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It's a question that hits close to home for us, going from a singular product with Price Intelligently to a multi-product company with ProfitWell.

On this episode of the ProfitWell Report, Chris Hexton, Co-Founder at Vero, asks us to look at the impact on growth of companies having either a singular product focus or a multi-product offering. To answer Chris's question, we looked at just over twelve hundred companies. Here's what we found.

  

 
 

*****We will only be posting a few of these episodes on the blog, which means if you want to make sure you don't miss an episode of this series you must subscribe separately below****

To get right to the point, it's extremely difficult to get to $100M and beyond very quickly without multiple products, but it's harder to get to $10M with multiple products than with a singular products.


In the $1M to $10M period of growth, companies with singular products, no matter their target ARPU, had a much easier time growing than their multi-product counterparts.

Click to enlarge

The base cause here is likely because when you're going from $1M to $10M in ARR you're figuring out your growth vectors, while by the time you get to $10M those are fairly figured out.

Looking beyond $10M is where things start to get interesting. All of a sudden we essentially see the inverse growth rates happening with multi-product companies growing at a higher clip than their single product cousins and by a fairly wide margin.

Click to enlarge

Traditional sentiment is that there's survivor bias when you come out with your second or third product, but if you do it after the $10M mark, you likely have figured out your growth vectors, your product approach, and your operational efficiency, leading you to have enough institutional memory to make a multi-product approach successful.

Ultimately, the single and multi-product choice really comes down to the DNA of your company, the market you're in, and the type of company you want. If you're going to scale beyond the startup stage though, the easiest thing you can do if you're in a smaller market is go multi-product. After all, if your customers love you, why wouldn't you try to take more of their pain away through more offerings?

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Chris from Vero for sparking this research by clicking the link below to share and give him a shoutout. We'll see you next week.

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It's the silent killer in our recurring revenue businesses. But while churn is something all of us in the subscription world must deal with, knowing what does and does not influence it can help us survive and build a faster growing business.

On this episode of the ProfitWell Report, Abhay Khurana, Chief Customer Officer at Feathr, asks us to look at the average revenue churn across dimensions like company age and price point. We studied just over three thousand subscription companies of all shapes, sizes, and verticals to answer Abhay's question, let's jump in to see what we found.

 
 
 
 
 
Click for sound
 
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: Churn is Higher than Publicly Disclosed
  3. 3Chapter 2: Age Does Present Survivor Bias
  4. 4Chapter 3: Churn Correlates with ARPU Per Month
  5. 5Chapter 4: Pick Your Poison
  6. 6OUTRO
 
 
 
●●●●●●
QUESTION
Chapter 1: Churn is Higher than Publicly Disclosed
Chapter 2: Age Does Present Survivor Bias
Chapter 3: Churn Correlates with ARPU Per Month
Chapter 4: Pick Your Poison
OUTRO
 
 
 
 
●●●●●●
QUESTION
Chapter 1: Churn is Higher than Publicly Disclosed
Chapter 2: Age Does Present Survivor Bias
Chapter 3: Churn Correlates with ARPU Per Month
Chapter 4: Pick Your Poison
OUTRO
 
 
 
 
 
 
 
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 Churn Loosely Correlates with MRR

Interestingly enough, churn is actually much higher than you typically see publicly disclosed. When looking at churn based on the size of the company, you’ll notice that churn only loosely correlates with a company’s monthly recurring revenue with wide interquartile ranges that fluctuate between 5% and 16% gross revenue churn on the low end of MRR and 2% to 8% on the high end of MRR.

You’d expect that as a company grows, they’d be figuring out their churn, which in kind would help them grow quicker. Yet, this isn’t the case.

Company Age Shows Survivor Bias

Digging deeper down the the churn rabbit hole though we find that company age does present us with some good survivor bias when it comes to churn. Those companies who are older have dramatically lower churn than their younger counterparts. Companies who are less than three years old are seeing the interquartile range spread from 4% to a whopping 24% whereas companies who are 10 plus years old are seeing churn in the 2% to 4% range.


While the model fits quite nicely, these companies of course survive through properly figuring out churn, because by that time, funding, patience, or at the very least interest will dry up with poor unit economics.

