Episode Transcript
[00:00:00] Speaker A: Yo, mic check. What's up everybody? You're listening to the street pricing podcast, the only show where proven SaaS leaders share their mindset and mistakes in pricing so we can all stop guessing and start growing. Enjoy. Subscribe and tell a friend. Now let's break it down with your host and sought after slayer of bad pricing, Marcos Rivera.
[00:00:24] Speaker B: What's up? And welcome to the Street Pricing podcast. I'm Marcos Rivera, author, founder and pricing coach. And today I am super excited for today's guest. If you're interested in how to grow your product or how to test pricing and how to really know and focus on getting something right, you really want to pay attention. Today, I'm excited to bring to you Miguel Dergald. Miguel, welcome.
[00:00:49] Speaker C: Thank you so much, Marcus. I'm super excited to chat with you again and see you again.
[00:00:53] Speaker B: So am I. People, they don't even know, they're in for a treat, man. You've done so much in your career. Invoice to go. You've done chime. You're currently head of growth at Canva, a small, little tiny company out of Sydney, I believe, right? So just real quick, tell us a little bit about you and about what you do.
[00:01:10] Speaker C: Well, thank you. You're super kind with your words. Yeah. I'Miguel Dergal. I've been always a product growth geek all my career. And I started 14 years ago at PayPal with what was then the growth team. And then soon after I joined Invoice to go, that little invoicing app that became the number one invoicing app for microsmbs, one person companies, the plumbers, the carpet, the electricians of this world that needed a way to send an invoice so they get paid later. Invoice to go had a successful lexing and became part of build at Ibusuga I led growth and then the payments of financing business unit. And then after sometime at invoice to go, I joined Chime, that also tiny little startup that became the largest and most successful fintech financial services company. And I joined there when it was a very small company. And I saw the evolution from less than 100 employees to close to 1200 employees, from less than 100 million dollar ARR to a multibillion dollar ARR. And it was a very fun trajectory seeing the changes of the company. And I led product growth there. And then after some time there I thought, well, another mission driven company because I believe in products that benefit the lives of people, everyday people. Then I thought, well, why not join canva? That also helps SMBs all around the world lead better, more efficient, productive, more successful businesses across the world. So that's how I arrived at canva.
[00:02:41] Speaker B: I love you. So that's the stuff that SaaS founders dreams are made of, right? You got to see things kind of grow from early stage take up to a very high level of scale acquisition. And now you're at another place, which, by the way, is no stranger to scale. I mean, canva, lots of folks use it. I even use it. And so I'd love to dig into a little bit of your overall story, because a lot of your background was in fintech. And while fintech, I think, powers most of these b, two b companies, they get no love, man. They get no love whatsoever. A lot of people are really challenged to try to tell you the name of a fintech or what they do, right. At least the folks outside of the tech bubble.
[00:03:19] Speaker C: Right.
[00:03:19] Speaker B: But today I want to get into some really just genuine stories and things that happen in that pricing journey, right. Because you're so connected with growth, you're connected with the mission. You probably have seen a lot of great things that worked out well from a monetization perspective or didn't. So let me walk you through a little bit of how we're going to set this up. I'll give you a quick roadmap. Okay. So it's really designed based on the book street pricing.
[00:03:43] Speaker C: Right.
[00:03:43] Speaker B: So the way we're structuring this is, let's go rewind into the past. Let's find a story back there, whether it's Paypal invoice to go wherever. And let's talk about a true pricing journey that you took. Let's get into the meats and potatoes of that. Then we're going to bring it back to today to play, and we're going to understand a little bit about what's working present time. What are things that you've seen that are very effective ways to monetize value? And then we're going to look into the future, fast forward. We're going to go in and see. All right, what's next? What do you think is a really worthwhile area to look into change to get more value? Right. Does that sound pretty good?
[00:04:18] Speaker C: Sounds excellent. I'm excited.
[00:04:21] Speaker B: I'm excited, too. People don't know how much of a treat they're in for right now. So please just start off, tell us, let's go back in time. A really great pricing story. Let's step into it.
