March 28, 2020
I came across this post on IndieHackers’ forum: Drop in Conversion with a Fourth Pricing Tier and wanted to write a more comprehensive response here.
They’re a SaaS business and recently introduced another pricing plan in their plan grid:
However, they see reduced conversions even though they have sent more traffic to the pricing page. Let’s investigate potential reasons along with other improvements that may help.
We’d had 35% more visitors to our pricing page, but our sign up clicker rate was 1/2 of what it had been before, and the number of clickers that became paying users was 1/3 of what it was previously.
Late February was when COVID-19 become a bit more of a thing in the U.S. (where almost all of our users come from). But if they were gunshy about buying new software, you’d think that would also show up in how many people show interest by getting on the waiting list and how many people then show interest by clicking to the pricing page. Yet, both of those numbers were up.
I don’t think the Coronavirus has had any adverse effect on the diminished conversions.
Based on the numbers Gregg has supplied in his blog, we’re dealing with a small scale – sub 100 visitors to the pricing page. While the Coronavirus is a big issue today and is affecting the United States’ economy, it should not have any real noticeable effect on these signups. Also, since Gregg is gating users and letting them in by cohort, they wouldn’t be signing up if there wasn’t any interest.
We won an award as a top tool for product managers during this stretch, which could have skewed things. Perhaps product managers didn’t get it like an email marketer would? But, again those people would have had to be interested enough to join the waiting list and then still interested enough to click through once they got their invite.
This theory sounds the most probable for me. I wouldn’t necessarily call it demographics, however. Demographics typically refers to people’s attributes, such as age, gender, income. What Gregg is referring to are actually audiences. An audience refers to people and their interests, and in Gregg’s example, product manager is an audience, and email marketer is a different audience.
Where did SendView’s users come from in each cohort? I highly recommend tracking this – you can use Google Analytics and set up campaigns as a start. It’s especially useful since SendView is letting users get access by group. This way you can experiment with marketing to different audiences on a small scale and see how the numbers play out before committing.
But, again those people would have had to be interested enough to join the waiting list and then still interested enough to click through once they got their invite.
You will often come across audiences that are flakier than others. A big mistake is thinking that email marketers and product managers will react the same at each part of the funnel.
Even though both audiences signed up in the same way, there may be factors in the funnel that result in different levels of engagement and different conversion rates.
Perhaps the idea of tracking email marketing campaigns from other companies is attractive to a product manager, so they sign up. Once they hit the pricing page and see the plans, they suddenly realize SendView isn’t as worth at least $29 a month to them.
Maybe SendView’s marketing and funnel cater more to the email marketer than the product manager, so it’s easier for email marketers to see the value in the product quickly. Maybe the typical product manager doesn’t have the budget or decision making ability to purchase SendView.
It’s also possible that the kind of user that signed up in this cohort is more likely to be a tire kicker. A great example of this effect I’ve seen is when a product that doesn’t cater to the audience that hangs around on ProductHunt is highly upvoted but does not end up getting very many signups or purchases. This scenario does not mean your pricing page is ineffective, it means the conversion rate for that audience is lower.
There was some discussion on the Indie Hackers thread on changing the pricing page back from four tiers to three tiers. I would heavily caution Gregg from making this change so soon. A potentially severe consequence is SendView reverts its pricing page, and their audience goes back to primarily email marketers. Then the conversion rates go back to normal, and the SendView team thinks that the four-column pricing page was the problem. This thinking could be an extremely costly mistake. Instead of being able to charge more and address more segments of their audience, they might end up sticking to the three-column plan page forever, losing out on potential revenue from the most profitable customers.
The other thought that nags at me is that once that fourth option is on there, three things might happen:
- The user now has to choose between one more option, and perhaps that leads so some incremental percentage of paralysis.
- Our smaller plans – where most of our users fall – now look less valuable in comparison. If you put $1, $2, and $5 bill on the table, $1 and $2 still look like a lot. But place a $10 or a $20 into the mix, and now $1 looks less exciting in comparison.
- We start to look more like enterprise software and less like software for individual email marketers which, again, describes most of our users.
Going from three choices to four choices would not affect the conversion metric in any kind of substantial way. I would toss this theory out.
As always, I’ll make the recommendation to name the plans by what kind of user or business that would most likely benefit from it.
For example, instead of Lite, Standard, Pro, and Ultimate, name it something like Individual, Agency, Business, Enterprise. These names will help your users self select the plans based on what kind of business they are. I always recommend talking to your users and analyzing your current customers to get a sense of how your users refer to themselves and try to find patterns.
Another easy and quick win is to change the
Sign Up button text to something that sounds less generic such as:
Start tracking now!.