away from now the removing self-service cancellation it's a bad option however it really works especially if you if you have poor product market fit and if you rip your self-service cancellation out your cancellation will go down okay now the reason I say it's a really bad idea is because you're causing some really serious damage to the long-term of your business and it's not gonna show up in the metrics right away you're hitting your brand you're really pissing

[4:48] your current customers off and even worse the biggest problem is your team is no longer focused on the core problem which is fixing product market fit and the product they're worried about tactical hacks that get you through the next couple of months or anything the next year that's not where you want your team to spend their time the other bad option contacting inactive accounts don't do this all you're gonna do is remind people that they don't get any value out of your product and then they're gonna cancel your churn is going to double while you're running that campaign you're gonna do it for a few months you're gonna realize that's a

[5:22] really bad idea you're gonna stop doing it and then your turns going to come back down so just skip all that and don't do it in the first place the marginal ones pushing annual plans yes you should push annual plans it helps with cash flow it does reduce churn slightly but it's not a game-changer support ticket prioritization yes your biggest customers should get immediate response if possible but it doesn't cut your turn in half same thing with down sell campaigns less revenue is better than no revenue but once someone wants to down sell they're already on the way out so the major wins they're generally on onboarding or the

[6:00] product so improving the value of the product or helping people get to that value as quickly as possible these are hard problems they're not easy your team's gonna struggle with them but it's really your own only lever to permanently get churned down right so don't avoid the hard problem and get distracted by little tactical hacks now if you noticed I skipped one item the forced annual there are certain situations where forced annual can work really well and you should do forced annual the biggest most straightforward one is if there's an established norm in your category at the segment of the whole target market that you're going

[6:46] after you know small versus mid-market versus enterprise there are established norms at every level for any given category if there's a norm do forced annual so a very easy example is marketing automation especially mid market part out HubSpot Marketo all annual contracts if you're in mid market at all you can usually get away with forced annual without any issues however be really careful with this stuff because if you misjudge it and you force annual plans you could drop your funnel off a cliff your acquisition before and after you try forcing annual will literally just drop down to ten twenty percent of what it was last week be very very careful

[7:32] with trying to force people when there isn't an established norm in your space in your category but really again don't get sucked into the tactical hacks when it comes to churn focus on product market fit focus on onboarding those are your two levers now churn isn't the only way to measure product market fit there's another way I like to validate that churn and the product value or the turn as a result of product value and the way I like to do that is with this thing called a product market fit question I'm sure some of you have seen it Shaun Ellis came up with this heat

[8:12] and taught it to me and I now use this on just about any sass product I touch I start here to get a sense for what is the gap on my product market fit regardless of what churn might be saying right I need another data point because I'm about to invest a lot of time and energy in a potential problem I want to make sure I'm going in the right direction so the question is pretty straightforward it's a multiple choice questions you ask how would you feel you could no longer use whatever your product is three choice multiple choice very disappointed somewhat disappointed or not disappointed it's not really that

[8:41] useful pretty simple send this to a couple hundred or paying customers and you'll know instantly what your product market fit actually looks like because there's a very simple benchmark that you should be targeting when you ask this question forty percent of the respondents should say disappointed in other words at least 40% of people love your product usually when I run this survey I get a 25 to a 35% product market fit score sterling what we call it the products the value that you think you're delivering with your product is generally not quite as good as it really is okay your customers have a higher standard than you do this question tells you

[9:31] whether or not you're really meeting that benchmark and to two other products that I've done this survey on that I can actually talk about actually Heaton ran this survey on slack and they had a product market fit score 51% when I was at KISSmetrics I did a survey on Google Analytics users never had 72% which is ridiculous is by far the highest score I've ever seen I guess people really love their vanity metrics but you're not going to hit these numbers right if you get it over 40 great your products where it needs to be your churn is probably at a very manageable level you can focus on those

[10:07] marginal tweaks to continue to optimize it but you can move forward into the next levers into the next engines of your business if you're not here do not pass go do not keep going focus on your product so the second big engine cohort expansion a lot of people miss this step it really hurts them later fundamentally you want your product built in a way and priced in a way that as your customers grow you grow too right as they add more people as they add more revenue you are also generating more revenue from that customer now the trick to making this work really comes down to one variable