Influence Churn Through Your Pricing 

That being said, you can’t control your age or your MRR with the flick of a switch. You do have significant influence over your ARPU through your pricing though - and it may be time to revisit that pricing to control churn. 

Those companies with low ARPUs see much higher churn than those with larger ARPU. If you’re average revenue per user per month is below $100, you’re likely seeing monthly gross dollar churn rates between 3 and 16% with a median between 6 and 9%. That’s a lot of churn. Yet, ARPUs over $500 see significantly less revenue churn with a range of roughly 2 to 6% and a median closer to 3-4%.

Of course, this is intuitive, as those higher ARPUs tend to come with more hand holding, annual contracts, and a deeper relationship with your customer - that which is afforded through higher revenues per user.

Ultimately though, you need to pick your poison when it comes to the company you’re building and the implications those decisions have on churn. Less churn is always more success though, and you should be fighting to reduce your churn as much as humanly possible. Ship us a question on that front and we’ll study the data to tell you how. :)

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Abhay from Feathr for sparking this research by clicking this link to share on LinkedIn and give him a shoutout. We’ll see you next week.

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Ah, one of the great debates in SaaS: implementation fees. For the uninitiated, implementation fees are essentially an extra fee for training, setup, or actual technical implementation that you pay in addition to what you’re paying for the product. Although mainly seen in B2B, there are quite a few B2C companies that deploy this tactic. 

On this episode of the ProfitWell Report, Cem Hurturk, Co-Founder of Sendloop -  asks us "How do implementation fees affect unit economics?" To answer his question, we looked at just under one thousand companies and over half a million subscription customers. Here’s what we found.

 
 


*****We will only be posting a few of these episodes on the blog, which means if you want to make sure you don't miss an episode of this series you must subscribe separately below****

 Improve CAC Recovery and Retention with Implementation Fees

To get right to the point, implementation fees dramatically improve customer acquisition cost or CAC recovery and actually improve retention rates across different ARPU customers considerably.

From a CAC recovery standpoint those companies utilizing an implementation fee of some sort are seeing 30-40% lower CAC recovery timelines than their non-implementation fee counterparts.



This is intuitive, because no matter what your implementation fee looks like, the basic math will tell you that this revenue will clear some of the cost of acquiring that customer.

Further though, retention is an important consideration when looking at an implementation fee, because most of the time in SaaS and the world of subscriptions you’re not using the fee to cover the cost of setup, you’re using it to cover the cost of some sort of training, which is used to get your customer using the product, seeing the value, etc.

Companies with implementation fees are typically seeing roughly 10 to 20% better net retention across different ARPUs than their non-implementation fee cousins.



This data bucks the notion that friction is bad for business. In reality, a little bit of friction not only helps CAC recovery, but your retention as users are pushed to see the value in what they’re buying.

 Lower Conversion Rates - The Case Against Implementation Fees

Critics of implementation fees point to the conversion implications and they aren’t completely wrong. When comparing the two models, low ARPU buyers did convert at a lower rate as their higher ARPU counterparts when faced with an implementation fee, but considering those customers with the fee were retained longer, there’s an argument to be made that the numbers net out still for the better in the long run.



Ultimately, your job as a leader in the recurring revenue economy is to understand your customer to the point that you can utilize all of the tools at your disposal to serve them well and align your unit economics properly. Implementation and setup fees of some sort, although a bit controversial, may be an effective way for you to start counterintuitively slow down the conversion process for nice, long term gains.

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Cem from Sendloop for sparking this research by clicking the link here to share and give him a shoutout. We’ll see you next week.

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It's the silent killer in our recurring revenue businesses. But while Churn is something all of us in the subscription world must deal with, knowing what does and does not influence it can help us survive and build a faster growing business.

On this episode of the ProfitWell Report, Abhay Khurana, Chief Customer Officer at Feathr, asks us to look at the average logo churn across dimensions like age and price point. We studied just over three thousand subscription companies of all shapes, sizes, and verticals to answer Abhay's question, let's jump in to see what we found.

