
The Pricing Model That Increased Our Free Trial Signups by 358% - nathas
http://groovehq.com/blog/pricing-that-worked
======
davidjgraph
This doesn't sound like the complete set of metrics that should be measured.
Surely, the key thing is how much money each model made? What is the average
revenue per user in either case for those users converted?

Later on the average lifetime value of a user in each model is needed (plus
the cost to get and convert them).

Yes, conversion is part of the equation, but this feels like a vanity metric
on its own.

Just so I'm not sounding pedantic, our SaaS tool has a conversion rate of over
40% because it's completely free, permanently. That's the boundary case of
moving the pricing.

~~~
amirkovich
Just looking at this for one of the first times (new to this part of the
game), it seems like this is a step-by-step progression from 'we have users!'
to 'users are paying!' If I were working my way forward yours would absolutely
be my next question, along with figuring how to target the 20% of customers
that drive 80% of my revenue.

Do you think that it would be better to have the revenue model fully thought
out (through to revenue/user and lifetime value) before a/b testing the
pricing models?

~~~
gacba
There really is no such thing as "fully thought out" here w.r.t what the
customers will actually do with it. If you look again at the article, they
went through this kind of progression:

\- Best guess at a starting price model

\- Revisited price model after poor test performance. Did research, revamped
model based on research

\- Revisited price model after poor test performance. Simplified plan to match
the philosophy of business. Performance greatly improved

It's about testing the ideas, not keeping them in your head. What you _think_
works and what _actually_ works are often counterintuitively different.

------
ianstormtaylor
Tangential comments:

1\. The pirate theme, and the fact that each blog post has it's own well-done
image are freaking amazing. I also love the sand effect (on the homepage
laptop too). Made me instantly feel good about your brand, and I went to the
home page thinking, "Hey we already use Help Scout but maybe we should try
this out", even though we are completely happy with Help Scout and I had no
real good reason to even think of switching... you still got me.

2\. All of that was completely undone by the two screen-invading modal windows
with sleazy tricks like not having an obvious "get the fuck out of my way you
annoying piece of shit" button. One on the blog itself (which pops up before I
even start reading your post) and one on the homepage. I'm even surprised that
ESC worked, but thank god it did. Thing is I actually really wanted to read
your article, and send it out to the team, but now I feel like I don't really
want to help a company that uses slimy tactics. I still will though because
the title fits so perfectly with what we're working on.

3\. Oh fuck me, while writing this comment another one popped up on a really
delayed timer. Never mind, no longer reading.

------
bretthopper
If anyone from Groove is reading these comments, your log in page looks like
this on latest Chrome OS X:
[https://www.dropbox.com/s/u7s0mqhu8172bpf/Screenshot%202013-...](https://www.dropbox.com/s/u7s0mqhu8172bpf/Screenshot%202013-10-24%2012.03.02.png)

~~~
alexmturnbull
ouch, that's no good :( Fixing that asap....Thanks for the heads up!

~~~
amirkovich
in chrome inspector, deleting the fake-placeholder nodes makes it look okay.
maybe just change their styling to display:none?

------
birken
I'd be a little careful here. I've personally dealt with the situation of
creating a "customer-pleasing" revenue model, only to have to change it a year
later because it was leaving way too much money on the table. It was a
horrible process that resulted in losing a lot of customers. While we did
eventually successfully make the transition, I think all of us wished we
hadn't just said "oh if this takes off that will be a great problem to have".
You don't want to A/B test your core business model unless you are very
confident it is going to work long term.

Obviously, it is important to pick a business model that people will pay for,
but it is also important to make sure that business model is going to support
your business properly long-term.

~~~
jacques_chester
Did you not grandfather your existing customers' plans?

------
robomartin
I urge you to purchase and read The Strategy and Tactics of Pricing [0]. You
are making a number of mistakes, not the least of which is to use low pricing
as a differentiator. Bad idea. You've landed yourself on a potential slippery
slope that can be devastating. I doubt your current competitors will follow
you down. They are likely not suicidal. However, your position is easily
attacked by anyone willing and able to take a dive for the weeds (in terms of
pricing). Product being reasonably equal, the lower price wins. Customers
nearly always want to pay as close to zero as possible.

I see a lot of "we had this revelation" type posts on HN. Perhaps this is a
side effect of a younger, less experienced membership. A lot of these things
are nowhere close to revelations. People --many people-- have trenched these
paths before you. Anyone with a reasonable amount of business "street"
experience could have told you that giving away EVERYTHING for a low price
would convert better. What you need to do is optimize profit per unit and
segment the market in order to maximize that function. The other thing you are
doing is colloquially referred to as "leaving money on the table".

The pricing field is deep, wide and complex. The suggested book is one of many
I studied over the years. For a number of years one of the most frustrating
aspects of entrepreneurship for me was having to read piles of business books
to understand what the hell I was supposed to do. Engineering school does not
prepare you for this.

[0] [http://www.amazon.com/The-Strategy-Tactics-Pricing-
Profitabl...](http://www.amazon.com/The-Strategy-Tactics-Pricing-
Profitably/dp/0136106811)

------
Jemaclus
I'm confused. Your customers wanted to pay per ticket, but you wound up going
back to the industry-standard of paying per agent. What gives?