[10:56] and pact we've got into this a little bit yesterday but it's really the quality of your pricing metric do you have a really high caliber pricing metric baked into your product baked into your business model now the easiest almost cliche example of this at this point is Salesforce and their user or seats metric right so every time you got a user to Salesforce you pay them more money now this works almost a little too well at Salesforce because of how connected that pricing metric is to value so every time I add a sales rep I'm about to spend a lot of money on that person's salary and I'm about to

[11:37] make a lot more money than that salary a couple hundred dollars a month on that extra user seat is irrelevant right I don't care no Director of Sales no VP of Sales no sales manager ever has to get approval for adding another license to Salesforce because the value is that easy to see most companies are not like that most companies try to force pricing metric around seats or some other metric that either isn't understandable or it's too complicated or isn't tied closely enough to revenue and GoToWebinar is actually a good example where they get half of it right and they screw up the other half I think if they just tweak

[12:22] their pricing they could have it add some very nice growth to their business so they actually have to pricing metrics the first one works really well it's on attendees they have three tiers based on how many attendees you want to be able to invite into your webinar this works great and I never have any issues getting approval for budgets on GoToWebinar upgrading GoToWebinar and the larger my marketing machine gets the more I'm gonna have to pay go to ever it's everything that we want from a really great pricing metric the more attendees I have the more demos I'm throwing people into the more trials I'm getting the more sales I'm making right

[13:01] the connection is there however their second pricing metric is really poor its organizers its admins that help you run the webinar that connection to webinar or that connection to revenue is actually really weak all right if I have another admin help me run a webinar that's not gonna actually do anything for my revenue so how can we get more leads more demos all its gonna do is take some slight annoyances out of my day out of my job right but do I really want to burn my own social capital internally as a manager of an entire team to get approval for an upgrade on GoToWebinar no I'm just gonna get pissed off and go

[13:42] to webinar we're all gonna use the same login right so don't force the seats metric find a pricing metric that really works with the value that you're delivering so people want to upgrade it's really easy for them to do so so again tie it to value that's close to value as you possibly can for a lot of your products this might not even be obvious right you know like Lars actually well what where's my value metric here how can I actually tie a given event to revenue or similar or the amount of dollars I'm saving a particular customer even if it's complicated spend some serious time with

[14:18] your team figuring this out because if you get this right you'll basically add potentially millions of you know monthly recurring revenue without having to do any extra work so it's worth the time up front the real magic from this engine comes when you pair it with the first engine getting that super low churn if you get your churn right down and eat your expansion revenue up you end up in this very magical place called negative churn right now they return all it means is that the revenue from each cohort each group of customers that you're pulling in expands faster than the revenue that you're losing from that

[15:01] cohort from cancellations and down sells let's do a quick recap so we know where we are and our business at this point okay we spent a lot of time focusing on product market fit and our product value so we've gotten our churn way down we've then spent a lot of time focused on our pricing metric to get our expansion revenue up we've now combined the two so we're in negative churn and our business is now stable or growing without any acquisition we don't have to do anything at the top of the funnel we don't need a growth team we don't my marketing team we don't need to worry

[15:37] about brand nothing this read like this this business model is incredibly stable the SAS business is basically sitting there waiting to grow your entire team could take an entire month off not do anything and you'll still grow right that's absolutely amazing and the best SAS companies get to this or get very very close now let's talk about acquisition the last kind of red flag that I look for before like really trying to build it lead gen program or growth program is if you really have solid product market fit there should be some word-of-mouth growth in your funnel right there should be some steady consistent it'll be small won't be

[16:27] aggressive won't be crazy but you should be able to feel the word-of-mouth in your funnel soon as you launch any sort of online marketing programs or acquisition programs you know that just blends into everything else and you can't see the word of mouth you can't feel it but you're not doing any of that stuff already it should be obvious that that's happening when you talk to customers and ask them hey how did you hear about us the fact that they heard about them so heard about you from a friend a co-worker a boss some other company some blog post those kind of answers should come up very frequently

