Patrick Campbell is founder and CEO of ProfitWell, a subscription metrics tool to accurately measure SaaS subscriptions, reduce churn, price your products intelligently, and keep audit-proof revenue records. ProfitWell also includes detailed content that breaks down pricing models and podcasts about business growth. Patrick previously worked as an economist at Google, among other roles.
Ask Patrick all your questions around SaaS pricing and billing practices, metrics, using content to grow your business, and more!
Good question. :)
So...we don't have two companies is really the true and short answer here, but we changed our name, still had/have two websites, and had no one dedicated to product marketing. Chaos ensued and is still ensuing from some of the confusion.
The longer answer is that we ended up starting Price Intelligently with a thesis that we were going to use our software to help subscription companies (mainly SaaS at first, but later expanded to any type of subscription) with their monetization. Monetization is more than just the number you're charging; it's the packaging, value metric, price, positioning, and really anything that influences ARPU/ACV. Since monetization is so central, we went out and tried to sell our software and got a lot of, "hey this data is great, but can you just come talk to us." We weren't (and still aren't) funded, but we thought, "oh services are bad - VCs don't like those" until these folks basically said they'd pay us a bunch of money to let them use the software/get the data output and have us come in and coach them through the changes.
We ended up building towards what's called a tech enabled service where you can't buy us without the software and you can't by our software without us (at least for the Price Intelligently software). The distinction is this isn't consulting (although we get compared to consulting constantly - more product marketing woes). It's not consulting because we don't just do anything that we're asked. Instead, we explain how our software works, how the team overlays with that software, and which of our own packages we'd provide our customer. They then choose if that's the fit for them and fortunately a lot of them have said it is a fit. Our gross margin is better than most software companies at 78% (on this product).
Where does ProfitWell come in?
Well, two events happened quite closely together:
1. Our PI software is survey based so we need to collect respondents from our customer's target customer to get accurate data. This is problematic for a few reaosns, but still better than what most folks use on the market. As such, we started seeking out how we could put together a much cleaner solution to the monetization problem. We centered on essentially what we're trying to do is create a unified theory of subscription growth, which models out as a function of a whole host of things, which may be better served in a different answer here. The TLDR was we needed to identify proper segments and then make adjustments on those segments to do what our PI software was doing automatically. To even get there, we needed to cleanly look at the data from the entire lifecycle of those segments - from pre-visit and visit to lead to opp to close to engaged to expanded to churned. The forcing function for us was then realizing that the most important data was going to be financial data bcause if we started anywhere else (usage, upfunnel, etc) we'd always be left with "so what....we need to know what worked or what didn't...what contributed to more revenue and what contributed to less"
2. One of our customers that was about to IPO who we were helping with pricing was calculating their MRR and churn completely incorrectly, so we thought - "holy shit....we can create a cool analytics app for financial metrics...we're geniuses...we're the only ones who ever would think of this amazing idea."
Of course, we weren't. Maybe our thesis around the unified theory of subscription growth was novel, but the analytics wasn't (Baremetrics, Chartmogul, etc.)
So where does this fit into ProfitWell?
Well, we needed a name that was less "price" oriented, because our mission expanded and we did the classic "what's cheap and sounds ok" (plus I like double entendres) and came up with ProfitWell. We didn't want to kill the momentum of PI (we're customer funded/bootstrapped), so we kept the PI website and added "by ProfitWell" and some cross linking to mildly help.
The core thesis for us then centers around revenue automation for subscription companies. We want to take on all the mechanical pieces of growth and do those automatically. We call this "anti-active usage". You plug it in and we make you money (and we charge you based on the money we make you). Anything that's analytics or insights we'll give you for free, which is why ProfitWell Metrics is completely free and used by 20% of the subscription market. It's also why we spend so much time and money on the free metrics product - because it gives us a network effect from the data that powers our algorithms for the pricing, retention, and soon to be acquisition products we've built.
