Show Notes
In this episode, we discuss how to think about positioning, packaging, and pricing a second product when you have an existing customer base. Here are some of the takeaways:
- Be clear about the primary reason you want to add a second product.
- This will impact how you package and price the product.
- Is this the right thing for the business and for your customers?
- Or is this about you and what makes you happy?
- Is your goal to expand customer acquisition?
- It might make sense to package the product on a stand-alone basis.
- If you take a stand-alone product approach, recognize that it may be more work.
- Positioning will be harder.
- You may have to build additional infrastructure.
- It also might make sense to give it away for free.
- Is your goal is to retain more customers?
- It might make sense to include the second product with current pricing.
- Is you goal is to increase revenue per customer?
- It might make sense to offer the second product as an add-on.
- If you decide to take an add-on approach, recognize that it may be harder to maximize the price.
- An add-on probably shouldn’t be 100%+ of the base price.
- You’re probably looking more like a 50% up-sell opportunity.
- Or it might make sense to package the second product as part of a second, higher tier of pricing.
- Are you just bored and wanting to build something to satisfy a personal craving?
- It might make more sense to do the product as a side thing.
What else would you add to this list?
Context
Tyler: To the deep dive topic here. So this is an issue I'm thinking about right now and it's basically pricing a second product. I have a first product... Let me get a little context on what we've got right now. So like I said, we're 10 years old about. Our product has always been $10 per user per month. I know a lot of people would say that's too low or whatever, but we're pretty entrenched in the lower tier of the market at this point. And we've grown to 22 thousand paying users. So we've got a pretty big customer base, at least relative to what we used to. The plan from day one was build a suite of products. Our name is actually Less Annoying Software, not
Less Annoying CRM. That's just the first thing. But we expected probably a year or two in launch that second thing and a year turns into 10.
Ben: Turns out every 10 years you get a new something.
Tyler: Yeah, exactly.
Ben: Something less annoying.
Tyler: By the time I retire we'll have four products.
Ben: Okay.
Tyler: But yeah, I think we're finally at a point where our dev team's big enough. We can peel a few people, maybe two people off and launch something new. When I say a new product, I think the idea is it would be within the same app. So one login, one billing system. But it's like, do you want the CRM or do you want both of these things? Or maybe the other thing standalone, depending. Most likely, we surveyed our customers, did a little customer research. I think the thing that's low hanging fruit to get our current customers to buy something else is an appointment scheduler. So a
Calendly type of thing. And then we could grow... We have a lot of ideas beyond just appointment scheduling, but kind of starting there and building it out. So what I'm interested in talking about is A, general structures for, it's one thing to price one product, but when you have this idea that I want to sell two things to the same group of people, the right structure for that. I'm less interested in the number but more the, is it a bundle thing, is it a la carte? What if we had a third product? Kind of general structure stuff to this. And then a few things that have kind of been on my mind to consider here is should we be prioritizing getting our current customer base to upgrade versus treating this as a channel for getting new customers? Should people be able to buy this new product on its own? Obviously all else being equal, it'd be nice, but is it worth the effort versus just upselling our current people? And then should we be thinking about a third product or should we basically just say, it took us 10 years to get to our second one, it would be stupid to base any decisions we make right now around the idea of a third one coming out. So, that's a lot. But those are some different things to chew on here.
Ben: Is this product done, like you're already committed to this decision? This is a thing that's happening?
Tyler: No it's not. We've done a fair amount of validating it with customers. We have not built anything yet. I should say, one thing, that not all CRMs have this, we have a fully functional calendar with all of the functionality you get from Google or Outlook or something. So we're in a good position to build calendar related tools, but we haven't actually started this second product, no.
Ben: What's the motivation behind adding another product?
Why are you building a second product?
Tyler: A couple. One is the unit economics of the business could get better. You could say just raise the price on the existing product. That would certainly work from a... If a private equity firm bought us, that's what they would do and it would work. We have certain other interests and I take a lot of pride in serving the low tier of the market that a lot of other SaaS companies don't care about. So I want to be able to improve our margins without raising prices and that's one way to do it I think. Another thing is I do think that our customers... I don't know, I feel like software goes in cycles between everything being bundled together and then everything unbundling and being a bunch of different tools that integrate together. And we're in a very unbundled phase right now and I think a lot of value could be provided by going back to bundling here for our customers who are not tech savvy and really just want one clean experience. But that's a fair question. Do you think that maybe we should back up even more?