~~~
enjo
I've been through this same exact price confusion with customers. They told us
they wanted to pay a la carte, but when we tested it they very much did not.

I think the psychology makes sense. When they told us they wanted to pay on a
pay per use basis they based that completely on the past. They did the basic
math. Last month I did 16 tickets. At $.25 a piece I would have paid $4! _That
's_ what I want to pay!

When faced with a future purchase decision, however, the mindset immediately
changed. Now the decision was unbound. What if in three months I get to the
point I have 1,000 tickets?!??! My god, now it's $250/month. That's crazy
expensive! That fear caused a lot of issues.

So we tried the logical next step. $.25 per use, capped at a certain dollar
amount ($25/month). That was too complicated to understand.

So we just started charging a flat $25/month (sales-leads fwiw). That worked
really well.

~~~
jacques_chester
I think this is an example of the Simulation Heuristic, but I may be
misunderstanding it.

[http://en.wikipedia.org/wiki/Simulation_heuristic](http://en.wikipedia.org/wiki/Simulation_heuristic)

------
carbon3
I would really like to see a comparison between this flat fee per "unit" (in
this case users) model vs tiered pricing based on the number of these same
"units", where the "unit" is one that will be predefined and remain mostly
static.

So in this case, something like "$15 per user" vs "$39 for <= 3 users, $99 for
<= 10 users, $249 for <= 30 users".

Can anybody share such a study?

------
Scramblejams
Cool writeup. I don't know much about this market, but the Competitor Pricing
Comparison Chart shows them undercutting the others on price so much that I'm
wondering how much money they're leaving on the table. Hopefully as time goes
on they'll have enough differentiation that they don't feel the need to
compete on price any more.

------
pmtarantino
I'm sorry if I am not seeing this clearly, but did you change the pricing
model? All I am seeing between Test #2 and Test #3 (the succesful one) is that
you drop from $150 to $15. The $150 was the Unlimited Plan, and now you have
all that for $15.

All I see is price lowering instead a diff price model. I apologize if I am
wrong.

~~~
oneplusone
$150 was for unlimited everything including agents. New pricing is $15/agent.

~~~
pmtarantino
Oops, sorry. Makes sense now. Thank you.

------
pbreit
Have you considered freemium (or close to freemium, like Zendesk)? That would
be interesting. My sense is there are three audiences: those who want to pay
nothing or close to nothing, those who will pay a little and those who will
pay a lot.

And this is based primarily on their financial situation, not needs or
aspirations.

------
wikwocket
Good lessons:

* Make pricing easy to understand

* Don't make customers guess how many widgets they'll need

* Don't make customers afraid they'll run out of widgets or need to pay a different amount later

* Convince customers that tier X has everything they'll need and is cheap and easy

In other words, make the checkout funnel as smooth and frictionless as
possible.

------
dreamfactory
Looks like they jumped from too complex - 6 options - to throwing segmentation
([http://www.joelonsoftware.com/articles/CamelsandRubberDuckie...](http://www.joelonsoftware.com/articles/CamelsandRubberDuckies.html))
out with the bathwater

------
Justen
I've been following these posts and they've been really helpful, so thanks for
writing them up. But when A/B testing your pricing model, what are you
supposed to do for the customers that signed up for the now-defunct service
prices?

~~~
gbrits
Indeed. Do you offer them a (possibly rebated) way to change to the per-agent
model, or do you keep supporting the legacy per-ticket mode?

------
OWaz
I just want to say thank you to Alex Turnbull for writing about all the things
they've learned at Groove. It's incredibly helpful and insightful to read.

~~~
alexmturnbull
Thanks for the kind words :) Glad you're digging the series!

------
djt
What is the difference in:

free trial -> paid subscription?

It says 25% increase in revenue but presumably you have lowered your margins?

------
xpop2027
This is content marketing done right.

------
6ren

      easy to use
      easy to buy

------
acritique
I think the better conversion rate has more to do with a better pricing page
(simpler design & larger CTA) for the last one.

