Episode 93
· 57:04
Hey, product people. It's your buddy, Justin Jackson, back with another episode. This one is incredible. As a lot of you know, I'm building a new SaaS app in 2018 called transistor.fm, building it with my buddy John Buddha. We're at the point now where we're probably about a month or two out from launch and we're trying to price this thing.
Speaker 1:We're trying to figure out pricing. And you know we both worked for SaaS apps before but we're trying to not pretend we know everything there is to know about running a SaaS. And we wanted to reach out to some experts and get some outside opinions about what we should be thinking about as we're trying to figure out our pricing structure. And Patrick just blew my mind. This this conversation is incredible.
Speaker 1:Take out your notepads, take out your pencils, you're gonna get so much out of it. Before we get into the conversation, I just have two announcements. The first is I'm about to launch the product validation checklist. It's at productvalidationchecklist.com. And basically, if you're trying to figure out product market fit, if you are, you know, considering pursuing a new idea, you're like, ah, should I build this?
Speaker 1:Do people want this? This is like product validation on the rails. It takes you through each of the steps with these interactive worksheets. And every time you finish one of these worksheets, it'll send you a PDF so that you can review your progress as you go along well with your time. So check that out productvalidationchecklist.com.
Speaker 1:Get on the waiting list. There's already 60 early access customers in there right now. They're getting a ton of value. The second thing I wanted to mention is that there's been a lot more sales of my course marketing for developers lately and that's interesting because I was actually planning on taking it off the store in July so that we could update it August and September and then relaunch the updates in October. So I'm want this is kind of your last call to get marketing for developers before we take it out of the store and you can't buy it anymore.
Speaker 1:And I wanna make it worth your while. If you go to devmarketing.xyz and use the code summer two thousand eighteen, you'll get $50 off the course. And that's only available now in July. We're going to be taking it out of the store. You won't be able to buy it anymore.
Speaker 1:It'll still be active for users but you won't be able to buy it anymore. And then yeah. We'll we'll be working to update it and then we relaunch in October and then all the folks who bought the previous version get all of the updates as well. Now here's another reason to buy right now. The full unedited version of this conversation is in the course.
Speaker 1:It's one of the bonus videos we did. You'll get to see all of my screen, everything I was sharing with Patrick. You'll get to see his, you know, reactions to what I'm saying. It's like a crash course in pricing. Well, it's worth the money right there.
Speaker 1:Go to devmarketing. Xyz, let's get into this conversation with Patrick. So looking at what you do, it looks like you do a lot of consulting, like you're going in or like productized consulting. How does it work?
Speaker 2:Yeah, so it's kind of, we've evolved over the years essentially. So I don't know if you know, like we're also ProfitWell. I don't know if you've heard of that product or that brand or anything like that. No. So it's basically a barometrics competitor.
Speaker 2:Okay. And so our whole vision is basically we wanna give away, and we give away ProfitWell for free. And so it's one of those things where we're giving away like the insights and basically the analytics for free. And then we wanna point out problems that you have, and then sell you software and what we call tech enabled service, which is PI, price intelligently to you. So the price intelligently side is basically, it's basically a tech enabled service where you can't like come to us and get custom consulting.
Speaker 2:It's like, it started off as a pure software product actually, and then people were like, we don't wanna do the work to get the data. And then when we did the work for them, they're like, we're not confident enough, they didn't say it like this, but we're not confident enough to use the data. We need some help because no one's done pricing. And so it kinda rolled into this, like, nice high LTV product, which is great.
Speaker 1:Wow. And this, like, ProfitWell, I was looking at your team, is a big team. Like, you have a lot of people on this team.
Speaker 2:So the company, total company is 50 people, and it's all one company. Wow. And so we, yeah, we're fully bootstrapped. So we've no outside funding, no inside funding. I cashed out my $4.00 1 k from Google, which was not much because I was like a punk ass 25 year old.
Speaker 2:And so and then just kind of like got money from customers, like the classic story. And yeah, we're we're we're doing really well. It's hard to see the positive because obviously, you know, we're building, but, yeah, things are cranking.
Speaker 1:So you started with ProfitWell, or you started with Price Intelligently?
Speaker 2:Yeah, so we started with Price Intelligently, and it was basically a couple years in, we were helping this company that was about to IPO with their pricing and we found out their MRR was completely wrong. Like just a CFO was calculating MRR. Because it's not GAAP accounting. And so, it's one of those things where it was important, but it was off. And so, it was like a really funny thing because Josh launched Baremetrics like three weeks before we launched.
Speaker 2:Yeah. And then we launched and then Chartmogul launched like four weeks after us. And none of us knew each other, so it was just kind of this interesting like, we all were kind of thinking of like, a little bit different execution but similar stuff. So, yeah, it was kind of an interesting play. But yeah, so and now we're rebranding to ProfitWell first.
Speaker 2:So if you go to price intelligently, it's buy ProfitWell, and that's kinda what our shtick is gonna be. We'll hopefully Wow,
Speaker 1:this is fascinating. I could I should get you on again and just talk about how you grew this company, because this is Yeah.
Speaker 2:No worries.
Speaker 1:Yeah. So what I wanna do is, and, actually, you feel free to to steer as much of this conversation as you want. Totally. Because I I think one of the things that John and I wanna do with Transistor Yeah. Is even though we've both worked for SaaS companies for ten something years Yeah.