Ben: Oh, I mean, I don't know. Maybe. You did say you don't want to raise the prices, but if you roll out a new feature and say this new feature costs extra money, you haven't exactly raised the price, but you kind of have. You're... Yeah.
Tyler: Yeah. The standard I was hoping to hold myself to here is basically, if there are standalone products that sell just this thing, I can call it a different product, but if it's like this is clearly dependent on the CRM, that would be included in what we already offer. So for example, if we add our... Yeah, go ahead. Sorry.
Rick: Oh sorry. I interrupted you.
Tyler: I was just going to say if we add a little more reporting to how our pipeline reports work, I wouldn't charge more for that. But if we say, "Well, now there's an email client built in," I think it's pretty justifiable to say that's a different thing.
Rick: Do you have a way you're leaning right now in terms of, without us talking about today. If you had to make a decision today, what would you roll out?
What’s your current plan
Tyler: I'm somewhat torn between two possibilities. One is just treat this new thing, let's call it Less Annoying Meetings as it's a $10 a month product, just like the CRM. But once again, forget the number but it's in the same ballpark as the CRM and we just launch that as a separate pricing tier. Try to make it more or less standalone but really integrated with CRM and just build a second, do everything we did over the last 10 years again with another product. The other one is, there's a bunch of low hanging fruit where it's like we could spend a month on a really crappy appointment scheduler and another month on a really crappy invoicing tool and another month on... There's all this stuff we could do that people would use just because it's built into the CRM and do something like pay 25 a month total and you just get everything in one big bundle. I'm sort of torn between those two, but there may be other things I haven't even considered, I don't know.
Rick: I just had breakfast with our head of product, former head of product and we were in the benefits space and so we had this core product that reimbursed employees for individual health insurance in lieu of group health insurance. But the market for that was limited in terms of growth because of a lot of issues in Washington DC around the Affordable Care Act and the future of health insurance. So we had a vision for adding different products. One was education benefits where you go out and buy a book or go to a conference and you get tax-free reimbursement for your expense, versus maybe a traditional tuition reimbursed plan. We had an individual retirement account, retirement program vision. There were a couple others around transportation benefits and I can't remember the other one... Cell phone reimbursement. And we constantly waited to get those out because integrating it within the current product was taking so much time. Today we were literally talking and we said, "Man, we just wish we had created a website for one of those benefits and marketed as its own product just to test the validation, like it was a new company almost before trying to figure out how to integrate it within our software."
Should you treat it as a separate product?
Rick: So my inclination is if I were you and your situation, I'd be leaning towards the other side. The side of let's treat this as a separate product and worry about integration if there's actually a demand for this on a standalone basis versus looking at it as a way to pump up your existing product.
Tyler: Okay. I see a lot of appeal to that. The flip side is I think I could immediately get a few thousand customers if it's built into Less Annoying CRM. If I build, whether it's appointment scheduling or invoicing or an email client or whatever. If I build it standalone, then it's I think competing with other standalone tools and the bar is a lot higher for how good it has to be, I think.
Ben: Also, it seemed like one of your goals was to improve the unit economics of the business, but if you just start another $10 a month product, you don't achieve that goal.
Tyler: Yeah, that's true. So good point. So, if one person isn't using multiple products, I'm just copying and pasting what I've got rather than building on top of it.
Ben: Yeah. I also think it doesn't take advantage enough of the assets you have. I think if you have to make it standalone, you're going to have this weird thing where it's like, well, can we use the billing code? Can we use this code? Should we have separate? Should it be on its own P&L? I feel like there's probably a lot of hidden costs that come up with like, oh yeah, we forgot how much we had already created in terms of infrastructure for the original business that we rely on in our heads, but now that we actually start this new thing, it's like, oh, we need a lot of things.