[00:04:33] Speaker C: Yes, totally. I think Inbostugo would be a good example. Like, I shared in the intro. Inbostugo was born by a single founder who wanted to help, really, his brother, who was a tradie in Australia, get an easy way to create and send an invoice. So he looked professional with his customers and get paid faster. As an SMB, cash flow is king. You work every day, you pay for materials, you have to pay for transfer, you do all this work, and then sometimes you have to float your larger customers and you have to also support your family. So it's a very hard work. So our founder had created a really great product that had a lot of product market fit, who was very effective at attracting customers.
Invoice to go with less than 20 employees was the number one downloaded invoicing app in the App Store, but it had a single digit conversion rate. So then we started to dig in and this was due to mostly three problems.
The first is the product was excellent, but we were giving a lot of value for free. There was not enough differentiation between the free product and the pre product. I'm not going to go into too much detail, but we did a lot of work to try to rebalance, give enough value, a generous free trial, but also create greater differentiation in what was perceived as a fair premium set of features. And we can go into that. But there was a second problem, which was we didn't have the features that attract people to an invoicing app are I want to get paid, but the features that will drive you to convert are very different. They need to be those moments of delight that are very easy and fast to experience. And it's not that we didn't have many of them, we didn't make sure that our customers saw them.
So then we had to focus a lot on creating and showing the value that was expected to drive conversion. But the third problem is that we were walking away from a very large set of customers. Our price was too high and there was a large set of customers that had lower willingness to pay. And part of the strategy of our CEO was to, yes, have a very large penetration with fair pricing of a SaaS product. But also we wanted to generate indirect revenue, work streams from payments, revenue, financing revenue. And that was part of the strat, to have a very large user base that would allow us also to not only monetize by charging customers, but also generating the indirect revenue streams that would be fairer to our customers. So what we did was we went directly to understand the needs of that segment and we had that good, better, best lineup that is very common in SaaS. Our founder had already arrived to that model and had some pricing. So we found that for the starter group, the group that was not yet convinced that invoicing was there for them, the price point that we were starting at was simply too high. So then we started to do some research to test our way into the optimal price for that segment. But then the big hypothesis here is, yes, if we're going to charge this small price, we need to make sure that these customers will stay and that they will have likelihood to upgrade to other plans. And then we looked at our historical data and we did see that one of the beauties of this beautiful product was the longer you use it, the more likely you are to stay. The more invoices you have, the more invoicing history, the more important it is for you to keep that invoicing app, because you report on taxes quarterly, you report on taxes annually, and it is a burden to have to use multiple invoicing apps. And we actually made it super easy for you to exploit and do all that busy work that nobody likes to do. So then all that sounds perfect, right? So then we went and tested a few prices. We actually reduced the price dramatically. We saw a massive influx of subscribers, in addition with us modifying our free product and adding a few more features that make sure that you saw value during your trial. And then we had this large user base.
We moved from single digit conversion to the mid double digit conversion, which is best in class for consumer products, especially if you think of SMBs, who are a very hard segment that has a lot of price sensitivity and that are, they are.
[00:09:16] Speaker B: I want to stop you right there only because you said something really important. A lot of folks out there are really challenged to find out, how do we get them over to the other side? Right. They give out something for free and you'll get people to start using it, and then you'll have 2% conversion, right?
[00:09:32] Speaker C: Yes.
[00:09:32] Speaker B: And that's really hard because it's free to them, but it's not free to you as the founder running your business.
[00:09:38] Speaker C: Exactly.
[00:09:38] Speaker B: And so getting folks over, you discovered that there's too much in there. That was one of the first things you noticed. There's too much in there. How can folks listening today look for signs that they're just too much in the free? It's just way too generous. There's so much talk, Miguel. The reason why I'm poking at this is there's talk, you know, product led growth means give everything away for free. Well, the product led growth, you have to make sure that you have product market fit, and the product can deliver those moments of delight. Right. That you mentioned. But I want you to maybe unpack a little bit of how do you know if something is just too much in there? Too much and free?
[00:10:16] Speaker C: Well, there are two ways, and I'm going to start with my favorite question for customers.