 
 
 
 
 
Click for sound
 
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: Churn is Higher than Publicly Disclosed
  3. 3Chapter 2: Age Does Present Survivor Bias
  4. 4Chapter 3: Churn Correlates with ARPU Per Month
  5. 5Chapter 4: Pick Your Poison
  6. 6OUTRO
 
 
 
●●●●●●
QUESTION
Chapter 1: Churn is Higher than Publicly Disclosed
Chapter 2: Age Does Present Survivor Bias
Chapter 3: Churn Correlates with ARPU Per Month
Chapter 4: Pick Your Poison
OUTRO
 
 
 
 
●●●●●●
QUESTION
Chapter 1: Churn is Higher than Publicly Disclosed
Chapter 2: Age Does Present Survivor Bias
Chapter 3: Churn Correlates with ARPU Per Month
Chapter 4: Pick Your Poison
OUTRO
 
 
 
 
 
 
 
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*****We will only be posting a few of these episodes on the blog, which means if you want to be a part of this series you must subscribe separately below****



 Churn Loosely Correlates with MRR

Interestingly enough, churn is actually much higher than you typically see publicly disclosed. When looking at churn based on the size of the company, you’ll notice that churn only loosely correlates with a company’s monthly recurring revenue with wide interquartile ranges that fluctuate between 5% and 16% gross revenue churn on the low end of MRR and 2% to 8% on the high end of MRR.

You’d expect that as a company grows, they’d be figuring out their churn, which in kind would help them grow quicker. Yet, this isn’t the case.

Company Age Shows Survivor Bias

Digging deeper down the the churn rabbit hole though we find that company age does present us with some good survivor bias when it comes to churn. Those companies who are older have dramatically lower churn than their younger counterparts. Companies who are less than three years old are seeing the interquartile range spread from 4% to a whopping 24% whereas companies who are 10 plus years old are seeing churn in the 2% to 4% range.


While the model fits quite nicely, these companies of course survive through properly figuring out churn, because by that time, funding, patience, or at the very least interest will dry up with poor unit economics.

Influence Churn Through Your Pricing 

That being said, you can’t control your age or your MRR with the flick of a switch. You do have significant influence over your ARPU through your pricing though - and it may be time to revisit that pricing to control churn. 

Those companies with low ARPUs see much higher churn than those with larger ARPU. If you’re average revenue per user per month is below $100, you’re likely seeing monthly gross dollar churn rates between 3 and 16% with a median between 6 and 9%. That’s a lot of churn. Yet, ARPUs over $500 see significantly less revenue churn with a range of roughly 2 to 6% and a median closer to 3-4%.

Of course, this is intuitive, as those higher ARPUs tend to come with more hand holding, annual contracts, and a deeper relationship with your customer - that which is afforded through higher revenues per user.

Ultimately though, you need to pick your poison when it comes to the company you’re building and the implications those decisions have on churn. Less churn is always more success though, and you should be fighting to reduce your churn as much as humanly possible. Ship us a question on that front and we’ll study the data to tell you how. :)

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Abhay from Feathr for sparking this research by clicking this link to share on LinkedIn and give him a shoutout. We’ll see you next week.

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In the Mad Men days of yore, sentiment would indicate that coming up with the right value proposition required a few steak dinners and plenty of martinis. In reality the data tells us the truth, namely using the right value proposition can have a big impact on your product.

On this episode of the ProfitWell Report, Ed Leake, Founder at AdEvolver asks us to look at the influence on willingness to pay that value propositions can have. To answer Ed's question, we looked at the willingness to pay data of nearly ten thousand different subscription consumers.

 
 
 
 
 
Click for sound
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: The Right Value Propisiton
  3. 3Chapter 2: Trends in B2C
  4. 4Chapter 3: Mindset Matters
  5. 5OUTRO
 
 
 
●●●●●
0:00
QUESTION
Chapter 1: The Right Value Propisiton
Chapter 2: Trends in B2C
Chapter 3: Mindset Matters
OUTRO
 
 
 
 
●●●●●
0:00
QUESTION
Chapter 1: The Right Value Propisiton
Chapter 2: Trends in B2C
Chapter 3: Mindset Matters
OUTRO
 
 
 
 
 
 
 
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Value Propositions Influence Willingness to Pay

To get right to the point, the right value proposition absolutely influences willingness to pay, and a lot more than you’d intuitively think. 

