In this week's teardown we take a look at the pricing strategies of office tool titans Office 365 and G Suite. Google's G Suite pricing goes for a simple, easy to follow approach. Microsoft's pricing page, well... it's just terrible. Watch as we dig into the data and see who's really on the right path.Read More
Is Front pushing too hard?
Patrick Campbell Jan 21 2021
This week we're breaking down a company that is both reinventing a new space, but as also creating their own new space, which I feel is the most nebulous introduction we've ever done, maybe. But it's all in the world of email and that is a company called Front—we're big customers of Front, here at ProfitWell.
And we wanted to dig into their pricing, see why we're paying them and why we like paying them. But also notice a couple of big problems that they have with their pricing, or at least, I shouldn't say they're big problems, but they're problems that could potentially be big problems. So, we're going to find out what Front is doing really well, and not so well, with their monetization. And we're going to wrap that into a nice little case study so that you can take these lessons away for your own pricing strategy and get your monetization moving in the right direction.
Pricing field notes
Front's vision to give email and corporate communication a facelift, and thereby making work enjoyable, has resonated and seems to be working. But can Front get their monetization in the right place to make sure they’re not alienating their different customer constituencies?
Below are some valuable takeaways you can implement in your own business.
- Push pricing is potentially problematic for Front.
- Pick your shots really well when it comes to pushing your users into an upper level plan.
- Understand which features should be a differentiable feature or an add-on.
- Understand which features belong in which tier so as not to force someone into a plan where they won't use 50% of the features.
- Push pricing is potentially problematic for Front.
- Understand how value shifts.
- Value shifts based on use case.
- Understand the different uses cases because the willingness to pay will differ, as well.
- It's crucial to understand which platforms or channels people are using and the associated willingness to pay.
- Integrations should be considered for retention.
- You want to monetize what you build.
- If you have your products touching each other and funneling data back and forth, it's going to make for a much better experience.
- Be cautious with separating out integrations from a monetization perspective.
- Understand how value shifts.
Watch the full episode
Email is fundamental to our everyday lives, both personally and professionally, but when it comes to business email the pace of innovation has been at a standstill for 15 years.
This is what led Mathilde Collin and Larent Perrin to found Front in 2013 from France. After moving to San Francisco to accelerate Front through Y Combinator, Collin and Perrin set out on a vision to give email and corporate communication a facelift, by creating a product that pulls together disparate conversations from many channels like Outlook, Slack, Twitter, and SMS and making them simple for teams to have a shared view of what’s being worked on, who’s working on it, and ultimately all the context around these conversations.
The vision for Front goes much deeper though—Collin wants to reinvent work through their product. Growing up in France in a family where no one enjoyed their jobs, she doesn’t want others to experience the same thing and Front’s focus on email can fundamentally impact a team’s fulfillment.
"We have an entry point to deeply change how people work," she says. By fixing email, Front untangles convoluted processes, miscommunication, and the crossed signals that hamper most teamwork. By improving all of this, stress goes down, emotions stay positive, and productivity goes up. Throw in a belief in improving productivity through workflows and automation, and you have a recipe for groups of individuals becoming productive teams and every team member getting an opportunity to do their best and most meaningful work.
And their vision seems to be working as Front’s raised over 100 million dollars from blue chip firms like Sequoia, as well as software elites, like Zoom’s Eric Yuan and Qualtrics Founders, Ryan and Jared smith, just to name a few. Their dedication and funding has led to over 200 team members across offices in Paris, San Francisco, and Phoenix, over six thousand customers, and an $800 million dollar valuation.
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Not everything’s amazing with Front though. Critics point out that they’re fighting battles on multiple fronts. For one, pinpointing where Front fits, in the wider messaging and communication category is difficult, which doesn’t mean they can’t be successful, but makes category creation difficult. They’re also dealing with high fragmentation amongst their customer base with many different types of businesses using their products. It’s a champagne problem, but when mixed with needing to make product and marketing decisions, can get complicated and go flat.
The question becomes: How can Front train the market when there are many, many alternatives and incumbent players that maybe don’t do what Front does, but do some or a lot of it? Also, how does Front get their monetization in the right place to make sure they’re not alienating their different customer constituencies? Front has a lot of work ahead of them, so we’re going to answer these questions by collecting data from 10, 542 current and prospective Front customers. Keep reading for all the data and answers to these questions.
Email, email, email
What's the most annoying thing about email? I hate having to go back and find emails that I know I saw but can't keep track of them—email search. I think the other thing is lost context. So one of the things I think Front solves really well, and really accentuate this on their website, is this whole concept of having an email that I'm going to forward to you that I need context for me. You're then going to forward it back. It was one of those things that confused me really early on because I was like, "Why isn't this just a help desk?" They just put an interface on top of email so that you can put notes and respond to the same inbox. You can keep the same inbox and it all feels like it's coming from the same person.