The first way is by asking your customers if they think that the features that they are using are fair to be premium features. That is my favorite question to ask. It is different than to say whether you will be willing to pay or whether you like that they are free. What matters is if this was a premium feature, do you think this is a fair premium feature? And the reality is that you're going to get a very different answer if you put the framing of fairness in the way that you ask the question than in almost any other question that I've asked. Because customers put themselves in your shoes and they think, yeah, it's true. This is more like, this is a feature that is advanced. And one of the beauties of the SMB segment is that they're the most. Yes, they are very vigilant with their budget. They want to make sure that every single dollar that they spend is useful, because it is coming from their pocket. And the perception is that the business money is the same as their household money. So they are very frugal, as they should be, but they're also unafraid to do the work, and they understand the position of the other side. And especially for those who want to understand SMBs, this question will help them. So that's the first way. The second way is that if you see a lot of, and this is more with data, and some founders do not have the beauty that we had. We had a history of two or three years of data. When you see that, the more you use the product, the more likely you are to stay, but the less likely you are to upgrade. When you start seeing, you will always see that reduction in the likelihood to convert with time. But then when that flattens dramatically and continues to go down with time, that means that customers love the product, want to stay in the product, but they do not upgrade because there's not enough differentiation between your product and their product. So the combination of these two, the quant analysis and the quality analysis, will tell you whether you're giving too much for free.
[00:12:24] Speaker B: Yeah, those two things. Genius, by the way. And one of the things I talk about in the book street pricing, is about this notion of when you ask customers and talk to them about pricing, you really don't want to talk to them about pricing. Nobody really wants to do that. I always say, you want to ask about value to get the truth. You want to ask pricing, you'll get a lie. Right. So the idea here is the framing of the fairness is, I think, the operative word. If you took out the word fair, you're right, then that question probably wouldn't be as impactful.
[00:12:54] Speaker C: Right.
[00:12:54] Speaker B: But is it fair for this to be a premium feature? I think it's a really fantastic way to start teasing out what really is in their mind driving a lot of that value. Then you bump it up against some of the data. And you're right, just because if you have fantastic conversion or just conversion and retention and folks are hanging around, but they're not bumping up and upgrading, truth is, there's probably not enough reason to, right. And I always look for these areas of what I call positive friction, which is, hey, I want to do more, I've done a little bit more, but I got to go to the next level. I want to expand. I have outgrown or what I say graduated from the plan. So I need to now move on to something else that is going to take me further. So those are really key things, man, just in that story.
[00:13:39] Speaker C: That's what I wanted to say. I love that you mentioned positive friction. That is almost always when I start with founders, when they invite me to advise them. I think that's a myth that we need to debunk. Growth is not all about removing friction left and right. There is such a thing as positive friction that helps people be better set up for success. The key is presenting in a way that not only is a chore, but also gives you value. And that makes sense. While you're asking for that information or adding that positive friction, people laugh at me.
[00:14:16] Speaker B: It's a bit of an oxymoron. Right. A positive friction. What does that mean? I always have to explain it. But you're absolutely right. Not all friction is bad. And I love your point about creating those wow moments or those moments of Delight, because I think you have to delight to grow them. Right? I'm going to coin that one and put it on a t shirt. Okay. But the idea here is very sound, right? So you have the fit, you got the right questions in place, you have the data, and this is now opening up ways to allow you to grow fantastic all the way around. What else would you want to add to that storyline, man?
[00:14:46] Speaker C: Because this is well chock full of good. It has a twist. So I wanted to give you the twist.
So we are reaching double digits conversion. We are seeing better than ever before subscribers. But then we start to see that the engagement of this segment, the retention segment, the retention of this segment is not behaving in the same way that our previous cohorts are.
Where and a lot of our assumptions rode into the upgradability of this segment, the upgrade migration of this segment and the retention rate. And also it turned out to be a segment that was a lot higher willingness, a lot lower willingness to pay, a lot more price sensitive, more sensitive to any change that we made in the product. So then through that we also identified that, well, they were retaining worse, they were filling on a lot more complaint tickets than any of our other customers. Then that started to create some negative network inside our own product. At the same time, we also identified that we found a segment of users that was actually loved our product and that was very high willingness to pay. So through this effort, we also found that there were another segment that had the exact opposite effect, that loved peace of mind, that were willing to pay whatever they needed to just make sure that they had the best in class of the product. So then what we found is that some of these segments we had catered with this steep price reduction, we might have gone too far and may not be the type of customers that will help us continue growing our business. And we not want to be able to create the product that they needed at the willingness to pay that they had. And that is also fine to decide. In order for us to continue growing and building this type of product, we need to focus on a segment that has alignment of goals and needs. And that is not to say that there should not be a solution for that segment. That just meant that we were not ready to tackle that segment at that moment in time. And we needed to be deliberate about focusing on the segment that we could serve versus not serving. And then we needed. So then that started to segment our user base. So we started to start defining within each one of our plans, what now is called ideal customer profiles. But it's really different segments that you're catering. And we were more deliberate about focusing on one and focusing on the other. And that led to us actually moving back price up and creating some changes in packaging. So that then we created less differentiation between. Great differentiation between our starter product and our midline of product. Our pro product. Got it.