We tested a fake CRM product amongst different groups of sales leadership with decision making authority on sales teams with less than 10 sales people. When asking these same buyers about the same product, but leading with different messaging we saw varying willingness to pay. Note how focusing on sales efficiency and organizing the chaos won out handedly against propositions like accelerate your growth and see inside your whole team.


Remember this was the same product with the same description, the only piece we changed was the value proposition of the page, which resulted in increasing willingness to pay by 15-30%, which is no small amount at scale. 

B2C Value Propositions Are Just as Important

Interestingly enough, these trends are similar in the B2C market, as well. When testing the willingness to pay for a fake fitness app, consumers resonated with the concept of keeping their fitness consistent and achieving their goals while sentiments around losing weight and getting healthy scored poorly. Again though, the swings are pretty dramatic.



Mindset matters when priming your buyers to make a purchasing decision, which is the very definition as to why product marketing exists as a function within your organization. You need to know what your buyers are thinking and ultimately need to make sure you get to a point of position, packaging, and pricing fit to ensure you align your entire funnel around that which will make conversion smooth and willingness to pay maximized.

All data indicates - value propositions have a big hand in that experience.

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Ed for sparking this research by clicking the here to share and give him a shoutout. We’ll see you next week.

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Customer research has ebbed and flowed throughout the years, so how important is it today? As the data suggests, it's more important than ever to do customer research in order to build the right valuable features and avoid building the wrong product.

On this episode of the ProfitWell Report, Adam Blake, CMO at ThriveHive asks us to look at the current state of customer research and whether it still matters. To answer Adam’s question, we looked at just over 3,000 subscription companies and over 1.2 million different subscription consumers.

 
 
 
 
 
Click for sound
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: Customer Research Matters
  3. 3Chapter 2: A/B Tests
  4. 4Chapter 3: All Talk and No Walk
  5. 5Chapter 4: You're Not Talking to Your Customers
  6. 6OUTRO
 
 
 
●●●●●●
QUESTION
Chapter 1: Customer Research Matters
Chapter 2: A/B Tests
Chapter 3: All Talk and No Walk
Chapter 4: You're Not Talking to Your Customers
OUTRO
 
 
 
3:06
 
 
 
 
 
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Not Enough Customer Research

To not bury the lede - yes, customer research matters more than ever, but no one seems to care, which is sad.

If you ask any luminary of Silicon Valley for the one lesson that matters, most will espouse the importance of focusing on the customer. Paul Graham, Gail Goodman, Steve Blank, Mary Meeker - all of them advocate for the customer.

Yet, no one’s really following their sage advice. Executives indicate that 7 out of 10 of their organizations are speaking to less than 10 prospects or customers in a non-sales research capacity per month and note this doesn’t get better with a company’s size.


Not Enough Testing

Subscription and SaaS executives love to tell me they don’t do customer research but by God, they love to A/B and multivariate test their way to success. Hill climbing problems aside, in reality, we’re not doing tests either. Nearly half of us are not even conducting 1 test per month and this includes marketing tests.

Put simply, we love to retweet articles about customer research, we love to give advice to people about customer research - but we’re not doing customer research - and that makes me die a little bit inside, because this lack of customer research is forcing us to build the wrong product.

We're Building the Wrong Product

We asked just over 2,500 product leaders to plot the last N features they built on a value matrix - which cross references how much companies care about a particular feature compared to other features with how much they’re willing to pay for features. In turn, this shows us what types of features we’re putting out - be it core features, add-ons, or just plain trash.

 


This is what your product leaders indicated they’re building for the last five thousand features they built. A lot of differentiable and valuable features. 


We then went out and asked 1.2 million different customers about their actual willingness to pay and their actual preference for features using our statistical models, and this is what they indicated you’re actually building. 


Essentially your product teams are extremely confident they’re building value when in reality they aren’t and they don’t even know they’re doing this, because you’re not talking to your customers.

As CAC increases, the relative value of features declines, and growing a business just becomes that much harder, we’re in a world where we’ve literally been given the answer to success - understanding our customer - not always agreeing, but at least understanding, and for the most part we’ve turned our noses up at the notion of actually talking to the people that are ultimately tpaying us. That’s a scary thought.