Tyler: Yeah, good point. And something you don't know about the history here. Last year I tried to do that. I had an idea for a task chat thing and we were like, this is too different from Less Annoying CRM, and started a whole different code base and all that and yeah, it's good to bring this up. The reason we abandoned that was as we started marketing it, it was like we're starting a whole new company here and that's a lot of work.
Should you treat it as an add-on?
Ben: Yeah. Just as a model that might be inspiration. I use
Baremetrics for analytics and so they charge a certain amount for the core analytics product, which is like, here's how much your MRR is, here's what your churn is, that kind of thing. And they have recently been creating products, quote unquote, but really they're features and adding them to the app and they sell them separately. For an extra 500 bucks a year you can get dunning emails so you can reach out to people when their credit cards expire or automatic cancellation surveys when people cancel trials or things like that. And that has been appealing because they sort of acquired us as a customer and we were fairly happy with that. And then they were like, "Hey, we have this new thing and it costs more. But it's just another tab in the same thing that you're already paying for with the same credit card. Do you want to get this new thing?" And we pretty successfully signed up and converted and became customers of those new things. And they're not really new products, they're just new features. But I kind of like how they went about that. They gave it the it's a launch kind of thing, like
Baremetrics Recover is on
Product Hunt and it has its
own landing page and whatnot. But really it's just another tab inside the product.
Rick: It's like an add-on for example.
Ben: Exactly.
Tyler: As a customer. So one thing I've been trying to balance is do people get annoyed if they feel like I'm constantly up-selling them everything? So kind of like, here's one thing and you get a bundle of stuff versus here's an a la carte thing and every feature you want to use is more. Have you been annoyed by that at all as a customer?
Ben: I mean, I think if you did it to me once every 10 years I'd probably be okay with it.
Tyler: Sure. Fair enough.
Ben: Yeah. I mean I think there's probably a balance there. One thing that I think is probably worth thinking about is the core Baremetrics experience was good. Like the product is good without the add-ons. It wasn't like they were holding back vital things and making the initial experience worse. So they were like, "There's just this more goodness over here if you want it," and that seemed good to me.
Tyler: So, if I can build on that a little bit. One thing you asked what would I go with right now if I had to decide and I kind of listed two options, this is one of the big things that I'm torn between is spending the next, let's say it is the next 10 years or five or however long it is, spending the next amount of time making another thing that's as good as our current thing, or making an ecosystem of add-ons, ecosystem's maybe the wrong word, but a bunch of add-ons that are shallow but good enough to get the job done and having more different options.
Ben: Why do they have to be shallow?
Tyler: Well, just in terms of the amount of time. If we have a set amount of time to devote, is it better to focus on one thing and make it really good or focus on multiple things and they'll be less good? And I'm torn here given that, normally I'd always say go for quality over quantity, but the pitch here is we've already got a really captive audience. Our customers are not savvy. They don't need the best invoicing tool. They just need something to send invoices.
Rick: In other words, leverage your current value proposition… rather than feature complexity and features breadth… it’s about convenience. Basic features, but you get in-app experience versus having to go to another app. The bundle approach.
Tyler: I think that's right.
Rick: Yeah. Coming back, For some reason I had my head that this might be a customer acquisition tactic in addition to a unit economic play. Is it primarily a unit economic play?
Tyler: I mean in a perfect world, it's both. In a perfect world we can, every place you can market a CRM, if you can also say this is an appointment schedule, you've got twice as many channels or whatever. But I'd say that's secondary probably.
Ben: Yeah. I mean that feels like a positioning challenge. We have an app, it does A and also B, which is kind of similar but not the same in a way, although... Well so you said you did some research to figure out like okay, appointments scheduling is the thing. So your customers are saying like I would love it if it did this, I want to use it for this, this tool as well, this purpose as well.
Tyler: Yeah. So we've surveyed people. I've also had like one-on-one conversations, but the survey was pretty informative. We basically said A here are 10 product ideas, what do you want? Which I know is not the best way to ask it. So then the other way we asked it is, what do you currently use and then are you paying for it? Because appointment scheduling has a lot of freemium stuff where maybe you're using it but you're not paying. I think something like 50 plus percent of the people who filled out the survey are paying for Calendly or
Appointlet or something like that right now and it's such, it's very difficult to differentiate yourself with appointment scheduling. I think it's a pretty well defined set of features that it's like I think they would use ours all else being equal.
