Kennedy: 5% to 15% of paying SaaS customers are inactive
James Kennedy · Episode 646 | Building a Recurring, Annual Price Increase Into Yo... · Jan 31, 2023 · at 13:54
James Kennedy, founder of ProcurementExpress, discusses inactive users and churn dynamics when raising software subscription prices.
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“So especially, I think it's a, maybe a little secret of SaaS is that there's, you know, inactive users. It can be anything from five to 15% of your Customer base may be paying you and are not getting value from the product.”
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More from James Kennedy
Kennedy: Software's exact dollar price rarely affects mid-market purchasing decisions
“I'm firmly convinced that the actual dollar value has very little to do with the buying decision, definitely in mid-market.”
ProcurementExpress institutes automatic 5% to 10% price increases every September
“New customers to come on September, we do our price increase. We normally say exactly that. It's like between five and 10%. Last year it was eight percent.”
Kennedy: SaaS customers tolerate price increases under 20% if deriving value
“The second thing is that I think really, you know, it's a rule of thumb that no one really cares as long as less than 20%, except for one group of people, and that's the group of people that weren't getting value from your product in the first place.”
Kennedy: Price increase churn strictly comes from customers who never onboarded
“We do have a bump in churn after we do this, for sure. It does exist, but it's always the people who were just never onboarded in the first place.”
Kennedy: Blind price increases unintentionally force shifts in SaaS customer segments
“If you're just increasing your prices and you're not thinking about it, at a certain point, you change the nature of your customers. So you might go from prosumer to mid-market, you suddenly might go from mid-market to enterprise, and then that changes how you…”
Kennedy: Surging customer acquisition costs make bootstrapping ProcurementExpress impossible today
“If I was to start our product today, there's no way we would have enough money to compete with the other people like ourselves in the market, because the ACVs have become high enough to support more expensive marketing channels. They've pushed up Capterra, pus…”