[16:58] if that's happening okay now you're really ready to focus on acquisition there's a lot of lead gen pass out there most of these can be bolted on top of a b2b SAS business I have anything from you know inbound and content engines cold calling events partnerships get into paid PR affiliates viral loops if you really baked them into the product you go after social I've seen all of these work in most categories they all can work but the thing is you really need to focus okay I've done all of these at one point or the other some of them I'm very good at some of them I'm

[17:37] okay at but every time I'm thinking about okay how am I gonna find the next source of growth how am I really gonna grow like a consistent stable acquisition engine I'm always thinking about how can I focus how can I go after one channel do that really well and then as soon as I think I'm heading diminishing returns on that channel how can I go after the next one do not spread your team too thin do not spread yourself too thin you'll never build the momentum that you really need generally takes me a solid solid year to build a channel from scratch okay there's a steep learning curve on

[18:12] these things generally every channel there's a certain pattern that you need to get to sync up just right there's a couple of variables that all need to line up and then the channel works but if any of those is out of sync then the whole thing fails right either you're generating traffic you're not generating revenue or vice versa or you knots or how to scale it you don't know how to throw a system behind it that can be run by kind of an entry-level marketer to keep it growing consistently there's a lot of complexity that goes in to being able to pull that off and every channel

[18:43] is different and there's usually different quirks when you go from one category or one target market to the other so don't spread yourself too thin a good benchmark for what you're looking for ten percent month-over-month lead growth that's usually where I start depending on the size and how much you know growth is built into the engine already you can tune that up or down but generally you're looking for something in this range the real question though is why not start this in the beginning why not do this earlier and more importantly what happens if we do do it at the beginning well some nasty things start to happen the biggest point is

[19:26] that acquisition cannot outrun high churn forever especially if you're missing that expansion engine to cover a big portion of that churn the reason for this is acquisition tends to scale and grow in a stepwise function it's linear it so I get a spurt of growth it tapers off then I go find another spurt of growth it tapers off and I just kind of work my way up a staircase very few channels are truly exponential on the acquisition side every once in a while you find one but they're very very rare and if you're not sure whether or not yours is then it's definitely not okay however on the other side churn does

[20:06] scale exponentially no matter how good you are at acquisition if your churn is high it's going to catch up and then you plateau so you want to make sure everything's built in upfront to avoid that in the beginning now if you're really good at acquisition you could push that problem down the road and you can keep you know finding other sources of acquisition you can keep optimizing but sooner or later it catches up with you and things get really hard so ask yourself if the majority of your acquisition every month goes to replacing lost m RR you're in a bad spot and it's a matter of time before you

[20:44] Plateau now poor product market fit doesn't just show up in churn it also shows up in the funnel people think that all these metrics and all these difference you know pieces of a business operate independently that you can push on one without impacting the others and it's definitely not true deep problems with your product will hit your funnel and you'll end up with something if the product market fit is bad enough you'll end up with something I call the alligator sales funnel now if you have good markers they know how to run online channels they'll find a way to grow the top of the funnel you won't get more

[21:25] traffic you will get more free trials you will get more demos they will find a way to do that even add an aggressive growth rate at ten percent month-over-month so the top of your funnel gets this nice growth curve however because you have product market fit problems not only are you having a bunch of customers churn out the back end but you're having really serious problems taking that top of the funnel and converting them into actual customers and into actual revenue so the top of the funnel lifts the middle of the funnel doesn't budge an inch now the reason this happens is because marketing can dodge a bad product and fairly

[22:04] easily to a halfway competent marketing team will be able to just avoid it entirely they'll get a little bit more vague with their benefits and their value props they'll replace screenshots with illustrate okay they'll just skip all the little details of the product and neglect to talk about it because they know as soon as they actually start talking about it all the conversion rates go down okay so they can lift the conversion rates but your sales team or your product onboarding if your self-service they don't have that same luxury okay they have to actually show the customer what they're getting at some point now if you

[22:38] have a world-class sales team that really knows how to close you might be able to delay this problem but you're still gonna have issues with churn and anything short of the absolute top-tier world-class sales team is going to struggle with this any average typical sales team is not gonna have a good time now the alligator funnel it actually gets even worse because not only do you have this really serious problem in the middle of the funnel where your acquisition just is going to but your entire team starts focusing on the symptoms and not the fundamental problem the fundamental problem is your product market fit is not where it needs to be