Narrowing in on add-ons
Rick: I mean I, I feel like for this it's one outcome or the other that drives this and it sounds like unit economics is the primary driver, in which case the whole separate product idea I throw out the window that I suggested earlier and I really liked this add-on approach. What is keeping you from... Could you... Is there a way for you to figure... I guess if that's... Do you disagree that that's the right approach? Because it seems pretty obvious to me.
Tyler: Well within ad-ons are you saying like a bunch of different little things or one deep thing?
Rick: I don't necessarily, I'm not quite there to how to do the add-on. I guess to me it seems like this isn't a separate product type piece. How to price it is going to depend on what you build, but taking a more of an add-on much smaller pieces of functionality that have standalone value but penetrate some percentage of your customer base is probably the right framework to think about this to start, do you disagree? I mean it seems like that decision is a good decision to make.
Tyler: Yeah, I think I agree with that. Still unknown to me is let's say this, we do a good job of this. Should it be built in such a way that one day the CRM is an add-on of this other thing? Where either one could kind of take on a life of its own versus the CRM is the product and these are strictly just add-ons.
Rick: It feels like if unit economics are the goal and you're going to focus on one thing, that's a worry about it later kind of thing.
Tyler: Okay, so it starts out as just however many dollars add-onto the CRM you're saying?
Ben: Yeah. My intuition is that building another fairly low average revenue per user product and keeping it as a separate standalone thing is probably not worth the additional logistical organizational challenges versus saying this is a premium add-on for an extra five bucks a month using all the existing stuff that we already know and understand.
Tyler: Okay, I buy that, and yeah, I think that was probably my instinct, so it's good to hear that. Maybe one day people say this is the best appointment schedule I've ever used. You should make it available as a standalone thing, but the complexity of building it that way from the start would slow down the launch and all that and most of our customers are going to be CRM customers anyway.
Ben: Right. Given these 22,000 people that already like and trust you and pay you money. I feel like if I were going to buy an appointment scheduling tool from you, I would expect it to be ridiculously integrated with the existing CRM to the point where it would make no sense to ever use it as a standalone thing because of how crazy easy... It shows up on the same screen or whatever. Whatever it means to be integrated, I would expect it to be, completely first-class and native.
Tyler: Yeah. I totally agree. Let me throw a wrinkle into this. We also in that same survey asked our customers, so our average account size is 2.3 users per account. We're talking about the smallest of the small businesses. We asked how many of you have other employees at your company that aren't using the CRM? So basically non sales, customer service people and it seems like there's an order of magnitude more employees at these companies. So in terms of having a growth channel, another channel here is get more people at our existing customers, more users to use it because it's not just for salespeople anymore, which I don't think conflicts with what we're saying here at all. But that might be a way to kind of grow the customer base while still keeping it fully integrated in the CRM.
Ben: Like the addition of this new feature and makes it attractive to other people who don't really want the core CRM feature?
Tyler: Yeah. Yes. So if we built invoicing, no non-sales, only a small set of people want that. But if we build a meetings tool, let's say it's more than appointment scheduling, it's meeting notes and whatever else you could imagine the whole company wants the meeting stuff. Maybe I'm getting too distracted here though.
Why are you really adding a second product?
Ben: Yeah. Actually, I find myself wondering as we were talking is any percentage of this just that you're kind of bored and you want to work on a new product?
Tyler: The, the last one was that. The product I said we started and then killed it was that. I wouldn't say that I'm bored, but that there's a grass is always greener thing. I listen to podcasts like yours. I hear all these people with great unit economics and all that stuff and I'm still like really, really in love with what we're doing with the CRM. But I will say improving the CRM, which we're going to continue doing and we're doing aggressively because we're serving really small customers, it doesn't really come with a lot of creativity going into it. It's like every feature we add is a slam dunk. It's like literally 2,000 people told us they want this. We built it. It's easy, which is nice in a lot of ways, but it also limits our upside somewhat. I don't think we're ever going to get much significant growth by just iterating on the CRM. For example.