There's a few inboxes, some of you know this, that if you email them you get a response really quickly. And you wouldn't think you would get responses quickly and that's because 10 people are inside that inbox. But I think that the other thing that Front's trying to do, which I think is really admirable, is they're trying to push this into a new kind of workplace communication, right? Because they've taken not only email, it's where they started, but they now added live chat. I think they're adding different social channels like Twitter, as well as Facebook. The folks who have tried this before, they didn't have a design-focused thesis when it came to this. They were just aggregators. It's one of those things where they have all of the SMB value proposition of not opening up all these apps to respond to messages, but they also have a growing company value proposition of having a lot of stuff.
This is a really good efficiency and effectiveness platform for you. Your positioning really matters. And unfortunately, I think for Front, when you first go to their website, it's not clear what they do. When we scroll down on the actual page, it starts to really come alive. It's all about email, email overload, feeling out of the loop, "it's time to release email from isolation," it's email, email, email. Email is going to be 90% of the communication in most businesses. And then we throw everything else in there, which I think is like the battle that anyone who's trying to create a space is going to end up having. So let's take a look at their pricing page and then let's dig into some of the data that we collected on current and prospective customers. We're going to find out what Front is doing really well, and not so well, or could be tweaked a little bit to be better so that you can take all of these lessons away into a nice little case study for your own business to improve your own monetization strategy.
Front's pricing page
Overall great pricing page. In my opinion, I think there's two little tweaks that I would look at. The first tweak is the one thing that I do really, really well here is the Starter, Plus, Prime, Enterprise. Some people do like pond, lake, ocean plan, right? Which depends on your product, but it's a little kitschy. These little call-outs are great. So the Plus plan—"Customize your workflow with rules and integrations." Prime—"More channels and data to transform your teamwork." Those are very function-based. And what we historically find is that these little call-outs should be value prop and persona or segment some identity. For small business just getting started with a few inboxes that's way too long, but that helps contextualize where I should go. Because when I come to this page, I should roughly know where I should explore more within five seconds.
It's really hard for me to figure that out, or figure out where we should be because I'm looking at this and I'm like, "Well, I think I want to customize my workflow with rules and integrations, but I don't know if I need more channels." It's just one of those things where it doesn't contextualize me enough. You want to be easing that user into a decision from the get-go. All of a sudden, it's like, okay, three, five, 15. Again, I should still understand where I'm going. I think that's a really big point. One thing I really do like, is they have that "compare all features" drop-down. They did a great job of really consolidating the salient features and bringing them up top with value metrics. I love the fact that they don't just have this huge mess of check marks—the check mark problem.
I also like how, and I know this is super subtle, but they basically organized these sections: team collaboration, section team, channel limits, and types. It's a lot of information, but they highlight them so you can scroll over them and not get lost. You need to explain a lot of information in a short amount of space. You don't want to confuse people, but there are people who do want to explore really deeply. Then when I go to "show all features," or "compare all features," I'm looking at a world where I kind of already know where I should be. So I'm going down and I'm looking at that plan very specifically. And then I'm like, "Oh wait, but there's this thing up here that I want. Maybe I do need to be on the Prime plan, or all these features they're saying I need. Maybe I need to be back on the Starter plan." Let's get into the data...
Where does our data come from?
Here at ProfitWell, our Price Intelligently software combines proprietary algorithms and methodologies with a team of pricing experts who think about this stuff more than anyone else to help companies optimize their monetization strategy. We do this by going out into the market and collecting data from current and prospective customers, having the ability to collect data from everyone, from a soccer mom or dad in the middle of Kansas, all the way to a fortune 500 CIO in South Africa. We then take that data and run it through our algorithms and analyze it in every direction to determine a company's ideal customer profiles, as well as which segments value, which features and which segments are willing to pay more, all in the spirit of determining how a company can use monetization for growth.
Data and analysis
First up push pricing is potentially problematic for Front, so they need to be careful. We've talked about this concept of push vs. pull pricing. And basically the idea is pull pricing is when the usage or the feature need of the actual users are pulling them up to a more expensive tier. What Wistia video hosting analytics does, for example, is the more videos you use, the more you pay and you're more than happy to pay more. Push pricing is like, "Hey, I'm going to push that user up to another tier, whether they might like it or not." And this is very well seen by Salesforce where even if you only want one feature, you have to upgrade and get all the other features. And you're not really happy with it because you're forced into something where you end up not using 50% of the features that you're offered within this tier. Front isn't necessarily doing full Salesforce, and full Salesforce isn't a bad thing. They're obviously super successful.