[23:17] you're not delivering the value that you really need to be to those customers or to your prospects but marketing will start blaming the sales team and the sales team will start blaming the marketing team sales will say that marketing can't or is only generating leads sale or marketing team will say that sales doesn't know how to close worth a damn and the entire culture gets really negative really fast and what's worse is now your entire team is focused on a problem that really isn't the actual problem and it's causing a lot of negativity people are getting burnt out and you're losing a lot of internal momentum when you see things like this

[24:00] it's usually a product problem it's a term problem you really gotta tack the fundamentals of the business your marketing and sales teams aren't going to solve that for you right it's a leadership issue it's a product issue go solve the hard problems if you do this upfront by focusing churn early then when you do throw gas on the fire and build out a sales org or keating org and Adam and Jen program this entire inside sales funnel you don't have these fundamental problems that forces you to re-engineer that entire thing in mid-flight so again the three growth levers and the order that you go after them first make sure

[24:45] you have product market fit it's super low churn don't go past that until you've hit it then get your cohort expansion in place really focus on that pricing metric that's the key then and only then do you go build your lead gen program on top of all that thank you I'm now happy to do as many questions as you guys want hey so you mentioned if you're sitting at over 10 percent churn you should basically just shut down what you're doing because it's not working well I am that guy I am sitting at well percent 12 percent 13 percent at this point I'm hitting every one of the

[25:34] plateaus that you're talking about how serious are you about that statement is that an offhand remark or should I seriously be re-evaluating what I'm doing or my product market fit or what yeah so if I was in your position I would be asking some very serious questions on whether or not I'm going after the right category right so not just how can I tweak my product what am i serving the right customer like it should I go after an entirely different target market like are you looking at a very extensive pivot and the answer might be yes but I can't tell you that you're gonna have to spend a lot of time

[26:09] with your customers and do some soul-searching on is there an opportunity here or should I just go after something else a couple of couple of things to look for to know that whether or not you're on the right track one is if your product is project based in other words people come in they do one project off of it and then they don't they stop working with it you're probably gonna have some pretty high turn right survey tools are a really good example this you come in you run your survey you you stop writing your survey because it's done it's one can and then you cancel your account right

[26:42] SurveyMonkey actually looks they don't even look at monthly churn they track all their monthly customers on an annual basis because the churn is so bad because people are constantly coming in and back out so I'm always looking for a SAS product that is going to be used very consistently by my target customer I'm also looking at something you want to find a product that when you ask your customers like when you're not even talking about your product you're just asking them you know about their day to day and you say okay we're like the top three problems you deal with your product does not help solve one of those

[27:18] top three problems it's probably a bad sign all right it's gonna be really hard to convince them that yes there's value here and you really want to keep paying for it hey Lars I have a question about the churn numbers you threw out so you have you know 10 percent and above typically what I've seen is with SAS the first say 60 days is gonna be higher turn and then it's gonna drop way off right so when you say your 5 percent your 3 percent are you tell them post 60 day sometimes that can be 90 depends on the app your junk in the post 60-day

[27:49] mark because if you just average up over all the months you're gonna get a higher than unusually higher rate does a lot of people in the first 60 days are actually just extending their trial yeah yeah so that first 60 days there is a lot more volatility in it I think Shopify stopped tracking or they actually separated their turn rates out from 60 days versus everything after that and track them completely separately so take a look at it if you see remarkably different churn you know at that 60 days and it's just people that didn't on board that yes there's probably you know some wins there if that's happening to you I take

[28:23] a really hard look at your onboarding and say great the values here the people that do see the value stick around how can I close that gap so even if the churn is higher in the first 60 days I'm not getting hit nearly as hard from it

[28:41] do you have any general advice on what it makes sense to have a free trial versus a freemium model for the onboarding so freemium and free trial are two entirely different funnels I used to be really hard on b2b freemium until Mixpanel kicked my ass with it and now I take it a lot more seriously so freemium can really work tremendously well but there's a couple of things that are required in order to make that happen especially on SAS you need some halfway-decent pockets for cash because the support is going to get hard and that's it's probably one of the reasons we didn't do it or we should have done