Speaker 1:We're really trying to swallow our egos and get help when we need help and not assume that we know everything. So I have done pricing for SaaS companies in the past, but
Speaker 2:Awesome.
Speaker 1:I'm I'm also feeling like I think there's a lot to learn. Yeah. And we there's a few different places we could take this. I wonder if you could just remembering your talk that you gave at MicroConf and reading through your your PDF, the book that you you give out on, Price Intelligently, how do people get that actually? What's the they where do they go to get that book?
Speaker 2:It's just they can, there's a couple of places. I mean, there's a, on the homepage on the bottom, there's an offer. It's our main offer, so it's kind of everywhere.
Speaker 1:Okay.
Speaker 2:Like if you're reading our content and stuff like that.
Speaker 1:So for a new company like us, what kind of process would you take us through? Where would you start us out?
Speaker 2:Yeah, and I think it's You guys were on the right track with I listened to the episode on the pricing side. You're on the right track with it. It really is that persona identification because when you're early, there's two things that are really, really important. Focus and your value metric. And the focus comes from who are you selling to?
Speaker 2:And everyone's like, Oh, I wanna go to everybody, right? Like, there's this big dogs that are coming in. Oh, there's a bunch of my like startup friends, that type of stuff. And it's okay to take inbound from all of those folks. But you know, you probably like, we've all read the like, you know, ClickFunnels and ConvertKit stories, where it was like once they focused, of a sudden, you know, things things took off.
Speaker 2:And that's really what's really important with pricing is that you wanna figure out who is going to be the sustainable, profitable customer. Mhmm. And that's not only from a, like, who you should target with your marketing, but it's also how are you gonna structure your pricing. Because oftentimes what happens, and this is why we gave ProfitWell away for free actually, is you do the analysis and you realize like, selling to my startup friends probably isn't that profitable. You know, it's low CAC, but you know, there's not a ton of them maybe, whereas selling to a really giant corporation also might not be great because you guys might not have the DNA to do that because you don't want to or you're like, I just don't know how to do that.
Speaker 2:So that's the biggest piece and it's the hardest piece because it's the most ambiguous. And the other thing is just really nailing your value metric, which is what you charge for. And you guys talked about that a little bit. Those are the two biggest things for an early company. And then as you grow, a bunch of other stuff becomes more important.
Speaker 2:But if you nail those two things and you get everything else wrong, you're typically fine.
Speaker 1:Yeah, this is And you might have even heard this in the episode, but we got stuck as soon as we started talking about the who. Like, who is this for? And, our advantage is we have this group of people that's, 60, you know, 60 some customers. Yeah. And we can look and go, okay.
Speaker 1:We can ask ourselves all sorts of questions. Like, we've already been serving them for a couple months. Who do we wanna serve for the rest of our lives? Like, what kind of customers do we want? And Yeah.
Speaker 1:Who's given us the most support tickets? Who do we think when we look at especially podcasting, you're looking at their stats every month, and you're going, okay, they still haven't published an episode. Yeah. Or they've published two episodes they haven't published Yeah.
Speaker 2:So you have, you kinda have the problem, it's it's It's not a terrible problem, but you know Wistia? I'm sure you've heard of Wistia at some point. So I know Chris and Brendan really well they've had this problem since the beginning, was like people like video, not everyone does video. You know what I mean? And so I think the way that you can back into this actually, is by trying to solve the value metric problem first.
Speaker 2:Because if you figure out and the way you solve a value metric, like the thought exercise is really what's like the perfect value metric? So for you, it might be number of downloads or number of episodes. And maybe you can't charge on that. I think you could if you wanted to and there's reasons you would or wouldn't, at least in my opinion. But if you start there, then it's like, okay.
Speaker 2:So if we wanna charge per episode, so like they get 10 episodes a month on plan A, they get 20 episodes a month on plan B, etc. And then there's like the daily episode person, which is like the cards against humanity. If we start there, then all of a sudden, the real delimiter between our buyers is episodes, And so then all of a sudden, if it is episodes, the free plan is zero episodes. That's like the solopreneur who just needs to get started. You nurture them until they go, and you're providing them some cool tools to get started.
Speaker 2:And then all of a sudden, once they start publishing, you're aligned towards that success. And it's hard because you can't make them publish. But then all of a sudden you can start to analyze, okay, cool, Cards Against Humanity, they're using us, but maybe they're not the right target customer because we don't know how to acquire them. We don't wanna spend the CAC, all that kind of stuff. But then there's this sweet spot of like someone who publishes once at least every two weeks.
Speaker 2:And then the name of the person, solopreneur, hobbyist, etcetera, is a little bit less important. And you can actually center your personas against that frequency, for example.
Speaker 1:Yeah. So this I I had a conversation with Nathan and Barry from ConvertKit. And he said he thought we should our value metric should be downloads. And at first, I was like, no, Nathan. That won't work because we've got lots of competitors.
Speaker 1:And if you do it in evaluation, if you if you did a pricing teardown of all of our competitors, you would be like
Speaker 2:Yeah.
Speaker 1:What the fuck is going on in this industry? It's all over the place, know what you wanna be. And Yeah. At least in the web hosting arena, there was some there was some commonalities. Like, what are we basing our pricing on?
Speaker 1:And, you know, folks like WP Engine I'm gonna share my screen again. And I I'm gonna be a little bit all over the place because I've got all these different conversations kind of coalescing. And so, on one hand, I have this Nathan conversation, on the other hand, I have Ruben Gomes from BidSketch. And when he looked at he's like, how does podcast hosting work? He's like, don't you just upload it to Apple Podcasts?