Realize that was long. Happy to clarify and hopefully that gives a nice, rambly reason why we changed our name and why we're not two companies. If you want to help us with our product marketing, please contact me at firstname.lastname@example.org. :)
Churn is a fact of life for a subscription company - like death and taxes. :)
Yet, the biggest surprise as I started studying churn and publishing findings on churn is the mechanical nature of a large portion of your churn. Right now for most subscription businesses roughly 40% of your churn could be solved through mechanical means. Put another way - 60% of your churn requires improvement in product, customer targeting, etc, but the other 40% could be cleaned up by getting your credit card failures in order, optimizing for the proper term for your customers, re-engagement campaigns, etc.
In product, we love to romanticize churn as the eternal pursuit of perfection that will keep the value driving for the customer and therefor keep them around. While there's some truth there, this view clouds growth managers from properly working on churn in most organizations. In reality, those mechanical bits matter. They'll never be the end all be all to your churn (and that 40% obviously fluctuates), but there's a lot more to do that is shorter term/medium impact when it comes to churn and retention.
Frankly it all comes back to Notion for me/us. We're a big writing culture at ProfitWell and Notion's our app du jour for this (previously Tettra). It allows us to properly communicate, track, and ultimately put together thoughtful memos about where we're headed. Notion also centralized our thinking, which as we're scaling is extremely important to our success going forward. While email, calendar, and slack are great, we find notion to be the most valuable to our future.
I know this wasn't the top question from votes, but it's probably my favorite, so kudos to the author.
Hal Varian: I had the chance to hang out with him briefly when I was at Google and he's one of those homies that just understands economics in the age of the internet. Would love to chat with him about how he simplified and then expanded the ad rank algorithm.
Adam Smith: I know it's old school (and a bit generic), but I think there's a fascinating conversation to be had with Smith on what's happening with subscription and the internet in general. He'd likely bring it all back to fundamentals, because he'd have very little context on all the quibbles we worry about, which would be very refreshing and provide a ton of context on the things I'm/we're trying to solve at ProfitWell.
Bonus: I kind of want to sit down with anyone with an economics tint that's doing actual research in the world of subscriptions. There aren't a lot of us, so there's a good summit/dinner to be had.
"First thing" is the tricky piece of this question, because in reality the first thing you should do is really evaluate where your value resides for different segments and customer profiles you're selling into. You can use JTBD, personas, pricing profiles, or any other framework, but you need something to understand where value resides.
From there, there's a few tactical pieces that have different levels of impact:
Make sure you're using some sort of value metric - charging per user, per 100 visits, per $100 spent, etc. This'll take you back to econ class where your professor told you about the demand curve and basically that optimizing revenue has to do with having multiple price points.
Value metrics make sure you're not charging Disney and a johnny or jane startup the same amount for different usages and it bakes expansion right into how you make money. As the user uses/consumes more s/he then ends up paying you more. Lots of pieces to be careful about here when you actually do this, but there isn't a single other growth lever that has the power of value metrics.
One of the most underutilized monetization levers in the world of subscriptions right now is the lack of add-ons. We just kind of assume we should put all the features inside our tiers, which stems from the first 20 years of SaaS not really having a lot of features, which therein caused us to bundle everything in the hopes of providing enough value. The problem is that most of our features aren't utilized or valued by everyone.
A good heuristic for a lot of companies is that if you have a feature that's used by less than 40% of a particular group (your entire base if you don't differentiate features or the people in a tier), you probably have a good candidate for an add-on that can not only be sold to folks in that group, but the wider customer or user base.
We've seen that customers with at least one add-on typically have LTVs that are 18-54% higher than those with no add-ons, because they're typically paying more for the add-on (increase in ARPU) and they're more bought in (increase in retention).
The reason I started with - you need to understand your value is that knowing where your value comes from allows you to even start to do either of the above.
Frankly that monetization isn't difficult, it's just a process where you have to follow a framework (of your choosing or one provided) to walk through how you take advantage of the growth lever. Most people just get paralysis when it comes to monetization because it touches many areas of the business and obviously your customers. In reality, it's like any other problem you face as a founder/operator.