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Strava’s pricing is for beginners
Patrick Campbell May 20 2021
This week, we're going on a run. Or perhaps a bike ride. Look—we're talking about Strava. As a lot of you know, Strava is one of the premium running/cycling apps. It's for the diehards. They came in the second or third wave of products like, depending on how you measure it. From that perspective, they actually had a leg up on the technology, but their monetization is very lacking in my opinion.
Because I love premium products and I love products that are doing good things, I wanted to take a look at Strava. I do believe they're doing some things right, but they've got some problems that we'll also examine to form a holistic case study. And you can take all of this information back to your own business to improve your own monetization strategy.
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Focus on the athletic community and the competitive aspects of fitness has made Strava not only loved, but wildly successful—they’re adding a million athletes per month to the product. But is Strava’s positioning and audience unique and loyal enough to help separate them from the competition—is there enough willingness to pay to support a fast-growing company like Strava?
Below are some valuable takeaways you can implement in your own business.
- In a premium market, you have to go after the premium pricing.
The big takeaway for you here is to make sure you know what kind of product you’ve developed. What is that overall positioning for you in the context of your market? If you know that you've developed a premium product, you need premium pricing—it’s a big part of your positioning.
- Understand your willingness to price appropiately.
Likely about 80% of the companies we look at are under-priced. When you’re under-priced, the perception of your product is also affected. You’re losing users, sales, and average revenue per user. You need to collect, at least, your basic willingness-to-pay data to avoid under- or over-pricing. It’s crucial to understand your users and different segments, and what they’re actually willing to pay.
- Premium strategy means you need to know where the willingness to pay is coming from.
Again, understanding your different segments is key. You need to know what your highest willingness-to-pay customers are actually willing to pay for. There are some features you're differentiating that should be included with every tier. Similarly, there are some features you're including with every tier that should be on a higher-end plan or offered as an add-on.
From Fitbit tracing your steps to new kid on the block Levels, which continuously tracks your glucose levels, the bond between fitness and tech seems to get stronger and stronger every year. Yet, while wearables have captured a hold of the market, some are still working on bringing us together in fitness, including our friends over at Strava.
Founded in 2009 by Harvard graduates Mark Gainey and Michael Horvath—Strava is a fitness social network designed by athletes for athletes. Horvath and Gainey met on the crew team at Harvard and after working separately for a bit after college, they came back together to launch Kana Communications, a successful customer relationship and engagement product. After exiting, they wanted to work on something they were more passionate about and had the idea for an app that combined the best elements of a fitness tracker with the best elements of social media.
As Horvath says, “[We] wanted to recreate that feeling of being on a team even though we couldn’t physically train with our friends anymore. The impetus was trying to recreate that feeling of training with your friends to motivate you to new heights.”
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Strava fulfills this dream by allowing users to track fitness activity like running and cycling on an interface that has the ability to communicate with others by sharing your routes and goals with the Strava community. You can form your own teams or join others with different fitness plans each week. They also added another innovative, key element to the Strava experience—competition. Strava includes leaderboards where users can face off along certain routes, challenging other users as well as themselves.
This focus on the community and competitive aspects of fitness has made Strava not only loved, but wildly successful—they’re adding a million athletes per month to the product and all those athletes rack up 19 million fitness activities per week. They’ve also been down a path similar to WHOOP where they target more hardcore athletes in order to go after the audience that truly cares.
Success is tough in this market though, because so many apps appeal to the mass market. Others have also been around much longer—RunKeeper was the first, and after being purchased by Asics still has a massive following. MapMyRun, Fitbit, and even WHOOP all have their own apps that track and even allow you to use teams. Other critics also point out the big elephants in the room of Apple, Amazon, and Google (who bought fitbit) are all getting in on the action with giant cash coffers to buy the market.
The question then becomes: Is Strava’s positioning and audience unique and loyal enough to help separate them from the competition? How can they more effectively separate themselves from the crowded market? Is there enough willingness to pay to support a fast-growing company like Strava?
