April 24, 2019

Office Hours with Patrick Campbell - CEO of ProfitWell

Patrick Campbell @patticus

Hello indie hackers!

I'm Patrick Campbell, the CEO of ProfitWell (formerly Price Intelligently), the software for helping subscription companies with their monetization and retention strategies. ProfitWell also provides free turnkey subscription financial metrics for over twelve thousand companies (plugs right into Stripe, Zuora, Chargebee—whatever billing system you’re using—with a 2-minute setup).

Prior to ProfitWell, I led Strategic Initiatives for Boston-based Gemvara and I was also an economist at Google and for the US Intelligence community.

I'll be holding an #office-hours session next week on the Thursday 2nd of May. Feel free to join and let's talk about about whatever challenges you may be facing — I'll pick up to 6 of you from the comments and email you the details on how to attend.

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    This sounds fascinating - don't have a specific question, but would love to be on a list to be notified once the video is posted (or watch live stream)

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    Hey Patrick,

    I would love to get your opinion on a pricing idea we are about to try. We have built a Cloud Management Platform for Microsoft Azure, and one of our hypothesis is that a value based strategy to pricing could be tied to consumption of Azure. You can see what I mean at https://www.auditwolf.com/pricing.

    In some 'hallway usability studies' its clear we haven't made the page clear enough yet. People see the 'cloud usage' number and initially think that's what they pay us. As soon as they try the slider, it makes a bit more sense. (So I'm told).

    Would love to get your feedback on the thoughts of a consumption aligned value based pricing strategy, and how we could improve that page.

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    I'm working on a location-based messaging and customer experience solution for brick-and-mortar businesses. Its purpose is to make customers feel like royalty when they go places. Think: location-based cloud-driven smart speaker (without a microphone) + SaaS for data and promotions.

    While looking at potential customer classifications, I noticed it doesn't seem right that a business like a football stadium would be paying roughly the same amount as a convenience store, but not sure where to look at the value exchange for a potential multiplier. There is also a setup component (hardware costs) and not sure if it just makes more sense to roll those into a service plan vs charge separately and up front.

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    I would like to join.
    I am working on an app which makes learning of a language easier and fun. Thanks

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    I want to join!

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    I'd like to learn more about your approach to validating an idea and the journey you took to get to that first paying customer. Thanks in advance!

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    Hey there, Thanks for doing this. Currently building a data and insights business for the crypto space. Will be charging USD 5-10K annually. Would be great to understand how to price the insights. Grateful if you can email [email protected] with a time

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    I'm working on an app called Premium Poker Tools. Poker players use it to study. I have about 300 users/month. The feedback I get from them is that they love the app. Some have even encouraged me to start charging.

    So I'm looking to start charging ASAP, but am uncertain about what price to pick. There are similar apps out there right now, and they charge $25-100 as a one time fee. I am thinking of charging $5/month, but am considering $10/month. "Charge more" seems to be one of the most common pieces of advice given to people, so I'm trying to charge more than what my intuition says, but I hesitate because it is significantly more than my competitors and I don't think I have a big enough competitive advantage to justify it yet.

    I'm also not sure if my pricing approach should be different as I'm just getting off the ground. Should I err on the side of charging less to help me "get my foot in the door"?

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      Not to invite myself to the conversation but you should probably do some split tests to see what works best. Because regardless of how great the advice is from anyone, you still have to test the theory. Not testing would be a huge mistake even if Elon Musk helped you come up with the pricing structure. And the truth is regardless of how much business experience and successful track record anyone has, it's pretty unlikely they will have a better understanding of your specific audience/niche. Lots of super business gurus/VC's/Mentors give wack advice that ends up being totally wrong all the time, maybe even most of the time which is why the majority of VC backed startups fail.

      Don't worry too much about having a bigger competitive advantage, the fact that you already have a competitive advantage is enough. You can charge as much as you want, as long as you can get them to convert into a paying customer which you can only determine through testing and optimizing.

      The reality is the majority of people do not want to learn a whole new system and have to switch platforms, even if they are paying a little more. You think poker players trying to make money and master their craft care that much about saving $30 per year? These are people who literally throw money away in the trashcan everyday of their lives, they don't care about a few bucks as long as they are happy with what you're giving them. And since you said you already have a better product, the higher price is justified. Maybe your servers are ten times better than the competition or more reliable or faster or have some invisible backup systems or you have better support or employees, etc. Quality costs more.