Speaker 1:And I said, no, that's not how it works. And as he listened to me, he said, oh, you know what this is like? This is like web hosting. This is like the early days of web hosting. And you need to look at what those folks did and, you know, find that's kind of your model.
Speaker 1:What worked for web hosting is what's going to work for you guys.
Speaker 2:Yeah. I think what's interesting is, is so the other thing with value metrics to kind of think about is when you look at this space, and this is what we learned in the analytics space for instance, the value to a 500,000 visit per month website doesn't scale dramatically compared to the value of a 30,000 visit website. Now, that person who's a 500,000 visit website, their willingness to pay is likely much higher just because they're a larger company. The concept of $300 to them is similar to the concept of $50 to the smaller company, like they're pretty equal in terms of perceived value. And it's a tough space to be in in particular because you're not able to get the whole like 10¢ per video kind of shtick that Wistia is able to get because I'm not thinking about that incremental gain, if that makes And so there isn't a perfect value metric, I would argue, away from where you are.
Speaker 2:And so this is where you can use your pricing to be I don't wanna say the word disruptive, but that's the natural word I wanna say, which is maybe you do price based on unlimited number of downloads, but it is based on how often they post, Or there's a two value metric, kinda like WP Engine does, where you can get unlimited visits or unlimited downloads, but only in the top tier. Meaning like when you're low end, you can pay a little bit less, but you don't want, you know, Bill Burr, I don't know, I'm just throwing, I don't listen to Bill Burr, but some of the guys in the office do. You don't want, like, a really famous podcast who down who does one post a week paying you $10 a month.
Speaker 1:Yes. Yeah. And so the other reason I think that pricing on downloads was interesting to me was it is the biggest cost for our business. So as downloads scale up, that is what costs us more. Yeah.
Speaker 1:There's also this challenge with podcasting, which is so you just saw the stats from product people, which I haven't posted at in a long time. Yeah. It's just getting downloads based on its back catalog.
Speaker 2:Yeah. It's consistent.
Speaker 1:And there is something valuable about that. That means people are still listening, still engaging. Maybe in the maybe in the future, we've got pro plans that allow you to splice out old ads and put in new ones. So there's a lot of interesting things we could do there. And there's always been this problem about what to do with dead shows, like shows that are no longer being updated but are still getting downloads.
Speaker 1:And we're thinking, you know, if a business invests, you know, let's say they invest $100,000 in producing a podcast for a year. Although that would Cards Against Humanity and Basecamp, I think, are investing $200 a year, but a solopreneur might be investing $5 a year. Regardless, if they invest the money, but those shows are still getting downloads and still bringing them value, we want to be able to charge them for that. And so this idea of and it's also when you ask when you ask folks what do they want, like why are they here? Let me show you this.
Speaker 1:Again, the advantage of having 60 early access customers is you can ask them questions. And let me I really wish there was a short key for Skype sharing, screen sharing, because every time I go
Speaker 2:I'm all Zoom now all the time just because it's
Speaker 1:Yeah, I got to go to Zoom or something.
Speaker 2:It has its own troubles, though.
Speaker 1:So I asked folks, which of these best describes your podcast on Transistor? I said, is your podcast part of your brand or is it a fun side project? Now, 58% said, this is my brand. 41%, this is a fun side project. So in our early access, we've got a bit of both group.
Speaker 2:Yeah.
Speaker 1:Now, in terms of what best describes their goal for their podcast, it's really strong. 50%, I'm using my podcast to grow my audience. And if we scroll down here, if you describe your biggest struggle with your podcast, what is it? Getting more listeners. And so it feels like downloads is a great metric because if we do give them more success, if we we say, okay, you know, maybe we've got a starter plan at $19 and that gets you up to, you know, up to a certain amount of downloads per month.
Speaker 1:But if we help you get above that, hopefully you're going to be ecstatic. And if we can also give you a few more pro features in that, let's say it goes from 19 to see, I'm really projecting now. I'm 19 to 99 or something like that.
Speaker 2:Good old Hootsuite. Yeah.
Speaker 1:And where's the plans? Yeah. So if we go from 19 to 99, but in that 99 tier, you get way more downloads per month and you get a bunch of more pro features as well. It just seems like there's something about that that could be compelling and allows us to scale the costs of the business as well. And also helps us deal with the dead shows problem, which is sure, if your show is no longer let's say it's getting less than 10,000 downloads per month, well, let's just put you back down in that $19 a month plan and, you know, you'll be fine.
Speaker 1:You can still get the benefit without having, you know, to constantly produce the show. Oh, one more thing I think it helps us with, and this is what Nathan said. He's like because I said originally, I was like, we should do it based on number of shows you have. So, you know, I've got product people, I've got Mega Maker, I've got Build Your Sass. And he's like
Speaker 2:Not everyone's got
Speaker 1:that. And he's like, no, no, no, no. He's like he's like, people that most folks are just gonna do one show. And the other thing that I was thinking about is there's all sorts of uses for podcasting that are interesting. Like, we have one customer that's doing a private show just for his staff.
Speaker 1:We have Mhmm. Other customers that are using it for the audiobook for their their like, write a book and then they're doing an audiobook. Why would we wanna discourage them from creating more shows? Why don't we just say, your account gets this much downloads? Unlimited shows.