Lots of us here at ProfitWell prefer to run the "old-fashioned" way—just our sneakers and the open road. Still, we've been very aware of Runkeeper and Asics. I think they were among the first 100 apps on the App Store, with Under Armour quickly joining in the form of MapMyRun. Though Strava came a bit later, they focused on targeting a very specific market. Not necessarily ultra-marathoners, but very serious athletes.
Despite their unique aim, they're running against problems and constraints in the App Store. They start out with a "freemium" play. As a lot of us know, some dynamics of the App Store make it extremely difficult to charge a significant amount of money. First of all, we seem willing to buy a $5 cup of coffee every day but won't shell out for an app.
This view has started to wane a little bit. You have apps that are hundreds of dollars per month, but your entry point is through the free mobile app. These might also offer an online web experience, or connect to a tool like a Fitbit. Other apps charge $20 per month and don't offer a website or content beyond the download.
I think this gradual shift in willingness to pay came from the pressure of a couple different places. People are certainly appreciating apps more. They're willing to pay for more things online if they feel they're still getting significant value. Developers are also demanding more. Honestly, they're likely just fed up with the Apple and Android stores taking a 30% cut on every purchase. Premium-priced apps like TrainerRoad and Peloton were born from these frustrations, and it's working for them.
So, what does this all have to do with Strava? Well, knowing all that we know about similar apps, when you look at Strava's pricing, it's just disheartening. They're so cheap! And you can argue that a lower price may attract more users, who could turn into paying customers. In reality, however, your user base isn't as big or as valuable as you think because very few of the people who are attracted to that small price tag will be the hardcore athletes you're looking for.
Big value props
First up: I like how they outline their really big value props right off the bat. They've got phrases like, "compete on segments," "accelerate training," and "discover new routes." These are things that super serious performers will be looking for. They want to do all of these things. In comparison to similar fitness apps, Strava isn't talking about getting in shape or losing weight. It's all about improving on your records and being intentional with your training.
Simple but under-priced
They lay out the free version versus the subscription, which helps to illustrate how much you can get with a subscription. There are so many features! But then there's just this downtrodden, $5 a month price point. In Strava's defense, it's not as bad as it used to be. If I recall correctly, they had three similar pillars to these that you could buy separately for $2 a month. In theory, it makes sense. But for a mobile app, it gets overwhelming. Even on the desktop experience, it's not simply enough. If you're only looking at $5-$6 a month anyway, why separate that out into $2 each?
I appreciate that it's not a kitchen sink model, where there's either premium or there's free. Unless they're going to do something a lot more dramatic, it's great that they made this so simple. I just think the price point is absolutely out of control. If they want to keep the $5/month discount for an annual plan, that would be okay. But why not make it more expensive than $6/month in general? There's barely a difference there. Make it $10 a month or something.
I like what Runkeeper did back in the day, where it was around $20 if you bought it month by month, and the six- and 12-month plans were incredibly discounted. They did that so you would get off Apple for the annual plan, moving instead to Stripe or Braintree or another platform like that. I think they picked the right market and the right people to go after. That's just not the case here.
If elite runners have already considered or committed to paying $30 for Whoops or $30 for Peloton, Strava has to step up their game. Give us something more. It's just too cheap. The $20/month for Runkeeper is something that Strava could easily be charging in this market.
Don't worry—we're going to see all of this backed up by our 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.
In a premium market, you have to go after premium pricing
We need to first remember that we're working within a premium market. That means that you have to go after premium pricing and, I know, we've been talking this point to death. So let's look at the data.
We collected willingness to pay data from a bunch of people—either some of Strava's current users or prospective users. We segmented our results based on what their main kind of training was and then compared that to the overall median price point. What you'll see is that folks who are training for a hardcore event (like a triathlon, marathon, etc.) had a willingness to pay that was about 25 to 30% higher than everyone else. That's why we've been harping on this point. Strava has a ton of different users. They can still offer their free plan for some of their base, but having a premium-priced plan for these hardcore fans will bring joy and cash in the long term.