[00:17:39] Speaker B: So you changed that transition.
Sorry, the experience in the transition from starter to mid. Exactly.
[00:17:47] Speaker C: Our medial product was called pro and the difference was not as great as our customers needed for them to upward migrate. So we created a greater packaging differentiation. So again, repackage starter to pro and consciously walked away in the short term from this other segment that we could not serve anymore. And that looked, in practice, us moving to a midpoint of pricing. So we did that. The second thing that we did was we identified this upper segment, this upper segment that was very high willingness to pay and that all they care about was peace of mind. So then, for that segment, what we wanted to do, what we needed to do was create a product that truly reflected their needs. They wanted the best of the best. They wanted the Ferrari of the embassy market and we could deliver it. So we created the higher plan, the unlimited plan. And that actually became our biggest success to that point in terms of ARR, but also in terms of customer engagement and nps. So by creating a product that totally catered to this higher end of the market, or I would say this advanced high peace of mind group of our customers, we're able to not only serve them, but also support the development of our other plans, our starter plow and later, our team's product that were below our unlimited plan.
[00:19:22] Speaker B: Fascinating. Fascinating on all fronts. The story takes a twist. And here's the interesting thing. Because when I think of where do we start with pricing and packaging and monetizing, it actually starts with understanding your values, like who you are, what do you stand for, the type of value you want to deliver and actually can deliver on. But also, who do you serve? Who are you and who do you serve? And what I'm hearing in your story as you impact is lots of understanding of the customer and very sharp focus on how you group them and segment them and then serving those segments and understanding the implications of doing so. That I think if you go back to. Here we go again. Who am I? What do I want? Right? Who do I want to serve? But those are really important because they will guide you in all those other efforts of segmentation and testing and making those decisions. If that's foggy and fuzzy, makes it really hard to make those decisions later. I got to ask you a little bit about that new segment, that really high paying. Yes, I don't care. I'll pay the money. Just give me what I want. How did you detect them in the base? They didn't just raise their hand and say, hey, can you take more of my money? Right. We love that. But what did you see in there that really just shined the light?
[00:20:38] Speaker C: We actually had a bug, a beautiful bug that we charged for a group of customers we overcharged by mistake.
And that was the genesis of that idea. And we had been considering this idea or the possibility of this before, but then the bug is really what solidified this for us because we had a bug where we overcharged by, I don't remember exactly the amount, but there were produce and we were charged by two or three x the amount and there was a lot of customer complaint, but there was a group that simply paid and kept going.
And when we looked into it, that's when we started to identify with this, like, oh, I thought that you had changed the plan and that this was a more unlimited plan because at the time our mid plan pro was unlimited and had a lot of the unlimited features that catered to that peace of mind. Customer said, oh, we thought that you had enhanced the product and you're just giving me the best of the best and that that meant that I would pay more.
Well, first, you should never do that to your customers.
You should always let them know, give them a warning.
[00:21:51] Speaker B: Do not insert bugs that double the price on your customers, please. But I get your point.
[00:21:57] Speaker C: But that really gave us the insight that this existed. And then after that, we did the more deliberate user research, identified the segment, tried to find what were the type of features that not only they value, but they were willing to pay because what you don't want is to increase the price. They will subscribe and then after a year they will churn out. That is not beneficial to any business. So for building that plan, we follow the traditional methodology of this is the customer. These are the features that they need. These are the features that they are willing to pay. I believe in introducing the willingness to pay discussion early on. And there are very smart ways to ask about this. You need to ask how much you want to charge for this. You can ask, what do you think is a fair price? Do you think is an expensive price? And that allows you to see how much value in use people see from the features. Because to your point, the money is not only to build products that are very useful, but there are products that are useful and you are willing to pay because you perceive fair to charge for that product. And that's what we did to build the unlimited plan. And we leaning heavily to the peace of mind, always the best in class positioning for that.