Speaker 1:Add as many as you want. Yeah. Try launching three. And if one takes off, amazing. Do a show on the side with your kids.
Speaker 1:Why would we want to limit their usage, especially when them adding a show doesn't add more cost to us? So what do you think about what I've said so far?
Speaker 2:That. Yeah, yeah. So I think, so the instinct of So there's a couple of things. One, very logical, very rational. And I think that it's well thought out.
Speaker 2:There's a couple of wrinkles to think through. So for one, you're gonna have potentially the low volume, high value problem. This is not a terrible problem to have. It's probably the exception, but it's worth kind of exploring. Meaning, I don't know, LinkedIn has a podcast that has 5,000 execs and they publish once a month and it gets only 5,000 because it's like a closed group, but it's extremely valuable, right?
Speaker 2:It's not a reason to change something, but it's a reason to look into how many of those are potentially happening. I like the unlimited shows concept. I would probably put a limit on your $19 plan where maybe they can only chart or only do, you know, four posts a month or something like that just to start to move them up. That might be something that you do later, meaning you start off unlimited just to, you know, get perfectly aligned with the value that you're providing and then eventually hit that limit once you get kind of the flywheel going for distribution. And I will say that aligning, it has some remnants of HubSpot, right?
Speaker 2:So HubSpot, in most marketing automation, their main value metric is typically contacts, right? Which is a proxy for money. Theoretically more contacts means more money. Not all contact at every company is created equal, meaning a contact at our company versus your company might be very very different value. But what it allows you to do is exactly what you're talking about which is, if you are not successful, you're not paying us.
Speaker 2:And if you are successful, you have no problem paying us because you know, we're awesome. The one thing that I would think through though is also getting the value metric levels right is gonna be really, really important. So what you wanna do is you wanna make it sure it's not feeling nickeled and dimed. So with WP Engine, you occasionally get some spikes, which are great, but it doesn't feel good to get charged. I don't know if it was two X or it was more money for success, right?
Speaker 2:And so what Wistia does really, really well with this, and I don't know if they do it anymore, I know they did it for a while, was basically they would go, Hey, congratulations. Your videos got so many more views. This is awesome. You went over the limit. We're not gonna bump you up this month.
Speaker 2:But if it happens again, we'll bump you up to the new plan and it's gonna be awesome, right? Like they made it a really, really positive experience for that overage. And I think now they just bump you up, but they still make it a really, really positive experience where it's like, Congratulations, this is awesome, etc. So that's something to think about. I think there's once you have that main value metric picked and I would do a little bit of research and the section on feature value or relative preference campaigns in the book, our book, I would look at that and I would do a simple survey, is just when you think about transistors pricing, which is most preferred, which is least preferred.
Speaker 2:Pricing based on number of shows, pricing based on bands of downloads, pricing based on etcetera, etcetera. And just kind of level set it. And it's okay if everyone's not choosing that, but you wanna make sure that everyone's not opposed to it. Meaning it's not the least valued or least preferred piece. And hopefully, it's the most preferred, so you don't have an uphill battle when you launch your value metric or your pricing in general.
Speaker 1:Yeah. Just to kinda round out our conversation on the value metric. Yeah. Another thing I've been thinking about because we have a a point of view. We have a thesis with Transistor.
Speaker 1:Nice. That point of view is that in my own experience and the experience of my friends and the other folks I've seen, and even now this data we're getting out from the big publishers, we've seen that podcasting is the best way to earn trust with an audience, and that trust almost always leads to purchasing decisions. So Brian Cassel was just on stage with me at MicroCon in and he said, you know, 65% of my customers came from my podcast. When I when I launched marketing for developers and I did a follow-up survey like, how come you bought? Like, why would you buy from some dude in Canada?
Speaker 1:And they said, I listen to your podcast. 75%.
Speaker 2:That's great.
Speaker 1:And so and now we also have data from the big folks. So I think in the last Edison survey, they found that people were 56% more likely to buy a product if they'd heard about it on a podcast.
Speaker 2:That's great.
Speaker 1:So that's our thesis. And again, when when Nathan introduced this value metric of downloads, I was like, Because the idea is if you increase the number of listeners, then theoretically, you're gonna increase the number of customers. That it should scale together.
Speaker 2:100%.
Speaker 1:And so Yep. I think that's another reason for us to go after that group. Now, we're gonna leave that there because now I need you to be my my my persona therapist.
Speaker 2:There you go.
Speaker 1:So there was a point where John and I were talking. And we we kind of we've we've had this uneasiness, and we hadn't actually articulated it. But, you know, I come from a very kind of business, lots of solopreneur friends, lots of bootstrap friends, lots of people in software, etcetera. John comes from that whole other crowd of the Chicago Podcast Network, Cards Against Humanity, which is it's a business, but, you know, they're they're wacky. You know, they're they're very they appeal to artists.
Speaker 1:They appeal to their style. So we've attracted some really cool shows that we like. And we also have some folks who are not businesses but have big shows and want to be on our platform. And we want them in some ways because we're fans, because we're it's almost like we turn into just giddy fans when we hear about, oh, they want to be on transistor. That's
Speaker 2:cool.
Speaker 1:But the there's a trick here, which is we have to figure out who we're going to be focused on in our marketing material and our pricing. And so when you think about personas, what are some of the factors you consider? And also, I'll say that for myself, I think I have a tendency to think small. A lot of my customers are people just getting started. A lot of my customers are, you know, very small.