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Adam from ThriveHive for sparking this research by clicking the link here to share and give him a shoutout. We’ll see you next week.

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NPS or net promoter score is trending down across the board. But are the products we are building today really worse than they were 5 years ago? As the data suggests, with competition increasing it's getting tougher to drive a memorable experience that returns high NPS, but your brand, support, and speed to ship new features can help. 

On this episode of the ProfitWell Report, Christian Holmsen, CEO at Rezstream asks us to look at how NPS has changed over the years and what seem to be the main drivers of higher NPS. To answer Christian's question, let’s look at the NPS data from just over five thousand subscription executives and nearly twenty five thousand consumers.

 
 
 
 
 
Click for sound
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: NPS Across Industry Trends
  3. 3Chapter 2: Average NPS Trends
  4. 4Chapter 3: What's Causing the Change?
  5. 5Chapter 4: How Do You Boost NPS?
  6. 6Chapter 5: Many Factors Compound
  7. 7OUTRO
 
 
 
●●●●●●●
QUESTION
Chapter 1: NPS Across Industry Trends
Chapter 2: Average NPS Trends
Chapter 3: What's Causing the Change?
Chapter 4: How Do You Boost NPS?
Chapter 5: Many Factors Compound
OUTRO
 
 
 
 
●●●●●●●
QUESTION
Chapter 1: NPS Across Industry Trends
Chapter 2: Average NPS Trends
Chapter 3: What's Causing the Change?
Chapter 4: How Do You Boost NPS?
Chapter 5: Many Factors Compound
OUTRO
 
 
 
 
 
 
 
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NPS Trending Down

To not bury the lede - net promoter score across different industries and ARPU levels has actually trended downward over the past five years and when cross referencing roughly a dozen factors, brand, usage, and support satisfaction seem to be the main influencers. 

Overall, it’s hard to say the products we buy today are worse than the ones we bought a decade ago.

Yet, NPS data tells a different story.

When looking at NPS in both B2B and B2C aggregated across thousands of companies, note that the average NPS score five years ago was in the upper 20s and low 30s. With a scale of -100 to 100 that’s pretty good, but the average today has dropped to single digits and low teens.


What’s causing the change? Well, frankly consumers have become more and more ungrateful. This isn’t because you’re doing your job worse today than you were five years ago, but you’re certainly in a world where there’s more competition and creating a magical experience is just that much harder.

3 Key Factors to Boost Your NPS 

So how do you boost your NPS? When looking at 12 different factors we found you need to focus on brand, support, and the frequency you’re shipping. 

Brand appeared to drive NPS the most. We coded respondents perception of a company’s brand before measuring their NPS. Those customers who perceived a company’s brand positively had over double the NPS as those who were neutral. Negative perception just tanked NPS as to be expected.



Support perception showed similar results with positive perceptions of a company’s support showing 50-70% higher NPS than those customers with neutral perception.



Finally, the frequency at which you ship new features or products showed a positive trend, as well with customers who perceived the company as shipping new features and functionality often having 30-40% higher NPS than those who perceived the company as shipping infrequently.



Of course, many of these factors compound on one another, but in isolation the story they tell is that momentum and brand is crucial to customer satisfaction. Long gone are the days where a product just needed to work in order for your customer to love you and the expectations will continue to increase as the B2B and B2C products in our world of recurring revenue become more and more magical.

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Christian from RezStream for sparking this research by clicking the link here to share on LinkedIn and give him a shoutout. We’ll see you next week. 

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There's a pretty big update coming to privacy out of the European Union in the form of the General Data Protection Regulation (GDPR) (EU) 2016/679. For those of you who aren't aware, it's a regulation in EU law on data protection and privacy for all individuals within the European Union, which also addresses the export of personal data outside the EU (it's also why you've received dozens of privacy policy updates). 

We're a data company at our core, so this obviously impacts ProfitWell and our users (even the free ones), including those who are based in the United States who have EU customers/users themselves. 

What follows is a commentary/FAQon what we've done to be GDPR compliant, as well as information on where you can get more information. If you're fully initiated and just looking for a DPA (Data Protection Addendum), you can sign our comprehensive one here or email GDPR@profitwell.com

For the rest of you, let's jump in. 