[29:27] it anyway but it'll seriously up ramp support time your you need you need to make sure that your target market is big enough for freemium because your conversion rates are gonna be really bad and that's okay that's sort of part of the game but if you if you you know if you're looking at your entirely retired dressing Bowl target market there's like 10,000 potential people that's it's never gonna work right don't even bother trying it try to try to raise your rates go for some pretty high price points high touch model don't do this like freemium low touch model but if you if you're going after a category that's

[30:08] really really large then it can work pretty well again the other other area that really starts to make sense is any type of product that again is not like project based right it's ongoing usage because then you get them in you get them using it regularly and then you upsell them later which also depends again on the quality of that pricing metric so if you have any problems with your pricing tiers or getting people to upgrade that'll also show up in really low conversion rates on freemium so it can work its acquisition but again like everything else there's a lot of nuance to it it's another question over here

[30:46] hi Lars I'm over here on the year left yes so we haven't meal planned subscription business so yeah we have had dinner before and I know I will teach you be rich you guys have some kind of a subscription meal plan business or something yeah I think because I actually hired a developer that actually subscribes to it and I'm kind of curious and I know maybe I you're not gonna be able to tell me like what the churn rates are but arch our monthly churn is twenty three point one percent on monthly but our annual churn is like one point two percent so I'm just curious

[31:20] what what you have to say about that you know we're pretty well established about four plus years down the road and so yeah so every once in a while you know there's like as I mentioned earlier there's a couple situations where forced annual can work if there's established norms in this base it can also work in like either you're going after very small businesses or b2c and your monthly churn rates are just extraordinarily high at twenty thirty percent range if you push and if you actually force annual but you're already seeing you know one percent on your annual plans I might try forced annual for a month and

[31:54] see you're gonna take a hit on acquisition but if it's that bad you can get people bought in and you're more it's about getting the commitment for the long term especially you sense you know really small businesses or b2c customers are really fickle they don't tend to stick around okay yeah then I would consider forcing annual and not offering the monthly plans at all just wondering if you can share any quick wins with regards to onboarding from your time at KISSmetrics yeah so every on the my answer has there no there are no quick wins on onboarding so every onboarding funnel is different I've done every time I find a couple of

[32:40] wins that I think I that that work consistently they're only working consistently in that funnel as soon as I go try on on a different b2b funnel they don't work nearly as well they're probably the one that I use very regularly is the number of signup fields I know it's kind of like a very best practice reduce sign of fields to increase conversions a lot of forms that actually doesn't do anything what in sign up flows it does what we saw as we take about a 10% hit on conversions into the onboarding and into the free trial for every extra field that we added so then we had a very honest conversation

[33:19] with the sales team you know how many of these fields you guys actually using because we should get rid of them if we're not using it after that after the initial signup the only way you're gonna get some really solid wins is with deep customer development so really in-depth surveys lots of time with customers lots of user testing and user recordings through the funnel to see you know what pieces do they actually get value out of and then how can you deliver that value instantly so I try to stay especially in onboarding I try to stay away from you know hacky conversion type stuff and I'm

[33:54] always asking what is the core value I need to deliver and how can I make that happen sooner over here on your left do you have any experiences working with companies that have experimented with with with setup fees versus ARR excuse me with versus going on annual plans and how that's affected their LTV your churn rate yeah especially for like service businesses where you kind of have a product that service on the front yeah yeah yeah you should definitely if you can charge it do it so it's not gonna it's not gonna save you from all these other problems you know getting all these other engines working together the

[34:36] load sure and the expansion revenue all that stuff the acquisition but if you add a service fee for onboarding or set up especially in any mid market tier that's very very standard and an enterprise people expect it they get worried if you don't have it because then they it's kind of a sign that you don't know what you're doing so it is a standard for larger customers you should definitely be doing it especially if you have if you have a serious like customer success team with very structured onboarding programs you absolutely should be charging for that any sales team is going to be able to add that to