Speaker 1:And, now I've been doing Mega Maker for two years and I've seen something you mentioned, which is one of the challenges with that customer base is that they're often like they don't often don't make it. Like, they start and they don't make it. Mhmm. Startups don't always make great customers. So what are some of your thoughts around personas?
Speaker 1:Things we should be looking at, sand traps we should be avoiding.
Speaker 2:Yeah, I think you said a couple of interesting things. So for one, to answer your question directly, you need to think about the addressable market, the DNA of you and your team, like what you're good at. But you also can hedge some of this risk with your value metric. And what I mean by that is when you look at your business and you think about, okay, so we have this value metric now, let's assume it's number of downloads. And maybe we have like, you know, you only get one show on the low end and, you know, we have some other details in there, but it's number of downloads.
Speaker 2:You have the ability now to within reason get almost the entire spectrum of who you wanna go after. Now, doesn't mean that you should target with your positioning and your marketing and all this other stuff with all of those personas. But it does mean that you don't necessarily have to give up on someone. So in practice, what this looks like is I can give a real example with ProfitWell. So basically, when we looked at the market, the addressable market, it was, wow, there's a lot of like SaaS people, but it's not a lot of companies.
Speaker 2:And if you think about it, it's really only about 40,000 subscription companies, not just including SaaS, that includes like media companies and box of the month clubs and all this other stuff. That number is not growing that quickly. Wow. So it's growing at two to 3%. Actually, this last year, it's contracted a bit because we're no longer in this gold rush of everyone starting a subscription business.
Speaker 2:Now you're gonna see it more and more, but just as many are growing that are failing in certain cases. Yeah. And so when we were looking at that, we were thinking, okay, what do we wanna be? Well, we do wanna be a big company. We don't wanna just be a lifestyle business.
Speaker 2:So that means we're gonna need high LTV, right? And all of a sudden that started making the decisions for us because we're like, we love startups. We love SaaS. We're bootstrapped. We're like really proud of it.
Speaker 2:Mhmm. But that's not gonna help us get there. Yeah. So how do we set up our pricing and our targeting where we can be friends with our friends, you know, essentially, but we don't necessarily target them to make our dollars, right? And so that's what led with our free plan and why we gave propofol for free.
Speaker 2:And then when you pay us, it's kind of like slack or some of the other kind of free to enterprise or free to mid enterprise models where all of a sudden when you start paying us, you're paying us, you know, not $19. You end up paying us, you know, at least a $100. If not, most of our folks are paying us in the 4 figures, right? So you're in a market that's green, but really rapidly growing. Everyone and their mother is starting a podcast, which is amazing, right?
Speaker 2:Because of all the stats that you stated. So there's a world where you set this up, where your target might be the Chicago podcast, Cards Against Humanity, etcetera. But you still have either a free plan that's limited. You know, it's free until you publish or, you know, there's a $19 plan for when you're getting started.
Speaker 1:Yeah.
Speaker 2:So all of your buddies and everyone in this crowd and when we go to microconf, everyone gets on it and it's great with the hope that they grow because they eventually will pay you $100 or $200 or $500, right? So to kind of bring this home a little bit, I think you need to think about your addressable market. You need to think about what you're good at and what kind of company you wanna be. And I mean, do you just want, you know, $10 a month so you guys can, you know, have a good lifestyle and then this supplements everything else? Or do you want, you know, a $15,000,000 company in the next few years with a team of 20 to 50 or whatever it ends up being, right?
Speaker 2:Because that's gonna guide the decisions a lot. And then once you've kind of decided that, it might be like if if you wanna be a a larger company, a faster growing company, if this is like not a lifestyle side project, I think you would you would target not quite the starters or the solopreneurs. You would use them as like inbound, and then you would target more of the Cards Against Humanity, these other folks out there. That's kinda how I would start thinking about it. And then as you continue to refine that vision, all of a sudden you start aligning towards that success because your value metric is already a success and outcome based metric.
Speaker 2:And then all of your content, you might be writing it for that Cards Against the Humanity Producer, but it's still useful for Johnny or Jane startup, So you can start to hone this in and not necessarily get everything, but you know, get the focus on where you want the business to go and then get the inbound from all of your friends who are probably gonna be easy to acquire anyways as customers.
Speaker 1:Yeah. No, I really like that. So the question now is, I think I've got a little bit of insecurity around how would we ever go upmarket. And so you've managed to do this, so I want pick your brain a little bit. I look at this is what I think I just heard you said, is that you started ProfitWell as a tool that any SaaS company can use, it's free, and it's perfect for startups because, you know, they're just getting going.
Speaker 1:I mean, John and I would be a great user of this. Right? We like Yeah. If you've ever been in a budget decision with John Buddha
Speaker 2:Free is always better.
Speaker 1:Yeah. He's like, No, we can't spend the money, and I'm always the one that wants to spend the money.
Speaker 2:Very Canadian.
Speaker 1:Yeah. So he's like, No, we're not going spend the money. So we would be a great customer for this. But when I look at price intelligently, it says, you know, like, your build your pricing page starts at 45,000. Your embedded pricing and customer research team starts at 15,000 per month.
Speaker 1:What how like, I'm just seeing a lot in between. Like, how do we go from this to these high value customers? And to be honest, I've charged a SaaS customer $100 a month, but I just don't have an imagination for what's possible beyond that and how you would even bridge that gap. So how did you folks bridge that gap? How did, how does it work in practice?
