Fixing a Broken Pricing Model
Company: CloudFlow (Project Management SaaS)
Pre-Intervention Metrics (TTM):
- Revenue: $1.2M
- Profit: $180k (Net Margin: 15%)
- Blended CAC: $850
- LTV: $2,100
- LTV:CAC: 2.5:1
- Marketing Spend: $450k/year
- Trial-to-Paid Conversion Rate: 8% Only
- Ad Click-Through Rate (CTR): 4% Only
- Trial Signup Rate (Post-Click): 10% Only
Current Scenario
Pricing Tiers & Features:
Business
$8.99Month
- 15 Email Account
- 100 GB Space
- 1 Domain Name
- 300 GB Bandwidth
- 00 Mysql Databases
- Enhanced Security
Unlimited
$15.99Month
- 15 Email Account
- 100 GB Space
- 1 Domain Name
- 300 GB Bandwidth
- 00 Mysql Databases
- Enhanced Security
- Starter Plan ($29/user/month):
- Unlimited projects
- 10GB storage
- Basic analytics
- 5 team members
2. Pro Plan ($49/user/month):
- Starter features +
- Advanced reporting
- API access
- 20 team members
3. Enterprise Plan ($99/user/month):
- Pro features +
- Single Sign-On (SSO)
- Priority support
Problematic Ad Strategy:
- Ads targeted “small businesses” with generic headlines like “Affordable Project Management Tool.”
- Landing page promised “unlimited features for $29/month,” attracting freelancers who rarely scaled usage.
Customer Feedback:
- “Why upgrade to Pro? Starter already does everything I need.”
- “Your ads made it seem perfect for solopreneurs, but we’re a 50-person team – $29/user is too steep.”
Diagnostic Process
1. Funnel Analysis:
- Problem 1: High CTR (4%) but low trial signups (10%) → Mismatch between ad promise (affordability) and pricing ($29/user).
- Problem 2: 70% of trial users used only 20% of features → Starter plan overdelivered, killing upsell potential.
- Problem 3: Enterprise plan lacked “hero features” (e.g., SLA guarantees) to justify $99 price.
2. Competitor Audit:
- Competitors like Asana charged 24.99/user for Starter but locked advanced automation behind Enterprise (150+/user).
Problems in Detail:
1.Pricing Tiers Were Value-Blind
- Starter Plan: Overloaded with features (unlimited projects, 10GB storage) ideal for 1–5 person teams.
- Pro Plan: Added “advanced reporting” but didn’t tie it to outcomes (e.g., “Cut project delays by 30%”).
- Enterprise Plan: SSO and priority support weren’t enough to sway VPs of Ops.
2. Ad-to-Pricing Mismatch
- Ads appealed to solopreneurs with “affordable,” but $29/user felt expensive for solo users.
- Teams of 10+ saw 29/userasa29/userasa290+/month expense but got no volume discounts.
3. Missing Upsell Triggers
- No in-app prompts to upgrade (e.g., “Unlock automation for 10+ projects”).
Command Growth Solutions
1. Restructured Pricing Tiers (Value-Based Segmentation):
- Starter ($19/user):
a. 3 active projects
b. 5GB storage
c. Basic analytics
d. “Ideal for freelancers” - Pro ($79/user)
a. Unlimited projects
b. “AI Deadline Predictor” (unique feature)
c. 50GB storage
d. “For teams managing 10+ projects” - Enterprise ($199/users):
a. Pro features +
b. “99.9% Uptime SLA”
c. Dedicated account manager
d. “For enterprises with 100+ users”
Why This Will Work:
- Starter: Targets solopreneurs with project limits, creating urgency to upgrade.
- Pro: Anchors value with AI (perceived as cutting-edge).
- Enterprise: SLA guarantees justify premium pricing for risk-averse buyers.
New Ad Copy
- “Cut Project Delays by 40% with AI-Powered Workflows → Start Free Trial”
- Targeted to “Operations Managers at 50–500 person companies.”
Landing Page
- Added ROI calculator: “How much could you save? Teams save $12k/year on average.”
- Replaced “unlimited features” with specific outcomes (e.g., “Reduce missed deadlines by 50%”).
Upsell Triggers in-App:
- Trigger 1: User creates a 4th project → Pop-up: “Upgrade to Pro to unlock unlimited projects + AI Predictor.”
- Trigger 2: Team reaches 5 members → Email: “Scale smoothly – add 10+ members for 20% less/user.”
Implementation Steps
1. Week 1-2: Pricing & Product Changes
- Limit Starter plans to 3 projects in Stripe.
- Build “AI Deadline Predictor” with a no-code tool like Bubble ($2k budget).
- Train sales team on new value props: “Pro isn’t just more features – it’s insurance against delays.”
2. Week 3-4: Ad Campaigns
- Hire a freelance copywriter (Upwork: $500) to draft ad variants.
- A/B test landing pages: “Feature-centric” vs. “ROI-centric.”
3. Week 5-6: In-App Upsells
- Use Appcues for pop-up triggers ($299/month).
- Email existing customers: “Your team is growing! Upgrade for 20% off annual Pro plans.”
Results (6 Months Later)
- Ad CTR: 5% (+25%)
- Trial Signup Rate: 28% (+180%)
- Pro Plan Adoption: 35% of new users
- Enterprise Deals Closed: 12 (vs. 0 previously)
- Revenue: $2.7M (+125%)
- LTV:CAC: 5.2:1