This One ‘Weird’ Trick to Increase Conversions
This post is part of a series exploring the gaffes we made relaunching a product and how we eventually righted those wrongs. Essentially, it’s a run-down of what I wish we’d done the first time. Hopefully others can learn from the successes we’ve had since and can avoid making the same mistakes. Read the first post.
I’ve done it. I’ve figured out the secret to growth hacking. By making one simple change, you too can boost your conversion rate by 10%. How did I do it? Well, that’s the thing… I can tell you how I did it, but that doesn’t mean it’ll work for you. Each product and its customer base is unique, and a quick fix doesn’t exist.
When we started planning the relaunch of a ten-year-old product, we made some decisions that didn’t work out as we had intended. Initially, I was skeptical that our product would solve the user’s problem. We hadn’t established customer demand, meaning we weren’t fully prepared on developing the right features, and when sign-ups were low we lost all hope.
Pricing can be one of the most decisive factors in determining a product’s success. If your feature list is similar to competitors and offboarding is fairly simple, the switching cost for customers is low. They won’t think twice about jumping ship: if you’re too expensive, you won’t get traction.
Our seniors had instructed us to price the new product the same as the old product, but I thought it was too much. As I covered in the previous post, we hadn’t been growing the userbase. Growth had become stagnant and I thought it wrong to assume the old price was worth it.
The proof of the price being too high is evident in our conversion rate since launching the new product. Take a look at the table below. It shows trials and conversions, month by month: light grey bars for new trials, dark grey bars for existing trials, and green bars for converted trials. The line plots our conversion rate unique to each month.
Despite a few glimmers of hope after the initial launch, with a few sign-ups here and there, the downwards trend is clear. People were turned off by the high price, and – despite good KPIs during onboarding – triallists didn’t think the product was worth it. Our monthly recurring revenue was abysmally low.
How I Turned It Around
When February came, enough was enough. The product was working, some people found use in it, but something was stopping many others from subscribing. I was determined to change that. And when people pay for a thing, it proves they’re getting true value out of it.
During an exit survey, one user told me that they had switched to using Trello and their inbox; answers to our mid-trial survey suggested that a combination of Dropbox, Evernote and Todoist was an alternative to our system. Those alternatives cost £14 per month at the most – or nothing, due to free plans – and our solution cost £25 per month. It’s no wonder we had a slump in sign-ups. The switching cost was almost non-existent.
Planning for profit
Through competitor analysis of our customers’ next best alternative, I reckoned we could realistically charge between £5 and £15 per month. The easiest way to validate an assumption is through an experiment, the bread and butter of product management, and the results were clear. Churners would come back if we dropped the price to ~£10 per month. I took to our P&L and played around with figures until we hit the sweetspot.
£6.25 per month, or £60 per year. An almost unnoticeable cost to tempt sign-ups, and an annual plan to bring an injection of cash. We had a long runway for development too; when we were ready to release innovative features on our roadmap, a price increase would be warranted. With this new pricing strategy, we’d be competitive and have room for movement.
And, you know what…it WORKED!
Validating the assumption, proving the method
I contacted churners about the price drop. I set up a few ads on Facebook, a channel that had worked well in the past. I tinkered with our SEO to bring in more traffic. And just look at that spike in March — a raft of new sign-ups, not perturbed by the lower price. In April, we had a few conversions, and the growth continued into this month too – we’ve even matched our MRR prior to the price drop. With new triallists joining daily, we’re set to increase it and grow the business.
It’s a much better situation now. For us, cash flow means confidence, not only because the project is being funded, but because this…thing we’ve spent the last two years making is relevant to people’s needs. We reached the right conclusions in designing it, all it needed was a little tweak to put those benefits in front of more people.
A brighter, scalable future
One of the most biggest indicators of future success is that we’ve taken on more users of different types, adding more cards to our deck of user personas. It’s giving us the opportunity to look into other markets and explore different pricing options based on the changing userbase. The lower barrier-to-entry caused by dropping the price means we should – with good product management – see more revenue in the future.
Thanks for reading! As you’ve seen, there isn’t a ‘weird’ trick to making your product a success, you simply have to read the situation and understand what’s going on. I’ll be adding to this series with more tales over time, so please do follow me or check back later. If you have similar stories or something to teach us, grab me on Twitter (@stevenjmesser) or comment on the post.