Speaker 2:So, yeah, so in practice and our product marketing on the ProfitWell side is it's too old right now. And so there's gonna be a clearer bridge in the next couple of months that'll hopefully be a good mini case study for you. But I would look at, you know, WP Engine was an interesting example for you. Hootsuite's a little bit of an interesting example as well. But to answer your question directly, I think it's more about like, the real answer for us, and I'll extrapolate it out to maybe something that's useful, that we want there's an advantage in terms of time to having that free product.
Speaker 2:So we have a ton of like five ks a month, three ks a month, 15 ks a month companies on ProfitWell. Those folks were okay building our brand, you know, having them consume our content, taking up our support time, all of these different things to build that relationship because for every I don't know what the number is, but let's just say for every 20 of them, one of them is going to be a faster growing company that is eventually gonna need our $1,000 product, our $10,000 product, and then our $15,000 product, But we own the lead. That's the biggest thing for us, is we own that lead in terms of nurturing. And as long as we keep them happy, eventually as they grow, they're gonna want more of the firepower that we're bringing out. But this is a very like freemium play, which is not for everybody.
Speaker 2:And the important thing to remember is that freemium is an acquisition model. It's not a revenue model. So this is a very like acquisition long term brand nurture play. Now bridging the gap between small and large customers, it's actually not as hard as you might think because people know things cost money, And when you have Cards Against Humanity getting that much value, you know, 50% of people saying, Hey, I signed up or I bought this because I heard you on the podcast. That's a lot of value to them.
Speaker 2:And almost when you start charging them $20 they're like, they don't trust it, right? So if you're going after solopreneurs and charging $20, $50, etcetera, that's when you're getting into a situation where they're complaining the most, they're not happy, they're not aligned because they're not necessarily putting the full value into the product, meaning like they're not taking advantage of the product, but then Cards Against Humanity is actually looking at that and being like, this is too cheap, I don't really trust the quality of this product. We need to go buy something that looks more enterprise, It's not always like a very conscious decision or conversation that's happening, but you see that in the aggregate. And so for us, it really comes down to, hey, we have this pool of people in our free or let's say maybe your lower tier plans. And we know the triggers, whether it's their size or whether it's their need, all of a sudden, they're gonna need some of our paid products, and we're not gonna annoy them until those triggers are hit.
Speaker 1:Mhmm.
Speaker 2:But we have that lead and that might be your $19 plan where you give them support, you make them happy, help them amplify the brand. You're really targeting the minimum of $100 or $150 or $200 a month.
Speaker 1:Yeah. See, that's the perspective I think I need to hear more just because I haven't been in those rooms yet. I haven't, you know, all my SaaS experience has been based on selling a $100 a month plans. And, I've never been in a room with Hootsuite or, and I, I don't even, like, to me, I don't even, like, I'm thinking, what would they spend on food in a month? What do they say?
Speaker 1:Have no concept of that. It's a lot of money. Yeah. And so hearing from you is actually there is a little bit of therapy in that to to know that you still get nervous about it, but there are these companies that and I think about this all the time. I have my friend Tim, has he does work for really big retail chains, huge.
Speaker 1:And his favorite thing to do is jump on a call with me and ask me a bunch of questions about product marketing, about positioning, about whatever, what jobs to be done. And then he basically goes back to those customers and charges them a huge amount of money for it.
Speaker 2:Terrible amount Yeah. Of
Speaker 1:And he says, Justin, your problem is that, you know, your advice is worth, you know, x amount for a solopreneur, but it's worth even if you say it's only worth, like, 5% of annual revenue. Right? So five I mean, that would be huge for somebody who's gonna It's lot of money. Yeah. 0.0005% of annual revenue.
Speaker 1:Well, a solopreneur, that's nothing.
Speaker 2:Yeah.
Speaker 1:But for a multi billion dollar retail company, it's worth a lot. And it's the same advice. It's just a different customer.
Speaker 2:Different value. And I think for you, it's also like to give you some more confidence, so we have this data, we haven't published it yet, but entry willingness to pay for a product and the terminal willingness to pay for like a credit card. So meaning the amount of money people feel comfortable just like swiping their credit card or the amount of money they feel comfortable making a one call kind of close is going up over time. So it used to be if anything was a thousand dollars per month, you had to like meet the people, talk to them, maybe have three calls, like CAC was just crazy. Now, we know products that people are charging $10 a month, they've never met the people.
Speaker 2:It's based on a value metric, but they've never met the people and the value metric is exactly aligned with how much they think the value is. You I'll give you an example. So Wistia, I don't know if you saw this, but Kanye West emerged from his social slumber recently. And he changed his website. He's done a lot of crazy things.
Speaker 2:It's a whole another podcast hour. But he was using Wistia for a takeover of his website with just a video. His website was a video and it was Wistia player. Oh, wow. And they did not talk to anyone on Kanye West's team before they did that.
Speaker 2:And I imagine Kanye West traffic means a pretty good sum of money for Whisty. So it's like one of those things where people are more comfortable spending that money. And I think you may value not thinking about it as like a boardroom where you have to put a suit on and like sell this like product and more, hey, this value scales. We're not talking about a giant enterprise deal. We're talking about that point 00005%, which is pretty much nothing, sadly, in some cases to some of these brands.