GDP...what?

There have been countless articles written on what GDPR is, but overall GDPR is a big update in data regulations in the EU that adds some new requirements regarding how companies should protect individuals' data that they process. GDPR also increases the penalties for non-compliance by imposing greater fines for breaches.

There are 99 articles in the regulation setting out the rights of individuals and obligations placed on organizations covered by the regulation. I'd encourage you to consult your own lawyer (we've spoken to plenty to get this right), but essentially GDPR raises the stakes on the use, ownership, and protection of personal data. 

Personal data can be anything that allows an individual to be directly or indirectly identified (name, address, IP address, etc) and can also encompass pseudonymized data if you can back into identifying someone. GDPR wraps this concept up to giving people the "right to be forgotten." 

GDPR also requires much more transparency for businesses to make it clear on how you're using personal data. All of these obligations are required for any company with any connection to EU citizens, which means that US companies need to comply, as well (unless they've made the decision of not allowing EU citizens to use their products).

While regulation always costs money and time, especially when the regulation is a bit ambiguous (as some articles of GDPR are), the spirit of this regulation feels proper. You should always know where your data stand with a company and have the right to have your data deleted or "forgotten". 

Cool - so how does this impact ProfitWell

Well for one, since we're a controller and processor of identifiable information (names and email addresses), we need to make some product updates and some contractual updates. 

On the contractual front (which was infinitely easier), our privacy policy and terms were already in line with GDPR, since we're already certified pursuant to the EU-US and Swiss-US Privacy Shields (more on this below). We did clean up some language to include GDPR and make things a bit more "plain speak", although our lawyers still kept a good amount of legalease. You can find our privacy policy and terms here. 

We also put together a Data Protection Addendum for our customers that operate in the EU, which offer contractual terms that meet GDPR requirements and that reflect our data privacy and security commitments to our clients. You can sign our comprehensive DPA here on your own, but if you have any questions, email GDPR@profitwell.com

Now for the fun part - product. Given what we do at ProfitWell (subscription analytics, finances, etc.), maintaining our top product priority of 100% accuracy and complying with a "right to be forgotten" may appear to be mutually exclusive. 

For instance, when you're looking at your revenue for tax purposes, you can't not report your revenue, even if a user requested to be deleted. You also still need to maintain GAAP for revenue recognition. 

So what's an analytics product like ours to do? 

Well, we spoke to lawyers, privacy professional, tax lawyers, security professionals, more lawyers, accountants and, did we mention lawyers? We found that the center of GDPR centers around the identification of a user and tying that particular user to a product or app. We also found that GDPR can't usurp tax or finance laws, so the answer fortunately started to show itself as we dug in. 

From a product perspective, we've now given the ability to anonymize a user through the Customer section, which allows you to maintain their data in your numbers for consistency and legal/regulatory purposes, but evaporates their identification from our databases. We've also added the ability to completely delete a user and their history from our databases (including all of their financial history). 

There's plenty of other pieces we've done on the backend for compliance, but this is the crux of what's needed to go above and beyond the GDPR call, but also make sure it's easy to not break other laws around financial and tax reporting. 

Great. Tell me a bit more about Privacy though

To be crystal clear - ProfitWell does not and will not ever sell your data to third parties. Your data is your data. Further, your data is rarely accessed with the only reasons we'd ever look at your data is if there's a QA or security issue, or if you give us permission for the purposes of analysis and helping you with identifying problems/opportunities in your business. 

We do study in aggregate to improve our products, security, and knowledge of the market to help you. If you'd like to opt out of this, you can through signing a custom Terms of Use with us. 

On the GDPR front, there are some provisions on international data transfer mechanisms. To comply with these we certified under the EU-U.S. and Swiss-U.S. Privacy Shield frameworks, a mechanism that had been approved for cross border transfer of personal data under the Directive. 

You can always find more information right in our Privacy Policy. 

Where's your DPA? 

Talked about this above, but we put together a Data Protection Addendum for our customers that operate in the EU, which offer contractual terms that meet GDPR requirements and that reflect our data privacy and security commitments to our clients. You can sign our comprehensive DPA here on your own, but if you have any questions, email GDPR@profitwell.com

Don't your data centers need to be in the EU now? 

