As you know, we recently ended the SaaS Quick Start program - and now we're shutting down the Pricing Page Tune-Up™ service, too! Why would we do such a thing? The quick answer is that as the best SaaS consulting firm in the world (if I do say so myself) our retained client work does not give us the time necessary to dedicate to the marketing of - and market creation necessary for - the Pricing Page Tune-Up™ service. The longer answer, which is below, is where I will explain in detail the reasons for shutting down the Pricing Page Tune-Up service and attempt to teach you a lesson about the difference between a market and opportunities. Oh, and there is a great offer for one last Pricing Page Tune-Up at the end of this post.
The Pricing Page Tune-Up service is awesome and the 35 companies we've done Tune-Ups for, including those that have come back for a second one, absolutely love it. We consider it time well-spent when we perform a Tune-Up and the results reported by our clients have been amazing. But just like we tell our clients - your software/technology/methodology/special sauce is not what matters. The best product or service in the world means nothing if no one will buy it. While marketing is huge - having a market for your product in the first place is even huger. (Is that a word?)
So, the conclusion we've come to is that there is no market for the Pricing Page Tune-Up service. To make this service successful and to scale it into something worthwhile first requires the development of a market to consume the service. Something we tell our clients - but have never published - is that our definition of a market is a group of people ready, willing, and able to buy your product or service today. In fact, if they don't buy from you they will buy from someone else. Based on this definition, there is no market for the Pricing Page Tune-Up at this time - no group of people ready, willing, and able to buy the product en masse. I like to think the Tune-Up service could be lucrative in the long run, but when you are first to "market" you are tasked with the creation of that market.
This is the fallacy of "first mover advantage" - most of the time "fast second" is the better place to be. Innovation within the context of an existing market is different, and less costly, than innovation that includes market making. In fact, I originally sent this to our mailing list (they get all the juicy stuff first - you should signup) and one of our mailing list members replied to me with this quote: "The price of being first to market is the cost of creating that market; the price of entering an existing market is competition." Well put.... thanks Peter!
Given the nature of our business, I am often asked by ISVs or SaaS vendors how big the "SaaS market" is, to which I quickly reply "there is no such thing as a SaaS market, except for consultants like me that sell to SaaS companies." Yes, it is generally not helpful but helps illustrate the point that you aren't selling "SaaS" but are selling a solution to a problem - SaaS is just the Business Architecture. But I digress.
Understanding what a real market (defined above) is, I'm inclined to say that even for SaaS consulting services a true market does not exist. Instead of a market, there are just opportunities; a market being those ready, willing, and able vs. the right-place, right-time nature of opportunities. Unlike the Pricing Page Tune-Up service, or any low-price product or service, in an opportunity-based business, if the price is high-enough, a substantial business can be built off of opportunities. This is what we experience in our consulting practice.
However, if the price point is quite low - as with the Pricing Page Tune-Up - an opportunity-based model is simply not sustainable or, obviously, scalable. Low priced services need to be market-driven to ensure survivability. Put another way, high-touch sales (or market making) required to convert opportunities to deals exponentially increases the customer acquisition costs (CAC) for the service. If the revenue generated from that customer does not exceed the CAC, then it is a money loser. Unless you have substantial funding to overcome the CAC deficit you will ultimately fail in attempting to push a low-priced product or service where a market does not yet exist. If you have a runway long-enough to get you past the market building phase and into a true market, then this is a valid strategy. Just be careful and know what you can realistically achieve with available resources.
For Sixteen Ventures and our Pricing Page Tune-Up service, the creation of that market starts with educating SaaS & Web App vendors that pricing itself is important, that they need to have a real pricing strategy, and that pricing is not something that should be an afterthought. This education is far from complete - ask any Pricing "expert" out there - especially for early-stage startups. They just don't get it yet. Now take a subset of pricing specific to SaaS & Web Apps - the pricing page - and you have a significant uphill battle just to get people to realize that it is a subject they should pay attention to, never mind that they should pay you money to help them. Are you in a position to first educate (read: change behavior), and then convince people that your product is the right choice? Is there a group that is ready, willing, and able to buy your product today? If not, what are your options? Do you have the resources to create a new market or can you shift your focus to an existing market, at least while you continue to build the other market?
So we know the Pricing Page Tune-Up service is fantastic, and that it is very important for SaaS & Web App companies, startups or not. I can point you to 35 companies that would agree. Surely 35 companies shows that there is a group that finds value in this service, right? Yes, but those 35 companies were more opportunity-based than market-based. Most of the 35 came from within our sphere of influence, a group of people that have come to trust Sixteen Ventures over the years through the consumption of our articles, emails, presentations, tweets, etc. These folks have come to realize the importance of pricing in SaaS and every once in a while we hit some of them at the right time with offers for a Tune-Up. When it comes time for you to move beyond your "sphere of influence" - especially if you are a consultant attempting to "productize" or "servitize" your offerings - and start trying to land cold customers, are you sure there is a market? How will you determine this before jumping in? Do you know how you are positioned outside of your current captive audience?
Frankly, the lack of reach beyond our "sphere" is fine - only 2 of the 35 were "cold" clients - because we never did any marketing outside of that group. Unfortunately anyone can go to our Pricing landing page, and many do - and then exit - since the marketing site for the service is terrible. We just haven't spent the time or the resources (energy, money, etc.) to fully develop the marketing site for the Pricing Page Tune-Up service - the main reason being the lack of a market to build the site for. Based on some feedback we've had from those who abandoned the sign-up process recently, and the high percentage of exits overall, it is clear that the marketing site (or lack thereof) is affecting sign-ups and even worse, could be having a negative effect on the overall perception of Sixteen Ventures to those coming in cold. Whether it hurts our company isn't clear, but a bad marketing site certainly and obviously undermines the value-prop of the Tune-Up service!
So, without a market nor the time/resources/inclination to develop one, and without a fantastic marketing website that at least doesn't damage our reputation, it is time to shut down the service - or at least put it on hiatus for a while. But, like everything we do at Sixteen Ventures, it won't go away without a fight. We have done Pricing Page Tune-Ups for 35 companies - I want to say we've done Tune-Ups for 50 before we shut this thing down. Only 15 more to go. I know there are some people that have not taken advantage of the Pricing Page Tune-Up service yet, who *know* it is very important, and are just waiting for the right time. Well, times up.
I hope you take some of the lessons in here very seriously and look at your business to figure out if you are being too innovative for the amount of money in the bank. Heavily funded companies can afford to make markets - can you?
Of course, I'm also very interested in your thoughts on the lessons in this post, if you've experienced this, if you think we pulled the plug on the service too soon (I have a lot of thoughts on that, too), etc. Your feedback is encouraged.
Author: Lincoln Murphy (@lincolnmurphy on Twitter)