Speaker 2:Yeah. And you're providing a ton of value for that.
Speaker 1:Yeah. I think a good place for us to close out this conversation is you said you wanted ProfitWell to be a big company. And I wonder, it seems like so much of your business decisions, and especially pricing, was based on this vision you had for the company. How did you come to that conclusion? So, like I meet people like this all the time, like Sean McCabe, he's like, I want Sean West to be a billion dollar company.
Speaker 1:I talked to Nathan Barry. He's like, I want He had it in his mind. Like, I want a big team of people. Want And I Again, I don't know if it's because I'm not allowing myself to imagine that high or I just don't want it. John and I, when we talk, we say our first goal is we want Transistor to be a million dollar a year company.
Speaker 1:Because that just seems like a nice company, but what, what went on in your mind and your life and your soul that made you think this is going to be more than Patrick. This is going to be a team that's 50 people because then everything cascaded down from there.
Speaker 2:Yeah. So I think it's a tough question, because it's not a tough question because I know, but there's a lot of layers to it. Honestly, I think the thing is that, and this is maybe sad, I'm an incredibly insecure person. I just know that about myself. It's not like I am debilitated and I am an emotional eater, but it's not like I'm at home every night, like crying or anything like that.
Speaker 2:But I've had a lot of things happen, you know, in my past, like I was in childhood and all that kind of stuff that have made me like a pretty insecure person. And where I get security and where I kind of channel that vulnerability is in basically team. Like team is something that I get a lot of energy from because it gives me some validation, like I wanna be liked, you know, that type of stuff. And it gives me some, hey, I'm helping you, we're part of a hive and it's really good.
Speaker 1:And
Speaker 2:I think the other way that I deal with that insecurity is some level of workaholism. Meaning like, can't Yeah, I watch Netflix. Like, I do stuff here and there, but it's very, very difficult for me to stop working on something. When I was at Google, which doesn't really appreciate workaholism, like they're very like, Disneyland for adults, know, work your 45 to 50, be healthy, all that kind of stuff. It was really difficult for me because I would work, you know, I'd work just as much as I work now.
Speaker 2:And that was the reason that it was frustrating because I wouldn't get that outcome that I was looking for in terms of, you know, the team or those other things because it wasn't appreciated, right? My team, I think, you know, really appreciates how much I work, even though it does borderline unhealthy in certain cases, for me, not for the team. And so if I really think through like the psychological triggers, if you will, I think that's really where it comes from, which I don't know if it's helpful, you know, for you, but it's I think the other piece of it is there's definitely some hubris there. I think anyone who Or some arrogance, you know, in a more negative light. Like anyone who, you know, wants to build something big, there's some, I can do it better than anyone else or my team can do it better, I should say, than anyone else.
Speaker 2:Or like, I want to solve this problem. And it's a certain it's not necessarily negative or condescending, but it's more, I have this problem that I need to solve, right? And that problem or that satisfaction isn't going to come from having a lifestyle business. And so all of those things kind of mixed together. I think that really helped.
Speaker 2:Now, to be very frank with you, I wasn't like, hey, I wanna create a $100,000,000 company the first year in doing business. The first milestone was, let's create a million dollar company. It's really hard to create a million dollar company alone, so I could get all of those things that I wanted in that first to the million. Then it was, okay, this chess game of this problem and this space that we're in, you know, I don't think anyone's doing it right. And we don't think anyone's doing it right.
Speaker 2:And now it's like a cool challenge to try to get out there and have that thesis. That's why I was so pumped to hear you're like, we have a thesis on this world. I'm like, that's exactly what we have. Maybe it's wrong, maybe it's right, but it feeds all of those needs that I have. So I dunno if that's helpful, because it's a little more individualistic, and I hope you're not insecure.
Speaker 2:And we're all insecure, but I hope you're not insecure to the level that I know I am because of my history. But yeah, it's worth it.
Speaker 1:One thing that I thought about as you were talking is I'm 38 now.
Speaker 2:You're 38?
Speaker 1:I'm 38, yeah.
Speaker 2:You look so young. I know you had a gaggle of kids and
Speaker 1:everything. You don't look like,
Speaker 2:not to like, I'm not hitting on you, but it's just like, not look 38.
Speaker 1:I'm so surprised. Well, thank you. Thank you. Yeah. But the you know, I've and I had a really hard I've been pretty upfront.
Speaker 1:I had a really hard year last year in terms of mental health and depression. Nothing related to business, personal stuff. And one of the things that came out of that was, Justin, you have often and people do this. Lots of people do this, but you have gravitated towards things that are easy for you, and you have tried to avoid discomfort. And, the, you know, a lot of me even, one thing my friend Tim says to me is he says, again, listen, Justin, you could put all of this work, the same amount of more work, more work into serving, you know, these types of customers with this kind of business.
Speaker 1:But why not just do the same work, but for a higher value customer. Why not? Yeah. And I actually hear a little bit of that in our conversation today, or at least made me think of that. Like, why not?
Speaker 1:Why not? If if Wistia is good for a hobbyist that's willing to pay $5 but it's also good for a enterprise business that's willing to pay $5,000 why not go after the $5,000 business? And again, if you've got a point of view or a philosophy that says, you know, I really want to serve the little person. I really want to Yeah. That's fine.