Nope. GDPR does not require that our data centers be in the EU. GDPR allows a company to transfer data outside of the EU as long as practices are put in place ro make sure that personal data is properly protected. We've certified under the EU-U.S. and Swiss-U.S. Privacy Shield frameworks to satisfy this requirement and also offer up our DPA. 

That being said, we're more than happy to oblige storing your data in the EU if you have higher bar data requirements. We've been operating in the EU helping companies and government entities for quite some time now, so we're flexible. 

What if I have a Data Subject Right (DSR) request to delete or update data? 

If it's for one of your customers/users within ProfitWell, then you can update their information right in the Customer tab (as discussed above). Any other requests to correct, access, or delete information, will be handled by emailing gdpr@profitwell.com. We'll respond to this requests within 14 days (likely much sooner as our average time to respond is 15 minutes), which is well within the 30 days required by GDPR. 

Who do I contact with questions, comments, concerns, or suggestions? 

If you need anything, email GDPR@profitwell.com, which goes to our security, privacy, and EU team. 

Anything else? 

Not that we can think of as of right now. I know there will be updates, so we'll continue to update this blog post, as well as our privacy policy, terms of use, security write ups, and GDPR policies as the regulation and world of privacy evolves. 

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Value metrics increase ARPU across all-sized subscription companies including those in both B2B and B2C. As the data suggests, if you aren't using a value metric you're losing out on some of your key revenue growth potential. 

On this episode of the ProfitWell Report, John Bonini, Director of Marketing at Databox asks us to look at how value metrics can drive higher ARPU (average revenue per user) at signup. To answer his question, let’s look at the data from just over 5,000 recurring revenue companies.  

 
 
 
 
 
Click for sound
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: Value Metrics are Effective
  3. 3Chapter 2: Expansion Revenue and Pricing Model
  4. 4Chapter 3: What About Sign Ups?
  5. 5Chapter 4: Value Metrics are the Way to Go
  6. 6OUTRO
 
 
 
●●●●●●
QUESTION
Chapter 1: Value Metrics are Effective
Chapter 2: Expansion Revenue and Pricing Model
Chapter 3: What About Sign Ups?
Chapter 4: Value Metrics are the Way to Go
OUTRO
 
 
 
2:43
 
 
 
 
 
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*****We will only be posting a few of these episodes on the blog, which means if you want to be a part of this series you must subscribe separately below****



Value metrics' impact on ARPU

Love this question John - value metrics as a lot of you know are one of my favorite topics in the world of recurring revenue and pricing. To answer your question, we looked at just over five thousand recurring revenue companies.

To get right to the point - value metrics are the most effective way for you to drive ARPU. A value metric is what you charge for - per user, per dashboards, per 100 visits, etc.

Those companies deploying a value metric tend to have much higher ARPUs than their feature differentiated counterparts in both B2B and B2C with each blended category seeing over 20% higher ARPU.



We’re seeing this trend, mainly because expansion revenue is baked directly into the pricing model where as a customer consumes more and more of what you’re selling, he or she is more than happy to pay more.

In fact, when looking at expansion revenue based on pricing model, those companies deploying a value metric are seeing 40 to 100% higher expansion revenue as a percentage of their revenue than those simply using feature differentiation. 

Higher conversion rates at signup

So value metrics are great for ARPU and expansion revenue, but what about the signup element John asked us about? Well, value metrics are actually extremely useful for conversion.

Those individuals encountering a value metric based pricing model are also converting at a much higher rate.

Across different ARPU levels, conversion rates for value metric models tend to be a minimum of 10% better with some interquartile ranges extending to nearly 40% higher.

That’s pretty impressive and the efficiency stems from greater flexibility in upgrading those users over time. You’re not trying to push the user up to a plan they aren’t ready for, because they’re presumably only getting charged for the value they’re using.

Plus, if you throw a free plan into the mix, then a user can be nurtured while using a low amount of your value metric until triggered through increased usage, indicating they’re ready to convert as a customer.

