Build Your SaaS

Justin shares a phone call he had with Nathan, the founder of ConvertKit.

Show Notes

Today's show is not a full episode!

Jon and I have been busy with our day jobs, plus Memorial Day, and didn't have time to record a show.

But, to be honest, this pricing discussion isn't something we can solve in a 30-minute conversation. We've realized it's going to require more research. We need to talk to folks who know more than us.

So that's what we've been doing. This week, I have a call booked with Patrick from Price intelligently, as well as Rob Walling (who just his company Drip).

I'm hoping to get some useful insights on pricing from these folks. Mostly so we don't make the same mistakes that other SaaS companies have made. These chats will also benefit you, the listener, because we'll be sharing as much as we can in future episodes.

As a teaser, I'm going to share a phone call I had with Nathan Barry.  He has one of the fastest growing SaaS products in existence right now: ConvertKit.

They just crossed 1 million dollars in MRR. That's an Annual Run Rate of $12.8 million! They've grown fast, and Nathan's had to learn fast. 

So here are some of his thoughts on the pricing of podcast hosting. 

Show notes

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Creators & Guests

Host
Justin Jackson
Co-founder of Transistor.fm
Editor
Chris Enns
Owner of Lemon Productions
Guest
Nathan Barry
Founder & CEO at ConvertKi

What is Build Your SaaS?

Interested in building your own SaaS company? Follow the journey of Transistor.fm as they bootstrap a podcast hosting startup.

Justin:

Folks, Justin Jackson here. This is not a full episode. John and I have been really busy behind the scenes. Busy with our day jobs and also it's Memorial long weekend. And to be honest, this pricing discussion we brought up in last week's episode, if you haven't listened to that, go and listen to it.

Justin:

When we started diving into it, we realized this isn't something we can just solve in, you know, a 30 minute conversation. It's going to require more research. It's going to require us to talk to more folks that know more than us. And so that's what we've been doing. I had, some conversations already with some founders I really trust.

Justin:

I've got a call booked with Patrick from Price Intelligently. I have a call booked with Rob Walling, who recently exited DRIP and I'm really hoping to get some good insights on pricing. Mostly so we don't make the same mistakes that other folks have made and so the benefit for you the listener is all of this is coming in future episodes and instead of just getting 1 or 2 episodes focused on pricing and just having John and I talk about something where we actually don't know a lot about, we wanted to go to some experts and then bring that information to you. As a teaser, I'm going to share a little bit of this phone call I had with Nathan Barry. And you know how when you do Skype call recorder it just starts recording automatically?

Justin:

I I didn't realize I was recording this call and then after I realized I was and I asked Nathan if he I could use the clip and he said I could. If you don't know Nathan, he has one of the fastest growing SaaS products in existence right now, ConvertKit. They just crossed $1,000,000 in monthly recurring revenue. That's not annual. That's every month.

Justin:

They've grown really fast and, Nathan's learned a lot. He's also quite young. I think he's still in his twenties. And these are some of his thoughts around the pricing of podcast hosting. How did you guys what what process did you go through to figure out your pricing?

Justin:

What what advice can you give me about pricing that I should be thinking about?

Speaker 2:

So one thing that Heat and Shaw said super early on was only tier pricing on one thing. He was like, make it really, really simple. Because in the very early days, we had, buckets, and it was like, this was up to the x number of subscribers or x number of forms or landing pages. And so you would tip over on 1 or the other. And cause they were like, well, what if someone wants more forms?

Speaker 2:

We wanted to be able to charge them $75 a month instead of 50. Yeah. And he was just saying, make it easy to understand. You don't want someone like staring at it trying to go, oh, but then do I buy this other thing?

Justin:

Yeah. So you there's always seems to be like one. You choose one main anchor or one main variable to anchor your pricing on. So in your case, you chose subscribers.

Speaker 2:

Correct. It's the most natural for us. Now ours is largely set because we have so many competitors that you just have to price it a similar way to them.

Justin:

Yeah. How much how much did you look at competitors or did you just not like, was that a big consideration? Or

Speaker 2:

We attempted to be 10% more expensive than Mailchimp. Okay. Just in in general. Now Mailchimp's pricing stair steps in such weird ways.

Justin:

Yeah.

Speaker 2:

Like, if you were to make an Excel model or a graph of that pricing, it is bizarre. Yeah. Yeah. It's super weird. Because it but theirs is designed to give you the lowest price for the numbers that you're most likely to type in.

Speaker 2:

Mhmm. So if you're like, oh, 10,000 subscribers. Great. It will give you a price because the tier is actually at 10,500.

Justin:

Yeah.

Speaker 2:

Where it tips over to the next level. So someone very smart put theirs together. And Yeah. It's certainly, I'm sure it makes them an extra, like, $30,000,000 a year or something.

Justin:

Yeah. Totally. What? Have you have you seen because there is a way so with transistor, one natural place to do it is with number of shows. So if you look at, like I've been looking at Hootsuite's pricing quite a bit.

Justin:

They start at, they have, like, a $19 plan, and then it just jumps up to so it's like the $19 plan is for solo people, one user.