[35:09] the contract without a major if they're any good I'm wondering you listed up there the m RR I'm over here sorry awesome I'm going back yeah sorry you listed the the acceptable kind of m RR churn rates for for SAS products what would you expect those like minimum thresholds to be to hold for annual for the ARR like I mean do you want to have I mean three percent or two to three percent annual as well or are those a little bit higher for annual no annual is gonna be a lot higher so you basically have to take your monthly churn and then blend that all together

[35:59] and that gives you an annual churn right there's a bunch of equations if you just google like your turn monthly turn into annual churn you'll get some equations compound what about an annual to monthly I guess yeah same way goes a ways so the same benchmarks work at each one you just make sure you're using the right formula to calculate it okay thank you would you ever combine a premium with free trial for b2b downloadable product or do you think the free tier would be cannibalizing sales I would do or the other yeah so when you do free trial versus a freemium it's one of those

[36:35] variables that you can't really build in isolation you have to build the entire funnel around it everything from the acquisition before that to get them into the plan and then how do you upsell them afterwards you're gonna have an entirely different system and tired even at our different word chart to support those separate funnels so I would pick one if you can make freemium work great if you have the funds to support it it's a great moat to build for your business but if you can't if you need to be leaner you need to be much more careful with cash then do a 14-day trial and

[37:09] just stick with that right here in the center can you talk a little bit more about the use cases where pricing per seat makes sense versus like a group of seats the example that you used with join up me yeah so when I'm considering whether or not a seat pricing metric is doable really only need to ask one question that's it or your user is going to be able to share a login and if they can they will okay so like you know adding seats to like just metrics would be a horrible idea because people just share the same login and they'll all you know it's just analytics

[37:48] there's nothing personalized there's there's very few pieces of the product that actually adapts based on who's logging in so it would never work same thing with like survey tools or other data tools people can just share a log in and you're going to spend a lot of time trying to add a lot of authentication and security and to prevent that from happening which then you're just fighting your users right which is there's a huge opportunity you'd be missing out on that expansion engine so for a seat metric to work a core piece your product if not the majority of your product needs to deeply depend on your users to be able to log

[38:27] in under unique accounts CRM project management tools any type of like feat like tool that depends on deep feedback like Google Apps like everyone needs their own unique Gmail account any communication tool slack another really easy example right there pricing metric is almost too easy because everyone needs their own slack account right it's no brainer for a lot of other products it's not a no-brainer and that seat metric can actually be deceiving because it seems like it'll work really well but for most products it won't tailors every here I don't have a SAS application I have a monthly recurring membership site where the primary draw is a course that

[39:11] a user gets to take so I'm wondering if this framework is still applicable and if so how you would handle cohort expansion yeah so if I had a course I would not sell it on a subscription that's that's my I'd sell it I'd ramp up the and sell it all up front that's because user and decay rights and online courses are just very severe right so the churn rates are always gonna be super super high and if you talk to you know a lot of you look you like any of the hardcore info product marketers they've all done a membership site at one point of the

[39:45] other and it generally stalls right it's very hard to make it work so I have an ass ass product for unsophisticated SMBs by definition they're kind of limited in the amount of value that will grow and still fit as a product because they're eventually they won't be an SMB they'll probably grow themselves out of the product do you find that having a good dual access pricing hurts more than it helps when it comes to unsophisticated customers so having multiple axes around your pricing you'll need to have that at some point the pricing metric is not the only way to set up your price like Patrick got into a lot of that yesterday

[40:27] right so you're gonna have tiers you might have multiple products you'll have various upsells as you grow you will need to add additional complexity if you look at MailChimp for instance like they now have multiple products right that you don't sign up for you know their advanced email tool I don't even remember what it's called they keep trying to sell me on it and you know they're normal they have MailChimp they have mandrill they have all this stuff multiple tiers within each but that does not happen overnight right so you'll definitely get there if you get big enough you know it is a great lever for

[41:00] expanding your monthly recurring revenue over time we are essentially trying to take all those different tiers and all those different metrics and really isolate the value that each specific segment of your target market is trying to get and then capturing as much of that value as possible so you'll get you'll need to weather [Applause] [Music] you

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