Now, when you look at people who are new to running or are training to get healthy, they're willing to just pay about 30% more or less. Here's our recurring theme: Strava is just woefully under-priced, and it's really problematic. The takeaway for you is, you have to make sure you're measuring where willingness to pay is for your target segment.
My hypothesis is that 90% of their paying customers right now are probably training for these big events. Folks that are just getting started will use the free version or turn to a more basic app. By that logic, 90% of their current premium customers are already willing to pay a lot more than they currently are. Strava probably won't really lose anyone with a price hike.
You need to understand willingness to pay so you’re not over- or under-pricing
Let me really hammer this home. We collected this willingness to pay data and then segmented it out based on their usage level. What was kind of amazing is that Strava can defend the premium price point. It's a more premium product relative to something like MapMyRun. Obviously, we don't know what's going on internally at Strava. But it's one of those things where I look at this and go, "Holy cow, what is Strava doing right now?" They're anchoring themselves to the wrong type of competitor, to the wrong type of market.
There are arguments to go after the "mass play" with $5 per month. When you have this high willingness to pay, though, you have to understand that people look at you differently. There might be a lot of people just using the free version of Strava or paying the $5/month, and then are paying $30 a month for Whoop and other products.
There's maybe a best of both worlds situation here, where Strava could have multiple tiers—free, maybe a $5/month plan and a more exclusive $20/month. Still, it gets a bit murky and working with mobile can complicate things. Still, when you get a user in and get them attached to your product, slowly upgrading and moving up tiers is something that works out really, really well.
Premium strategy means you need to know where the willingness to pay is coming from
Finally, premium strategy means that you need to know where the willingness to pay is coming from. I've been hypothesizing on this. Clearly, they're targeting these super serious trainers and runners. They differentiate really, really easily from the rest of the running apps out there. So what do their actual users really care about?
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.
Things like "power analysis," "custom goals," or "training plans" are valued highly by users. Whether current or potential, the folks who care about these elements are willing to pay more. We also took a look at elements like live tracking for safety. Interestingly enough, this wasn't widely valued. Still, those who did care about it were willing to pay a lot to access it. That's a huge sign that you've identified an add-on.
- In a premium market, you have to go after premium pricing. The big takeaway for you here is to make sure you know what kind of product you’ve developed. What is that overall positioning for you in the context of your market? If you know that you've developed a premium product, pricing accordingly is a huge part of positioning.
- Understand your willingness to pay so you don’t over- or under-price. I would say 80% of the companies we look at are under-priced. You might be just getting started or are anchored to your insecure pricing from when you first got started. Unfortunately, you're losing users who are skeptical of your cheapness, as well as sales, and average revenue per user. You need to collect, at least, your basic willingness-to-pay data to avoid under- or over-pricing.
- Premium strategy means you need to know where the willingness to pay is coming from. There's nothing wrong with having a downmarket plan with basic features, and an upgraded plan. However, you need to know what your highest willingness-to-pay customers are actually willing to pay for. There are some features you're differentiating that should be included with every tier. Similarly, there are some features you're including with every tier that should be on a higher-end plan or offered as an add-on.
There are so many features you can build now, and we've all focused on shipping features quicker than ever. But the thing you need to keep in mind is, it's so difficult to make sure that you're shipping not only the right things, but also monetizing them properly.
Who's up next?
That's it for season six of Pricing Page Teardown. We'll be back soon though, with a new season and even more insight.
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If you want help with this type of pricing research for your company, feel free to email me at email@example.com or firstname.lastname@example.org, and we'll make sure you get hooked up with the right people to make sure you're focused getting your monetization right.
This is a ProfitWell Recur production—the first media network dedicated entirely to the SaaS and subscription space.
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.
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