If we go back to Front's actual pricing page, what you'll notice is that things like SMS channels, you can only get in the Prime plan, which is $50 per user per month. Obviously it's one of those things that, you know, you would want to have an extra charge. But you're pushing me up into this tier with all of these other features, where if I'm an ecommerce or a DTC brand, I might only have email and messenger, and maybe SMS. I don't necessarily need all of these different features or these advanced rules and all these other things, but you're making me pay for it. And you're making me pay in some cases, five times more. And they probably concluded that there's extra costs to this, and there's other things that they have to think about, therefore, they should only be putting this in their Prime plan. But they should just include this as an option that you can get, maybe not in the lowest tier, but at least the main tier that they're offering.
There are some features here, like private inbox analytics, totally fine. To be a differentiable feature. I probably would pull that out and make it an add on, but I'm fine with that being in a premium tier because people who are at that size, they probably are expecting it. But another place where this gets kind of tricky is when you're thinking of some of these integrations. You have to be on this Prime plan, the $50 per month tier, to get a CRM integration, which maybe we can justify, because if you're a CRM, you're maybe higher end and want to connect your apps, and you're not a small company. But then also for a Zapier integration? "Remove branding from the Front Chat Widget," is in the Prime plan. If I'm paying you $25 per user, and let's say I have five to 10 users, it's not a small amount of money. It's not a huge amount of money, but it's kind of like, "Why do I have your branding on there?
You're about to see something called a value matrix. We collected data from the group comparing feature preferences and plotted those on the horizontal axis, more valued features on the right, less valued on the left. We then collected willingness to pay for the overall product and plotted that based on their number-one feature preference on the y-axis. Analyzing data in this manner allows us to determine which features are differentiable add-ons, core, or commoditized for each segment.
Annual billing and consumer products
As we can see here, there is some higher willingness to pay for it, but it's very, very low. And things like the Audit Trail, Automation Integration with Zapier, Twitter access, Remove Front branding, they're kind of like in this plus or minus 10% of willingness to pay in the value matrix. This means those are things that you're kind of pushing someone up, where you really should just include it, or have them pull, which means you have to move it to lower tiers. Some of the other things like analytics, SSO roles and permissions, these should probably be add ons. It's fine that they're in premium tiers. We're looking at an aggregate view on this value matrix, but it's just one of those things that I think Front really needs to reconsider where their pricing is, in terms of their packaging, to figure out where they're being punitive.
And probably the most punitive piece here is their Twitter access is basically an add-on when, at most it, should be a differentiable feature. And it probably should just included as a channel. Again, I'm sure there's some cost or something associated with that, which pushed them to make it more premium. But it just doesn't make sense, at least from where I understand their current user base. You would think that they would make all everything that has to do with channels easier to access and boost the number of channels customers are actually using.
You build your pricing up as you build your product. What ends up happening is some of the things that you thought of in the early days, just no longer make sense. And so you want to take a step back. And I think the one thing that Front could do, as well as everyone, is the core functionality of your product. If it's communication, we want as much communication inside Front from a both monetizeable, but also from a retention aspect as possible. Therefore, maybe here, all the types of channels, maybe they're not all included the lowest tier but they're at least all included in the next tier up. And then it's just based on the number of channels that you have attached. I think that's the thing to really think about.
And the nickel and diming might be a problem when you look at something like Twitter in this case. Why is the separate? I understand there's likely only one Twitter account in a business, but even if I'm an agency, why is it included as a separate thing?
Understand how value shifts based on use case
So, what we looked at here is relative willingness to pay based on the actual primary channel besides email. And you can see some pretty intuitive fallout here. What I found interesting is that social media, Facebook particularly, is just such a wide range. SMS interestingly, and we touched on that earlier, it does command a premium. And I think that's why they're getting some false positives. Obviously people are willing to pay at that height for it, but again, the central thesis of their product is workplace communication, or manager platform, I can't remember the exact verbiage they're using.
In my mind they have a better opportunity to make backend revenue through Twilio charges included early on. Get that lock in where people are using SMS through Front and then charge. Get the discount from Twilio, but don't pass that discount onto your users. Let's say it's two cents per text. Well, if Twilio is giving Front a discount because of their volume at one cent per text, still charge two cents per text and collect the float. This is what Shopify does with payments. They're all pretty much the same. There's high variance on social because I'm sure there's people that have a much, much larger Facebook following and Facebook selling going on, but pass those costs onto your user, but don't pass on the ability to access something. Give users the ability to access SMS more easily. Get people using more channels. It's going to improve retention and you can upgrade them based on that, as well.