Ben: Why?
Tyler: Because I think the, well, sorry, let me rephrase that. I think that if we just give our current customers what they want, what they want is everything to work, how it currently does and kind of the performance improvement thing we were saying earlier, they, they want nothing to change and all the work goes into very, very incremental improvements. Within the CRM itself. If we were going after, like let's go up market, we could say, oh, we're going to build automation, we're going to do this, that's not what our customers want on the CRM space.
Ben: Yep.
Tyler: This is probably a fair pushback though that I do think of myself as a product person and I enjoy it.
Ben: Yeah, totally. A thing I've been thinking about for myself recently is possibly just doing a little thing on the side just for my own new shiny kind of satisfaction. And I'm not saying that's right for you, but I know I have this tendency and I think that's natural as people that like creating things especially I would imagine after 10 years you're like, yeah it's fun to just start with a blank slate and make a whole new thing. But also maybe recognize that tendency and just make sure is this the right thing for the business and for our customers or how much of this is about me and, and what makes me happy. And not that your happiness doesn't matter. Your satisfaction is probably an important component to the future success of the organization, so I don't think you should discount it to zero but also maybe just be aware of your own foibles perhaps.
Tyler: Yeah, that's fair. So are you comfortable talking about your own consideration of that?
Ben: Sure.
Tyler: Do you think you're going to, how do you balance the time you put into the other one versus your first,
Tuple?
Ben: Yeah, yeah. I don't know. I'm sort of always thinking of things to do and mostly I've managed to stay focused on Tuple so it's certainly possible that I won't, but the things I think of starting are kind of small or much smaller, less time intensive things. Maybe I'll make another course, another video course or some sort of thing where it's an info product type thing where I can put some effort in and then it's mostly done and it's just literally stuff I could kind of sneak around the edges, do on the weekends and not, it doesn't commit me to something for a long period of time. It's not a recurring revenue thing where I'm going to have customers now and I have to answer emails and things like that.
Tyler: Yeah. I've never done an info product. But that is an appealing thing. Like you ship it and it's done basically.
Ben: Oh yeah. It's amazing. Yeah. So I made a course on refactoring rails applications a couple of years ago before Tuple and man that's the best when you're done you are done. And you just get the emails that someone bought it and I still get them and it's just amazing. It's the best pure income thing, per hour thing that I've done in, I don't know, maybe ever,
Tyler: Hmm. You're doing some of that right Rick?
Rick: Yeah, I think, well I'm not, I haven't, monetization is down the road but I see, I've seen significant opportunities with taking some of the topics I'm covering and packaging them in a way that could be good for a course. One of the challenges with courses though is I think the best ones are timeless. So I wrote a book in 2014 called
The End of Employer-provided Health Insurance and the next year all the information was out of date. And so there's no residual income from that. And if you bought it today and you were expecting it to be useful, you would leave a bad review. So I don't know if you've had any, it's going to get off topic, but one of the hardest things with courses that I look at is how do you make them timeless so that they do have time to build that residual.
Ben: In my experience, so with my course, almost all the revenue came in the first week.
Rick: Really?
Ben: Yeah, and I think that's actually pretty common for most educational info product type things. Every so often you have a timeless home run in your hands and maybe it probably gets more likely if you try to make that, but I would bet that's an order of magnitude harder than getting a landing page up, get a bunch of people excited about what you're making, release it in a timed a discounted window kind of thing, make some amount of money and then expect it to fully fall off a cliff and slowly trickled zero over the years.
Rick: That's most content.
Focus on what’s best for your ideal user / existing audience
Tyler: Did you already have an audience at that? Because I feel like there are a lot of people who want to do this stuff where it's like, I don't have an audience and I don't have an info product and if you just make the info product, no one will buy it.
Ben: Yes, I did have an audience because I'd been doing things like info products except they were free for many, many, many years.
Tyler: Gotcha. Yeah.
Ben: And that's the secret, I think. The “secret” is everything's a hell of a lot easier if you start with an audience that likes and trusts you.
