Maximising revenue while enhancing customer value

In January 2017 I accepted a product marketing role at a small software studio. The studio wanted to transition from client revenue to product revenue. It already had two products in the market but they were only bringing in a small percentage of revenue.

One of these products had rapidly gained users, seemingly finding product-market-fit in no time. It helped solve a well-defined problem: turning files (CSV, Excel, JSON) into SQL databases. The product had thousands of daily users and had organically made it to the top three Google spots for ~10 search terms. But revenue was tiny.

My task was to find out why revenue was so low despite thousands of users and do something about it.

Research finds a lack of market position

As usual I started with market research. I found a handful of other products offering similiar, if not exactly the same, service. What stood out was:

I realised my product didn’t have a defined market position but had carved one out for itself: letting you easily convert your file to a SQL database. There was an opportunity to strengthen this position.

Talking to customers

The product had thousands of free and tens of paying customers. I talked with willing users from both groups and asked them:

Five things emerged from customer research:

I concluded that there was an opportunity to create a strong market position around security, privacy, and a superior user experience.

A paywall doesn’t equal revenue

At the time the product had a generous free tier (which free users loved) with a single (low priced) monthly subscription option. If someone tried to convert a file that was too large they hit a paywall. Despite thousands of daily users hardly anyone was paying.

Customer research had unearthed an inadequate pricing strategy so I took a deeper look at the analytics data I had and found:

Based on the analytics data and the multiple jobs I’d created from customer research, I concluded that our current pricing structure wasn’t serving our customers and their diverse use cases.

Forming a hypothesis and increasing revenue

It was clear the product needed a new pricing structure. I hypothesised that we could add a 24 hour pass and an annual tier while raising prices and boosting conversion rates. The new pricing structure:

Two hours after the new pricing was live someone bought a 24h pass. Three hours later someone purchased a monthly subscription.

After a month it was clear the new pricing was a hit:

After three months of consecutive revenue growth across all pricing tiers I believed prices could be raised again. Growth was strong enough to suggest the pricing structure was correct and could withstand a pricing change.

The goal now was to find the price ceiling without changing positioning or building out the product.

After asking willing users “how much would you pay each month/24h period to keep using this product?” every tier was doubled.

After another three months of consecutive, but slower, growth I again believed prices could be raised. But I was more conservative as I believed the product was reaching the price ceiling for its current positioning and product offering.

Prices were raised by 50%. Over three months user growth retracted slightly. But overall revenue was higher. The price ceiling had been reached.

By creating a strong market position and changing pricing to offer more value to customers I successfully 10xed MRR.

Read the article I wrote for Mind the Product about this.

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