Integrations need to be a big consideration for retention
Finally, integrations need to be a big consideration for retention, more than willingness to pay. A lot of companies don't realize where the world of integrations has gone in the past 10 years. Ten years ago or 20 years ago even, you could sell a Salesforce integration in addition to your product for an additional $1,000 per month, just for the integration. So, you're selling your other product for a $1,000 a month and you could sell the integration for a $1,000 a month. That's was the world that we lived in. But with Zapier, as well as other integrations, as they become easier and more demanded by our users, what we've consistently found is that the willingness to pay for integrations has tanked. In addition to that, the retention of those users who have integrations with your product and other products is so much higher.
Taking a look at the data here. What you're seeing is this lower end line is basically the folks who have zero integrations. You're looking at overall net retention. So net revenue retention, we tracked it for, I believe it was a thousand and a half, so 15 to 1600 different subscription companies. And what we found is that those customers who essentially had zero integrations amongst these companies, their retention was almost 20% lower when those folks had one to three integrations with the product, or had more than three integrations with the product. It makes sense. If you have your products touching each other and kind of funneling data back and forth, then it's going to make for a much better experience.
The direction of this didn't even really matter, which was really fascinating. And I think that it's just that we live in a multi-asset world. And the argument that people are using too many apps, I think it's a BS argument. I don't think that's the case at all. I do think it's a case in some instances like Front, where I think people don't want to use too many apps. But they're totally fine using Front, then also using ProfitWell, then also using Salesforce, and also using these other products. And what you want to do, is you want to have these integrations kind of flowing so people can choose the apps they're using. And they're probably going to choose the apps that allow them to integrate all the other systems that they have in order to have that retention. So long story short, I think the big takeaway that I would take as a business from this is that you should have an integration strategy within your business, but also you should be very, very careful with separating out integrations from a monetization perspective.
I could probably justify pushing a CRM integration into a higher end tier. I mean, there's a world where it's no longer going to be feasible. One strategy for Front, and for a lot of folk, is getting folks in at an entry level price. Getting them integrated with everything with your product, and then boom, getting them on a higher-end tier. Because all of a sudden they love Front. They use it with everything and all their integrations and it pushes the data in and out, or whatever it is. And they want to upgrade for that other feature because that's going to make the integrations even better. Don't nickel and dime the integrations.
- Push pricing is potentially problematic for Front. Be really careful with this. I don't think Front doesn't agree, justly, bad job at all. I think they actually do a really good job with push pricing, but there's a couple of things that they need to reconsider that were probably old iterations of their pricing that need to be updated. You have to be careful as a business with push pricing, because push pricing is just not really acceptable to users anymore, in this world where software integrations and all these other things are very ubiquitous. Pick your shots really, really well when it comes to pushing that user into an upper level plan.
Understand how value shifts based on use case. In Front's case, it's super important to understand which platforms and which channels people are using, and what the associated willingness to pay there. Also think about what it means for the overall monetization strategy?
I would just take that even a step further. With Front, they have, at least in my understanding, such a fragmented user base. They have really small companies, tech companies, all kinds of companies using the product, and depending on how they're using it, e-commerce vs. SaaS, etc., those use cases probably have different willingness to pay. We looked at the channel difference in willingness to pay, but there's probably an argument to be made to take that down to a segment level, to actually understand what in the world is going on.
Integrations need to be a big consideration for retention, more than willingness to pay. I think a lot of people want to monetize what they built and some of these integrations are gnarly. They're really, really hard to build. We know that better than anyone because we have a free product that's contingent on a lot of integrations. But more often than not, it's so much better to give that integration away, or monetize it very loosely, in order to get people to move up and really your products. So make sure you have some sort of an integration,
Who's up next?
Next week we have, I think the greatest, most used product in my life in the past 18 months. It's Chipotle. We're talking about Chipotle and talking about what a Chipotle subscription look like to not only boost community, but also take care of some of the pesky problems that Chipotle has had in the past 18 months.
I'm really excited about this one because Chipotle is near our office, so it's just a common lunch occurrence. I would subscribe. I would subscribe to some Chipotle, but we're going to go through what they're doing well, what they could be doing even better, in the context of the problems that they're having. You won't want to miss it.
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By Patrick Campbell
Founder & CEO of ProfitWell, the software for helping subscription companies with their monetization and retention strategies, as well as providing free turnkey subscription financial metrics for over 20,000 companies. Prior to ProfitWell Patrick led Strategic Initiatives for Boston-based Gemvara and was an Economist at Google and the US Intelligence community.