Tyler: Yeah. And this is one of my, so one of my challenges with like if I were to, whether I do it in less annoying CRM or as a separate thing is what I want to do is build productivity software for small businesses and the reality is no one is interested in following this. I wish I wanted to serve startups or tech people because they want to follow the journey and all that kind of stuff. I sell to real estate agents and insurance agents and they're not reading or in any way consuming this content.
Ben: Well, you managed to find a lot of them anyway, so it turns out, seems like your marketing chapter, okay. Anyhow.
Tyler: That's why I'm tempted to do this in Less Annoying CRM then I think is like it would be tempting to say maybe, oh people listen to this podcast and I could build something for them or something, but it's going to be hard to replicate the platform of 22,000 small businesses.
Ben: Whose credit cards you already have.
Tyler: Right.
Rick: Maybe the challenge here is getting more focused on, I think you're, you could probably narrow in on some high level outcome metrics that you want to move, but then setting some, maybe we will not rules to keep your eyes from getting bigger than your stomach and that should, those we will not should be driven by who your audience already is. So if you could figure, you could find that, you probably know who your ideal profile is, but if you could somehow design the, think through all the things that if you did them, it would go against what is best for them. And then constrain when you, when you look at these add-ons, you know, before you build something you, you think through, is this, does this meet the criteria of one the outcome and two, does it cross into any of these boundaries and that would keep you focused.
Tyler: Yeah, I agree with that. I think probably all the different things we're considering fall within those constraints, I think. We had a user conference a month or two ago and it was only 50 people, but I talked about this with every single one of them and they were all like, yes, do it. But they also, I could propose anything and they, I was like, well what if we built better reporting in this area? They're like, yeah, do that, do that.
Ben: I mean this is your biggest fans, right?
Tyler: Yes. It's very biased for sure.
Ben: It'd be hard to get like validated back from them.
Tyler: Yeah. They flew to St. Louis to participate in a conference about a product that costs $10 a month. So yes, they're unique.
Breadth or depth?
Rick: So, so in terms of going deep or going broad, my, my inclination is to pick three add-ons you have a high confidence about whether how you get to those three and then build the MVP of each of those, come up with some sort of add-on pricing structure for each that you think is good and just throw them out there and see what happens. And maybe even don't even build much, just have a waiting list of some kind and see, play with different pricing structures and see what happens. I feel like breadth here is the play versus trying to go deep because you're probably going to have like a 10%, 20% pickup rate based on what the user actually needs.
Tyler: Okay. So you're saying breadth because it allows us to offer more and more stuff which people use rather than, I could see an argument for breadth being like, that's the way to explore what people want and then dive deep into one of those.
Rick: Yeah. Well, I guess what I'm trying to say is you probably have, you have 20 thousand users. If you roll out the Calendly thing, what percentage of people, if you just penetrated the whole market of 20 thousand users would take it up? I would say I'd model out 10, 20%. That's your best, right?
Tyler: Yeah. I would probably guess less than that at first, but yeah.
Rick: Yeah, so if you wanted to get 50% of your users to buy some sort of add-on at some point you would absolutely need more than one add-on to make that happen because they're going to be niche use cases.
Tyler: Yeah. That's fair. What do you think about that, Ben?
Ben: I'm actually just doing the math in my head where it's like if it does, if you do the build a premium feature and only 10% of people take you up on it and you want to charge five bucks a month.
Tyler: Yeah that's not huge.
Ben: You'll get like an extra 10k MRR. It's like, do you even care?
Tyler: When I say yeah, so I could be way off base here. My guess was probably, let's say it's $10 a month for an appointment scheduler, which is what Calendly is and it probably starts out a little bit worse than them, but we have the advantage that it's built in.
Ben: Probably a lot. Calendly is really good. Don't sleep on how complicated this product actually is.
