Usage based pricing is often perceived to be the truest pricing model that best aligns to customer value. Join two cloud services firms, Pertino and SendGrid, as they share their pricing journeys, their quest to evolve to new models built around consumption, and their learning along the way. They will discuss pros and cons of different models and address the business case and operational requirements to support.

1. A Tale of Two Pricing Journeys
Evolving to Usage-Based Models
Todd Krautkremer
VP Marketing
Joe Hamlet
Senior Manager,
Business Systems
@tkrautkremer @jhamlet

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Todd Krautkremer
VP Marketing

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About Pertino – What We Do
Cloud Network Service that lets anyone build a secure
network in minutes, connecting everyone
with everything IT, from anywhere.
• GA Launched in Jan 2014
• 5,000+ Freemium customers
• 130 paying customers in 5 months
• Targeting SMB IT organizations
• Inbound marketing model
• Consumption-based pricing

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About Pertino – Current Pricing

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Changing Buyer Landscape
Losing control of the audience
• Attention economy
• Wealth of information is creating a poverty of knowledge
Losing control of the message
• Customers seek out and trust other sources
• Can’t control what is said, who’s saying it, how fast it travels
Losing control of the brand
• Brand affinity based on experience, instinct and feels right
• People don’t like to be sold, they like to buy, and they buy in tribes
Losing control of the sales process
• 98% of all IT buying processes start with a search
• 57% of the buying journey is complete before sales enters the picture

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What Does It All Mean?
Customer preference is driven
by third-party Influence and
hands-on experience
Buying process is increasingly driven
by customer’s
“compelling events”
It’s essential to
intimately understand
customer’s buying journey
Product moving
upstream in sales process,
packaging/pricing are enablers
Buyer’s Journey Map – The Path to Purchasing
Engage
Product
Engage
Process
Engage
Content

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Which Free-mium is Right For You?
High Reach
Millions
Low Affinity
High Affinity
Collaborative Value
(more users drive more users, user-perpetuating)
High growth, highly viral
Low Reach
100K’s
Alternative Value
(give away product to build community)
Lower growth, higher value
Experiential Value
(facilitate buyer’s journey, offset marketing expense)
Lower growth, higher conversion
Usage Value
(value increases with usage, self-perpetuating)
High growth, faster CAC recovery

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Common Pricing Misconceptions
Two wrongs don’t make a
right, but three lefts do!
1. Everyone should be happy to pay for your product
2. There’s some mythical “perfect” price
3. Pricing can never be changed once chosen
4. Delaying charging indefinitely due to 1, 2 or 3

9. How Do You Determine Pricing?
Slide 9
== + =
+
Relational Value Analysis
(+/= indicates perceived value of Pertino from Spiceworks Community)

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How Do You Determine Pricing?
Local Maxima
Consumer Surplus
Demand Curve
Demand Curve mapped to profit
Bronze Silver Gold
Demand Curve Analysis

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Evolving To Usage PricingPricing
Product Maturity
GB/month
Hybrid
Devices
Users
Freemium
Support enterprise (e.g. pooling)
Support multi-device
Starting
point
Support new use cases (e.g. DR)
We are here

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Pricing In Context of SaaS Metrics
LTV > 3X CAC
CAC back < 12 mo.

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Platform Considerations
• Best-of-breed approach
• End-to-end automation
• Deep SaaS platform Integration
• Facilitates buyer’s journey at
every waypoint
• Agile, scalable billing platform
• Swapping out systems while
scaling is difficult
SaaS Operational & Automation Platform
Build For the Business Your Building

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Summary
• Pricing as strategy, not pricing strategy
• Buying landscape has changed, deal with it
• Understand your customer’s buying journey
• Pricing and packaging play a role in the buyer’s
journey, not just the destination
• Balance market factors with SaaS metrics
• Choose your platforms wisely, billing can be a
boon or bane

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Joe Hamlet
Senior Manager,
Business Systems

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A Snapshot of SendGrid
Denver, CO
Boulder, CO
Orange County, CA
Providence, RI
Romania
Key Customers
Founded 2009
210 Employees
160K Customers
13 Billion Emails Sent
Developer Focused

17. of the world’s wanted email
does not reach the inbox
20%

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Value Proposition

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SendGrid Pricing Story

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Make it Simple, Make it Scale

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Package Changes
Mid-month package changes
 Risk of revenue loss
 Operational overhead

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Package Changes
Solution
Load usage daily
Queuing

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Usage Volatility
Overage based pricing
 Revenue volatility
 Decreased predictability

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Solution
Reduce usage based pricing model
Volume based packages choices
Tiered + Recurring usage model
Usage Volatility

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What’s next

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Q&A
Todd Krautkremer
VP Marketing
Joe Hamlet
Senior Manager,
Business Systems
@tkrautkremer @jhamlet