Viktor’s World: How can €5 a month be a sustainable price-model?

Hi! I am Viktor and welcome to Viktor’s World!

As founder and COO in Contractbook — a tech-startup using a lean strategy, I spend most of my time in unknown territory both concerning price-model and marketing strategies. With Viktor’s World, I hope to map out some of this territory by sharing both hard-earned experience, lucky incidents and daily concerns.

This blog concept is first and foremost a look into my daily (working) life. But… I would also like it to an honest forum where we can discuss, engage and share both struggles, frustrations, and successes. In my opinion, exchanging knowledge is the best way to avoid the worst traps and find the buried treasure we are all searching for. In this first post, I will like to share some of my thoughts on how to develop a sustainable price-model.

A lean approach to pricing
The so-called lean strategy is often thought to be the optimal strategy for startups when developing products and marketing tactics. But when it comes to developing the right price-model, it seems to me that entrepreneurs are more locked.

I get it. A strict budget makes it hard to experiment with pricing models and miscalculations sometimes seem too costly for the trial-and-error approach. Nevertheless, developing a sustainable price-model for a SaaS-platform is notoriously hard though it is equally important to have a good product. The lean approach to pricing has certainly been the key for us.

Before 2018 we charged €13 per user, per month which created two problems for us:

• Our customers were compromising on quality. To see the full value of our product and it’s many features, you need to use a team setup with more than one profile. With the 99 kr. price-model our customers hesitated to buy more than one profile which compromised the quality of the setup, made our product less valuable and in the end created higher churn rates.
• We were too expensive compared with the products our users were benchmarking us against. The CRM’s or accounting solutions our users were comparing us with were cheaper for small and medium-sized companies. Furthermore, while it is common knowledge that a company of a certain size needs an accounting software, we are still in a process of convincing people that an agreement management system is equally important.

We, therefore, tried out different price-models to find out precisely when our customers were prone to buy more profiles. When we landed on €5 per user every month which equals to the highly effective 1 DKK per day solution.

Where is the catch?
People no longer question the price. Instead, I sometimes hear skeptical expressions like Where is the catch? What’s in it for you? It also happens that I hear from colleagues in the startup-community that a product is too cheap if customers aren’t trying to negotiate the price.

I beg to differ!

We are born to be a global concept. Our aim is not a thousand satisfied users, we need a million happy users.

Even though the upfront value of a customer is low, we are more likely to have them stick around for longer and thereby increase their lifetime value.

Our customers are hard to onboard, but once they have joined, they don’t need much maintenance. No matter what, they get a better product when they are able to co-work on their legal work and share it with their external bookkeepers, lawyers etc. If our customers don’t compromise the value, they see the true potential of the product.

The more people use our product, the more customers do we get. Our product has a viral effect because everytime a customer sends a contract to a client, they will have to create at least a free account and thereby get to know the product. With more profiles, our product is more flexible and can be used for more situations.

When our customers buy more than one profile, they pay more than €5 and sometimes they even end up paying more than the initial €13 We now have customers who bought one or two profiles coming back and asking for more thus increasing their value.

I hope you liked my insights! Feel free to let me know what you think 🙂

Originally published at hello.contractbook.co on March 22, 2018.