Tyler: That's fair. I think probably the ways in which it's good are not useful to most of our customers, but I agree that's fair. We, we use Apointlet because Calendly wasn't powerful enough, so we would not use the product I'm talking about. But anyway, good point. We have a lot of ideas on how I think Calendly and Appointlet and all the other ones,
Acuity Scheduling, miss the mark. One example being none of them allow for scheduling more than a one on one meeting. As far as I'm aware. The whole model of here's a link, pick a time only works for one-on-one meetings. I think there's a lot of area for improvement, so I guess what I was kind of thinking in my head is we launch a mediocre Calendly for $10 a month, get 5% of our customers and then over the years that turns into an actual legitimate, better product and we get 50% but maybe that's not realistic.
Ben: Yeah, I don't know. Does that, does that make you excited?
Tyler: Yes. If Less Annoying CRM went out of business right now, I'd start Less Annoying Meetings. I think it's crazy to me that there are, every person who works at a company, regardless of industry or anything else, has basically the same meetings as everyone else. And there's very little software to, there's software handling little chunks of it, like scheduling it or something, but I feel like building something that kind of owns the whole meeting flow, getting the video chat set up, getting the conference room scheduling handled, shared meeting notes in it. I would be really, really interested in building out that product.
Ben: Cool. I mean then, yeah, I that's, that's worth something. I think the fact that you think like it, it matches with your vision. Like you're, your own motivation is important here.
Tyler: All right. We're, we've talked about, I appreciate you indulging me this much. Let me ask you a final question here. So you said earlier, maybe I'm just doing this cause I'm scratching an itch for myself. Let's say I am, is it stupid to do that, to say I've got the 22 thousand customer base already. What I want to build is serving these same people and I think I have a vision for it, but probably the business doesn't need it. Am I stupid to even consider this?
Ben: Are you stupid? No, because I think your motivation to work on the business businesses an important asset. If you get burnt out and bored, then that's not good for the business. I mean or at least it means you probably shouldn't be running it.
Tyler: Yeah. Yeah.
Ben: Right. So I think, like we think about this a lot too where it's like, okay, for us we're, we're much smaller but it's like okay, we've crossed the point where we are not, we're, we're sustainable. We make enough money that we can keep working on this. So we're past the existential threat and now, we have the luxury I think of being able to say yeah, we can do A, B or C and they're all probably pretty okay for the business. A seems the most fun though, so let's do A. Like, it's okay to optimize for a little bit of that, I think, if you're paying the bills and you're not making other people's lives worse or endangering the company or something like that, I actually think that's a reasonable... It is important to the business that you would like working on it.
Tyler: That's fair. Yeah. A lot of people, Oh, sorry, go ahead.
Rick: How is it, how is this different than your last chat app?
Tyler: Yeah, I've thought a lot about this, the difference is the last one we said this is going to be different enough from the CRM that it might be for a different group of people, and so we built it under a different brand and all that. And what I'm committed to, if nothing else this time is if I build something new, it's going to be so tightly integrated into what we have that it'll at least leverage what we've got, but I think it will also serve our current customers in a way that the other one wouldn't have.
Rick: And that makes a lot of sense. So this is different because you're focused on the same audience.
Tyler: Yeah, I think that's it. Ben, to what you were saying, a lot of the podcasts out there've been talking recently about like when is enough enough? And every time I hear that conversation, my thought has always been you hit that, you cross that existential threat point and you've hit enough. Money is no longer the thing that should motivate it, but that doesn't mean you stop being greedy about something else. Maybe it's about loving the problem or maybe it's about helping the world or I don't know, but I think maybe I'm trying to figure out what to be greedy about next, now that money's okay.
Ben: Yeah, totally. Yeah, and then on the topic, my response to that question has been I don't think there's enough in the sense that I would be okay with a company that didn't do anything different that wasn't growing and changing. To me, I always want the MRR to go up because it's kind of a scorecard of how much value we're providing the world and I want a more interesting, brighter, crazier, different future because that's what keeps me interested and motivated.
How to price an add-on
Tyler: Yeah. Okay. Cool. Well, I appreciate all your thoughts on this. Obviously pricing specifically was one of, one part of a much broader conversation, nut this gave me a lot to think about.