Ultimately, value metrics are the way to go, because they get right to the very root of the recurring revenue model, which is the relationship. If you price based on a value metric, you’re essentially creating a symbiotic relationship with your customer, giving them and charging them for exactly the amount of product they’re looking for - no more and no less.

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank John from Databox for sparking this research by clicking here to share and give him a shoutout. We’ll see you next week.

-- Subscribe to the weekly ProfitWell Report --

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There are many factors that go into which company size is an ideal target for SaaS companies. As the data suggests, there are different trade-offs when it comes to looking at potential retention rates, CAC (customer acquisition cost), and willingness to pay across the different market segments of SMB, Mid-Market, and Enterprise sized companies.

On this episode of the ProfitWell Report, Matt Smith, Founder of Later, asks Patrick a tough one: Which size company would he target as customers if he were to start a new company? To answer his question, let’s look at the data and unit economics from just over 5,000 companies and the willingness to pay for 1.2M subscription consumers.

 
 
 
 
 
Click for sound
 
 
 
  1. 1QUESTION
  2. 2Chapter 1: Back to Business Basics
  3. 3Chapter 2: Acquisition is a Big Factor
  4. 4Chapter 3: Willingness to Pay
  5. 5Chapter 4: What Should You Do?
  6. 6OUTRO
 
 
 
●●●●●●
QUESTION
Chapter 1: Back to Business Basics
Chapter 2: Acquisition is a Big Factor
Chapter 3: Willingness to Pay
Chapter 4: What Should You Do?
OUTRO
 
 
 
 
●●●●●●
QUESTION
Chapter 1: Back to Business Basics
Chapter 2: Acquisition is a Big Factor
Chapter 3: Willingness to Pay
Chapter 4: What Should You Do?
OUTRO
 
 
 
 
 
 
 
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Higher ARPU Companies Have a Retention Advantage

There are a lot of vectors to consider here, but let’s assume we’re taking the baseline of building a business - acquiring a customer, keeping them around, and monetizing them accordingly.

On the revenue retention front, larger ARPU (average revenue per user) companies have an advantage.

 

As a company’s ARPU increases - correlating with becoming more Enterprise - gross revenue retention reduces dramatically. Sub $100 products see revenue churn at 7 to 9% which balloons in comparison to the median of nearly 3% gross revenue churn for those getting into five thousand dollar plus ARPU.

CAC is rising across the board, but especially for SMB

Beyond retention, acquisition is a really big factor here, so we need to consider CAC, and here’s where things get really interesting.



CAC has increased substantially with both B2B and B2C seeing 55 to 65% higher than five years ago overall.

Yet, the story unfolds very differently when you look at our three sized categories.

On a relative basis, SMB CAC has grown at a far quicker and higher rate than CAC in the mid-market and enterprise.

While maybe not immediately intuitive, the big reason this has happened really centers around the fact that mid-market and enterprise CAC has always been high and there’s been gains in some efficiency with these types of sales processes over the years.

SMB and Mid-Market WTP has increased

Our third vector though around willingness to pay is where things get tricky. Interestingly enough, SMB and mid-market willingness to pay has actually increased in the aggregate while enterprise willingness to pay has decreased over time.

Compared to five years ago, the median willingness to pay for an SMB buyer has actually increased by 35 to 50%. Mid-market shows a similar path with an increase of 20 to 30%, but Enterprise has actually decreased by just over 10%. (graph 4)

Keep in mind that we’re blending B2B and B2C here and happy to go deeper there if you send us a question to, but the trend stands to reason considering the technical and information asymmetry moats we once enjoyed in the enterprise don’t exist as much as they used to.

So what should we do? Well, controlling for market size, which is expanding on all fronts, I believe the answer still comes down to the DNA of you and your company. No particular trend indicated there was a gold rush of opportunity and similarly no trend indicated you should be running for the hills. Instead, the trends indicated in context of one another it’s getting harder for everyone out there, so now more than ever you need to specialize and utilize your frameworks and data to grow as effectively as possible.

Well, that's all for now. If you have a question, ship me an email or video to pc@profitwell.com and let's also thank Matt from Later for sparking this research by clicking the here to give him a shoutout on Twitter. We’ll see you next week.

-- Subscribe to the weekly ProfitWell Report --

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