Can bundling take Xero to zero?

Patrick Campbell Feb 4 2021

This week we're talking about accounting software. Hey, don't fall asleep. It's interesting. I promise you, it's interesting. Beautiful design, beautiful pricing, and ultimately, just a beautiful business. We're talking about Xero. And I'm going to be talking about what they're doing really well, and what they're not doing so well, at least in the past couple of years. And we wrap up all of those lessons into a nice little case study, so you can improve your own monetization strategy.

 


Pricing field notes

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You may think accounting software doesn't need great design, but when you consider just how complex finance and accounting is, you realize that every functionality needs to be precisely designed with a user's process and end purpose in mind—something that gives Xero, both brains and beauty. Xero is now one of the fastest growing SaaS companies in the world. But is their fast-paced growth sustainable? Aside from acquiring new customers, what else can they do?

Below are some valuable takeaways you can implement in your own business.

    • Brand and design drive higher willingness to pay.
      • People with a positive affinity for a company’s design are willing to pay about 20-25% more.
      • Good brand perception increases willingness to pay between 20-30% more.
    • Don't bundle what should be an add-on.
      • Features that aren't really a proxy for the company size or maturity, should definitely be offered to everyone and allow them to build them onto the subscription that they're on.
      • Don’t give away too much value.
      • Features that you're selling, bundled in different tiers, are used or valued by less than 40% of the people within that tier.

    • Add-ons are the name of the game in mass but fragmented user bases.
      • Hone in on different use cases with different add-ons and make the product a lot more maneuverable or variable to these people.
      • You can increase that average revenue per count over time.
      • The willingness to pay for different fragmented types of users is different. Take advantage of that by unbundling some of these features and making sure that they’re add-ons.


Watch the full episode

 

 

XERO

Accounting isn’t thought of as beautiful, but when you learn what finance and accounting actually do, you realize they’re the heroes in your business. Xero knew that all along when they set out to make accounting software just as beautiful as your business. 

Xero was founded in New Zealand in 2006 by Rod Drury, a man with accounting in his blood. Drury started his career as an auditor, and then became a junior IT consultant at Arthur Young, an accounting giant going through a merger that became Ernst and Young, and later, EY. Subsequently, working closely with Microsoft, he founded a software development practice within EY. And that eventually led to branching out into his own consulting and development firm.

When Drury ran his own firm he realized that traditional accounting software was simply awful for business owners, which classically, started him down the path to doing something better with building Xero. 


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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