Ben: I think you might, let me just quickly on the pricing, if you're 10 bucks a month for your core product, I think rolling out another thing that you could say is an add-on to the product that doubles the monthly price will probably, just feels wrong to me. Intuitively it's like, wait, does this make it twice as useful? No, it's an add-on. Okay. So it shouldn't be twice as much, right? So I think you're probably looking at more like $5 a month because now it's an add-on. So your low monthly initial monthly price is probably going to prevent you from pushing the add-on as high as you might want. Later as that add-on matures and maybe you add another one, maybe instead there's like a base plan in a pro plan and the pro plan includes scheduling and invoicing and whatever, and now that now of course that's $25 a month.
Tyler: Mm-hmm (affirmative). Yeah, that makes sense to me. The way I've thought about this is when we launched the initial product, it was $10 and it was worth, it was not worth $10 the way it is now, but it kind of grew into it. If we think it will be worth $10 is it better to price it at $10 now and grow into it or price it at five and raise the price later?
Ben: Mm-hmm (affirmative). I'm pretty into aspirational pricing. I usually try to start and then come down if I have to.
Tyler: But yeah, I definitely see your point that it's anchoring, the $10 anchors what the add-on is, yeah.
Ben: Yeah, just intuitively to me it feels like I'm paying 10 and there's this new add-on it's also 10 it's like wait, why is it 10? Doesn't make sense.
Tyler: Yeah.
Ben: That's not an add-on. That's a new thing.
Tyler: Okay. So if it's positioned as an add-on, it can't be $10. If it's positioned as product number two in parallel with product number one, maybe $10 works, but maybe not even then.
Ben: Maybe, yeah, maybe, but again, I think my position on that is it shouldn't be its own product.
Tyler: Yeah, I agree. I think I'm sold on that one. Okay.
Rick: One more thing I would add in a different space is I would challenge you that your meeting passion is shared by your audience. So I think there may be a percentage that could share that passion, which again pushes me towards the add-on thing versus trying to go deep, which... I don't know what the answer is, but add-ons are a great way to validate maybe some of your passions with, with the current audience.
Tyler: Yeah. Yeah. I liked the idea of something cheap to start with, see how it goes and build from there.
Ben: I thought you were actually going to take that in a slightly different direction, Rick, and ask if the team was excited about the appointment stuff.
Tyler: The employees at Less Annoying?
Ben: Yes.
Tyler: I think actually they are. Basically anything that's more internal productivity focused versus external... The natural extension of a CRM is to build sales tools and none of us want to do that because we don't have any salespeople. So anything that inches us more towards productivity, collaboration type stuff versus sales and marketing, I think people are pretty excited about.
Ben: Cool. Yeah. Nice. I think that's important to think about too.
Takeaways
Rick: What are your main takeaways, Tyler?
Tyler: I think the thing I benefited most from, I'm going to go listen to this again, but is just questioning, is it for the margin, is it for a new marketing channel? Is it just personally indulging myself and even if it is, maybe that's okay and then from a pricing standpoint, yeah, I'm going to have to put some thought into the right way to do it, but I buy that definitely the friction for the initial stuff is way lower if it's a lower priced add-onto the CRM, not even pretending it's a new product at all.
Rick: Interesting.
Tyler: Does that sound like what I should have taken away from this?
Rick: That sounds great.
Tyler: Okay, awesome.
Rick: Do you have anything else to add, Ben?
Ben: No, I think I've said my piece.
Rick: Well special thanks to you for, for joining.
Tyler: Yeah.
Ben: My pleasure.
Tyler: Do you want to give a shout out to, I mean I kind of intro'd your app and podcast, but where can people find you? Anything you want to promote here?
Ben: Sure. I mean we make an app for remote pair programming. So if you're a programmer and you pair program and you want do it remotely, we have a pretty nice Mac app for that. If you like hot takes, I'm are
r00k on Twitter and I put a podcast out pretty much every week and it's kind of like this one. So if you'd like this one you might like that one and it's called the
Art of Product. Maybe check us out.
Rick: Awesome. Well thank you. Hey everyone, thank you for listening. You can join the conversation on this topic and review past topics by visiting
startuptolast.com. If you have questions, contact us on
Twitter. I'm on LinkedIn, but Tyler is not, so you can find me on
LinkedIn. We'd love to hear thoughts and ideas again, that's
startuptolast.com, see you next week.