      You don't want a business that wins customers based on lowest price.

      I'm not criticizing your website because I personally like the simple clean look but if I had to take a wild guess, your website could probably be improved to convert at a higher rate too. Performing split testing would be pointless without first improving your website.

      Awesome work so far though man....Whether it's through subscription fees or ads, poker seems like a great industry to monetize in general.

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        Hey Mailman, thanks for offering your thoughts! They're definitely welcomed, I'm eager to get as much input as possible.

        That's a good point about the importance of testing different prices, and how no one can tell you the right answer. It seems very true. Although my impression is that I'd give more weight to the impression of experienced pros, but that seems like a moot point because testing prices will trump that. Here's a follow up question though - do you think it makes sense to start off testing different prices from the get go, or should I accumulate a bigger base of paying users first ("get my foot in the door") before looking to test my pricing?

        Thanks for the input on not needing that huge of a competitive advantage to justify a larger price. It's something I'm confused about so it's good to get more input on that. Personally, I totally agree with what you're saying, about saving 30 bucks or whatever isn't worth having to use worse software. I think of it almost like buying a bed - you're going to be using it all of the time, so even a slightly better experience is worth paying for. Not to mention that my software will easily pay for itself. Other apps don't really let you analyze multiway pots, for example, so paying more for that one feature should easily pay for itself. BUT, I'm not sure how many people think this way. I worry that some will say, "Meh, $5/month is a lot over the long run, $35 as a one time fee is way cheaper, I'll go with that one." I guess I'll have to test things to figure it out.

        Yeah, I could definitely use some UI improvements. I'm not a trained designer so it's to be expected. I plan on consulting with a designer once I have some money rolling in.

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          When you're talking about getting your foot in the door with an initial base of customers....My point is that this is the perfect opportunity to perform tests so you can learn and determine what to charge those people.

          I know it sounds scary to test things on real traffic, that's why you put some thought into it and do a good job. This is the time you will have the least amount of risk, so you should take this opportunity to get used to doing things like tests. The longer you wait to test things, the more traffic you'll have and the more scary it will be.

          I could be wrong, but I think it's best to optimize pricing and converting customers as quickly as possible. But I can understand how it's a little scary since these are real users.

          In addition to testing, you should have lots of conversations with lots of your users to see what they want, like, don't need, price model preferences, etc. Or at least put together a survey/poll and put them in a lottery for filling it out or something.

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            Gotcha, that makes a lot of sense about it being less risky to test in the beginning because you don't have as many users, and also because they haven't established any expectations yet. Thanks the the advice!

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              Adam,

              The most important thing right now is for you to figure out whether or not you can use your website to print money.

              I think your competitors are charging a one time fee of $50 (for example) because they can acquire 1 new paid user by spending $40 in paid advertising using Facebook, Instagram, Google Etc.

              If you can put $40 in, and get $50 out, that is a real business. If you can put in $25 and get $50 out, that's an even better business because your printing double your money.

              Your number one priority should be to answer this question as quickly as possible. Even if you can't get an ROI, you want to know this now, not later. And then go from there.

              Does this make sense?

              You have to do this now because how would you feel if you learned one year from now that your competitors have been getting rich by using this strategy and instead you were using some other approach like a $5 per month subscription which in this case would be completely wrong.

              I'm not saying a monthly subscription is right or wrong or that you can even make money using paid ads....but are you following what I'm saying brother?

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                Hm, I think so. Let my try paraphrasing to make sure.

                It sounds like you are saying that the #1 thing for me (and any business getting off the ground) is to figure out if you can profit (eg. "print money"). Eg. if you price at $50 and CAC is $40, you're profiting. But if you price at $25 and CAC is $30, you're not. So, at different price points, the answer to the question of whether you can profit will be different. So your first step is to play around with different price points and see if any of them allow you t o profit. And then, from there, once you've gotten at least one profitable approach, you can tweak it to make it optimally profitable. Eg. if you're charging $50 and CAC of $40, you are profitable, but maybe you can play around and see that you can get away with charging $60 for the same CAC.

                Is that what you're saying?

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                  100%

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                    Not letting me respond to your other comment so I'll respond here.

                    Yeah, I plan to do what you said.

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                    Cool. Yeah, that definitely makes sense.

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                      Did you already have a similar scenario in mind or is your plan a completely different approach?