Speaker 2:

Right.

Justin:

And they anchor on social number of social profiles and number of users. Okay. They're they're anchoring on 2 kind of primary things.

Speaker 2:

Yep.

Justin:

And so we could do number of shows because that is one thing. Right? You you get more into podcasting. You get more shows. And, you know, that might be that might make sense.

Justin:

But there's also I'm probably thinking the same way as you, and that's why I I wanna make sure I don't make the same the mistake. There's just a bunch of there's, like, the features everybody has in podcasting, analytics, embeddable players, all that stuff. And then there's some premium features we could add, like built in voicemail, built in ratings and reviews from all around the world, you know, all that kind of stuff. And so my initial inclination was to say, let's give, put this price here and then everything above it is just you get these new kind of pro features. But as I was looking around, I basically saw that same advice you just gave me, which is anchor it around one variable.

Speaker 2:

Yeah. Okay. So a counter to that advice, like we have great, expansion revenue because you cross from 10,000 square hours to 15,000. And like, the more successful you are, the more we win. One problem with what you're talking about is as a show.

Speaker 2:

Yeah. Like, I can just have my show be more popular. And I'm not, chances are the better I am at podcasting, the more likely I am to have a single show. Yeah. Instead of.

Justin:

Yeah. I know. Yeah.

Speaker 2:

You know, like, Dan Carlin's not out there going, I should create, like, 4 more shows. Yeah. You know? He's, like, he's got 2. Yeah.

Speaker 2:

Yeah. And so but that's he might be willing to spend 100 of dollars a month, whereas someone with 3 shows might be willing to spend dozens of dollars a month.

Justin:

Yeah. Well, this is the problem is that everyone's got into this unlimited downloads, unlimited bandwidth game. And so all of our competitors basically offer it's like Fireside is $19 a month for unlimited. You know, Simplecast is 20

Speaker 2:

gotta be users lose money on these shows, won't you?

Justin:

Well, yeah. I'm trying to I that's what we're trying to figure out is how we can,

Speaker 2:

so I'd probably go the active campaign route on this. I wouldn't go to 4, but do 2 and do a beginner and a pro. Mhmm. And then But would you do it

Justin:

with that. Would you do it with features? Like, so like a beginner is like $19 a month and then pros $99 a month? And then just the difference is features? Probably.

Speaker 2:

If you're saying if the image my default would be to do it based on downloads Mhmm. Or listeners.

Justin:

Yeah.

Speaker 2:

You can't actually do listeners, but listeners is the closest to subscribers.

Justin:

Yeah.

Speaker 2:

Now that could be interesting. Right? Because you do it on downloads. Could you determine listeners? Can you decide a unique person?

Justin:

We can approximate it. You're guessing basically.

Speaker 2:

I'm just thinking. So so I would my default would be to have something like that in there. Mhmm. Right? Because I just that's where the value scales with the

Justin:

With the product.

Speaker 2:

With the the usage and all that. Yeah. If you're saying for sure that the industry won't support that. Mhmm. Right?

Speaker 2:

If Mailchimp came out and said, look, it's $20 a month, unlimited subscribers.

Justin:

Yeah.

Speaker 2:

They would be like, well, shit.

Justin:

You know? Yeah. The podcast industry really I mean, it started like that number of listens or downloads, and then some people came in and, you know, went the other way. But

Speaker 2:

Is that truly what's, are people making buying decisions based on that?

Justin:

I don't know. That's the that's why that's you've got me thinking now.

Speaker 2:

So maybe putting it in some limit there and then asking people.

Justin:

Mhmm.

Speaker 2:

You know, because you might find that, hey, I'm choosing this one over that one be over you guys because, look, unlimited is compelling.

Justin:

Yeah. Well let's

Speaker 2:

not assume that it's compelling until

Justin:

Yeah.

Speaker 2:

It really is.

Justin:

Yeah. Yeah. Exactly. Right. So that's it.

Justin:

That was a pretty long part of our phone conversation. I hope you like being a fly on the wall listening to Nathan and I talk about that. By the way, I I have had the thought and people have reached out to me to say, you know, are you sure you wanna be this transparent? Do you really wanna reveal this much of, you know, these conversations you're having and the features you're planning and the pricing you're planning because we know that our competitors are probably listening to the show. Hello, competitors.

Justin:

If you're listening to the show. And, yeah. I I I'm wrestling with that a little bit. But anyway, I hope you enjoy that. I hope that was helpful for you.

Justin:

If you are on Breaker, the podcast app Breaker, it's on Android and, iPhone click that heart icon and leave a comment. It really, I love interacting in the comments there and I'm paying a lot of attention to breaker. So if you're on there, please, leave a comment, click that heart icon. And, maybe just reach out to John Buddha at John Buddha on Twitter and tell him you miss him being on the show. And we're gonna be back, in next Tuesday with a lot more of these interviews and discussions we're doing around pricing.

Justin:

If you have thoughts for us, let us know at transistor FM on Twitter. And, you can also reach us shows at transistor.fm. Thanks folks. I'm m I justin on Twitter if you want to reach out to me. Talk to you later.