Problem Statement:
From a product manager’s perspective perform a critical analysis of the results of the evaluation of the pricing research and the implications that Basecamp conducted on its pricing strategies.
Introduction
Although BaseCamp factored in some key metrics such as Lifetime value, net performer score and A/B testing, more important factors influence change in pricing strategies which should be considered. Namely metrics based on customer engagement and acquisition such as D7/D30 users and monthly active users’ prediction in case a change is implemented. For a product centered on customers, priority should be how would such a drastic change be perceived in the company’s customer community, and would it be able to maintain the same perception that it highly prides itself on.
Basecamp did prospective analysis on the impact of different scenarios on two of their plan offerings namely “For Us” and “With Clients”. They considered situations such as doubling up the price or increasing the price difference between these plans which was good brainstorming from the team, but they should also have incorporated end users into their decision-making process not to take view of what they think about the different use cases but in suggesting what price use cases scenarios would they like to be considered. The positive impact of this is that clients have the best idea about where the product being offered is lacking and how could it better leverage its position in the market especially pertaining to price. This is because the clientele is exposed to using many different such apps or have done this in the past.
Recommendations
The 2xA/B test data table suggestions cannot be deemed conclusive and considered normalized samples as they only make up a small proportion of the total percentage. The company should have considered these tests repeatedly on the customer base even with the small numbers (not overlapping) and then compiled the results to find hard evidence. Then the results could be evaluated against the numbers. Hence the following update in prices.
The price sensitivity meter method test showcased different figures for the two plans with individual analysis from the clients suggesting that they viewed the prices as bargain. This implies that word of mouth is as important in gathering information as the different price tests in the market. If the company would have leveraged its customers good word in spreading the the price change and noted down the reaction, it would have been more successful in solidifying its position to implement a change. It’s like giving your customers time and making them self-realize that the price increase makes sense without compromising on the quality of the different offerings. Another suggestion here would be to share the price graph as depicted in Exhibit 5 which specifically shows that the company currently charges the lowest price compared to the services and competition. This would go a long way in supporting the cause for a price increase.
One thing that does make sense is the discount on the annual payments to reduce churners. This can be thought as committing someone to constantly remain in touch with the product even if they at some time feel not entitled to be with. This also solidifies legacy relationships although not so significant due to the business model the company has strategically implemented.
The plan to shift more users Basecamp Big through an online campaign whose cost will be self-covered does not make sense. This is because no company wants a significant increase in operating costs and even if they have the capacity to do so, they are reluctant to do so at first. The company should rather share positives and merits behind shifting to the big plan. Sharing success stories of other clients would have made the switch is a big positive and influencing.
Another domain where the company has invested but not really made use of is social media. They hired Craig Mirage with huge expectations and yes, we believe that the new spreadsheet models might look promising but that is not the priority task here. The world has moved to fast moving and evolving solutions and so should the company. Spreading analysis of how the new prices justify the demands being served on social media is one of the significant steps of the marketing plan the company should consider. The aim here should be to acquire new users and quantify the results.
The information about different services or features that the project management tool offers such as to-do list, notifications, campfires, docs & files is well drafted but not well presented. Nobody wants a tutorial or list of features be read out to them. Everybody flaunts their services on paper. The recommendation here would be an informative video with an assistant bot service.
The memo shared by Jason fried is futuristic and compelling. The points he raises should be incorporated into the company vision and mission statement. These points should be revisited, and the aim as suggested should be to maximize profit, which the company is already trying to achieve through its pricing tactics. Re-iterating these points regularly would provide incentive and direction for future strategies pertaining to both pricing and services.
Conclusion:At last, I would recommend that although the company has fared well up till now with its general services but not to maintain the same rigid approach to the pricing strategy. Even if introducing a minimum threshold value makes you lose some customers but justify the lifetime values from the constant one not the big ones, it should be considered. Pricing analysis is not something which one department should carry out but something that should start from stakeholders and move down till the inputs from the employees as no one makes better recommendations than people in touch the SaaS every day.
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