Speaker 1:But in my case, I think a lot of it has to do with fear, uncertainty, and avoiding discomfort. I just don't want the to idea of calling some of these people. And some of these folks are my friends. And I've, I've just allowed myself this year to start to call them and say, Hey, what if I offered you this? What would that?
Speaker 1:And, you know, nothing's happened there yet, but I'm trying to push myself more into discomfort. And in that kind of again, we're all we're not even we we signed our our we kind of finished signing all our documents in January. So brand new company in January. We'll give it some time. Yeah.
Speaker 1:But I think there is something about allowing yourself, to think bigger than you might've normally, but also recognizing, you know, in my case, it's clear I'm being held back because of fear, discomfort, wanting things to be easy, all And those those are bad reasons. And I'd like to push myself beyond those things.
Speaker 2:Yeah.
Speaker 1:And then you see how it cascades down on everything. It's like, okay. Well, if that's my goal, even if my goal is a million dollars, that's my favorite conversation with John. Like, it's like, how many $10 a month customers would would we need to get to a million dollars?
Speaker 2:A lot. Yeah.
Speaker 1:It's like 8,333. And when you put it in the when you look at that, you're like, wow, that's just and how many customers at $500 would we need to get to a million dollars? Well, it's a lot less. It's considerably less. Yeah.
Speaker 1:And so there's something about that that is you know, people think, well, it is easier to get a $10 customer, but is it easier to get 8,333 of them? Maybe, Justin. You should just pick up the phone and call those five people that you've built relationships with and just see if you can sell them on it. And maybe you close one of those deals, but one of those deals might be worth $50.10 dollars a month customers. You know what I mean?
Speaker 2:Yeah. I think in in the way that you can kind of bridge this gap a little bit too is you have the value metric like we talked about or theoretically, you know, with some testing and I think it's on the right track. But when you're saying like, hey, doing like not going towards discomfort, Discomfort is kind of a fact of building in life and it has nothing to do necessarily with like startups and like building companies. But I think that there are ways that you can hedge that discomfort, right? So if I was insecure about, I'm with a better half and everything, but let's say I was dating now and I was insecure about dating, maybe I would just try, Hey, let's just go for drinks somewhere first.
Speaker 2:You that kind of thing. You chunk it down. And so starting with your friends, they're gonna tell you, Oh, that's ridiculous. They're the ones who are going to tell you those things, I think is really helpful. But I also wouldn't necessarily think about going outbound, right?
Speaker 2:Like, maybe you just set it up, you have that tier, maybe no one's on it, and you start where it's comfortable on your small guys and gals out there. And then all of a sudden, Cards Against Humanity is gonna say what's up. Or sounds like John knows a number of people that are bigger, right? And then you get your confidence with them coming in. Like for us, to be really upfront, we charge 6 figure deals now on the price intelligently side.
Speaker 2:Our first customer was Litmus. We charged them $1,650. And that felt like a lot of money. Because it was just me in a room working sixteen hour days. And was like, oh, we gotta charge them now.
Speaker 2:What are we gonna charge them? And ironically, being the pricing company, it was like, I don't know. Like, you know, it was like $1,600. And then the next customer was 3,000, and the next customer was 5. And then our ARPU has just like constantly gone up because we've just gotten bolder.
Speaker 2:And the product's definitely improved, but the product hasn't changed, if that makes sense. And so it's just a time aspect. And then all of a sudden, once you get over a million, you're really confident going to people and saying, Hey, you're over your limit. You need to pay us more. Because all of a sudden you're not like, Oh, I'm gonna lose everything.
Speaker 2:Right? So I think it's just, I mean, this is kind of advice I'm sure you've heard, but you can hedge it just by chunking things down, of course. And then one thing that's kind of cool too, is you can use some data, right? Like go collect some data. It's pretty easy to collect data on people who have podcasts and just get some, hey, the data says it's this, the data's not gonna be 100% off.
Speaker 2:It might be 50% off, but it's at least in the realm of things.
Speaker 1:That's super helpful. Patrick, thanks so much for having this conversation with When I publish this, I wanna let people know where they can find you online. What are some good places to find you?
Speaker 2:Yeah, so best place is probably LinkedIn or Twitter. I'm just Patrick Campbell on LinkedIn, or Paticus, childhood nickname, P A T T I C U S on Twitter. But yeah, and I'm always up for helping. I mean this stuff, our big thing is evangelizing and trying to teach a lot of this stuff and as I kinda said, eventually if you need something, you'll feel guilty enough or feel empowered enough to come back and buy something but yeah, always willing to help.
Speaker 1:So folks, there you have it. If you want more of that conversation, if you want to see the full unedited video, it's inside marketing for developers right now as one of the bonus case studies on just man. There's we got into so much good stuff. I was able to show screenshots on the screen and really get into the weeds of what should we do. And Patrick gave a lot of inside information, insider information, if you will, about pricing.
Speaker 1:So go to devmarketing.xyz and use that $50 coupon summer two thousand eighteen. Also, if you're looking to build something new, don't do it without a road map. Get productvalidationchecklist.com, and just follow those steps. It's the exact steps I've been using with my consulting, for the past three, four years, and, all my clients are on this program. And it's also the the system I'm using for Transistor.
Speaker 1:Fm. So lots of examples in there as well of you know practically how do you figure out you know if people really want this idea that you're working on. Alright so it feels good to get another episode in the can. Hoping to come back again with another one soon. Stay tuned.
Speaker 1:Stay subscribed. And I'll talk to you later.
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