[00:23:08] Speaker B: So you heard it here first, bugs can be beautiful. All right, they can be beautiful and they can result in some things, but just please play it forward a little bit more. They did do some rigor and testing to find out why they were willing to pay so much and then they crafted something for them. They didn't just keep doubling price. Right. And all that stuff. So fantastic story all the way around, Miguel, very useful tips for everyone listening. Let's bring us to the present now. Let's move from rewind to play. Anything that you want to call out or highlight that's working relatively well, whether it's a technique or a process, methodology, anything like that.
[00:23:41] Speaker C: Yes. So now at canva, fast forward to canva. We had a very similar challenge where we built a very good themes product that caters to a lot of SMBs all over the world, and we have a very generous free product. But over the last few months, like you may have noticed, we made some changes in our pricing structure where we have reduced the number of, we have increased the price of the bundle of seats that you can get when you buy for our teams bundle. The reason why we made that change is because we realized that we're giving more value than our customers needed to jumpstart their journey with canva. It's a very similar situation that we encountered at invoice Togo, where we had a product that was very good for SMBs. We made some price changes that allowed us to grow that plan dramatically, but actually started to compete with our individuals product. And we don't really want people who want the pro subscription of canva, who are solopreneurs, one person companies to believe that they should join a team or to go to a different segment, because then you're starting to straddle with the one product for two products. So we needed through pricing to create a clear differentiation so that then we could cater to the solopreneur separately to cater for the small teams. So the price changes reflected that purpose. The methodology that now we are using, and there's going to be a lot of exciting updates that we're going to make to our product, what I call the standard product development with willingness to pay inserted into the process methodology where we want to make sure that we enhance this product, we want to build the best product for SMBs and for larger organizations. And there's going to be more to come in the future. I cannot go into detail.
[00:25:53] Speaker B: No, I get it just yet. I get it.
[00:25:55] Speaker C: But we are brief focus on understanding the different segments that we have of small teams, small and medium sized teams. We are going to understand what is it that they need. But we are inserting the conversation among all of our pms on what is your willingness to pay? What do you see value in the product features. This is not just only about usefulness, it's also about willingness to pay. So we're making sure that the features that we're building in the premium plan are fair.
Premium features and that are features that people see value are the highest value features for users to want to pay and that way continue to grow our presence with SMBs not only with usefulness and sticky product, but also with a product that makes you feel good that you are paying for a good value of the product.
[00:26:54] Speaker B: The willingness to pay in value shouldn't wait until two weeks before you launch. It actually should happen way sooner when you're developing it, testing it, talking about it, I think that's a very hit home message for a lot of folks, not just product people, but just in general about having those conversations a lot sooner. All right, man, take us home. What is next? What do you think in the future is a good area to poke at and potentially change to monetize better?
[00:27:20] Speaker C: Well, I do think that there's a lot more sophistication that is needed to understand to usage based pricing where we are able to align as much as possible our SaaS pricing structure, not to static brands, but to the features that are most used, most useful and more most perceived value to customers. The challenge that I want to pose to everybody that is working in SaaS product growth is how can we all evolve the model into usage based pricing that is connected not to how we can best capture money from our customers, but how can we take part of the value that we're creating of the upside that we're creating with customers? And I do believe that that is going to be the future, taking part of that upside, not from what they already generate, but what they are to generate through your product.
[00:28:24] Speaker B: And when you share in the upside, you can capture a little bit more. That's the key thing that folks forget. You don't need to double tax them. I love connecting the usage, easier said than done, of course, but that is going to be a big challenge. And I love also what you said about connecting the right value to the right customer and then giving them a path to grow in that fairness concept that came through all the way around. So Miguel, you've been fantastic, man. Thank you so much for coming on here and dropping some street knowledge on what you really did and how you really infused a lot of growth in multiple contexts using pricing, packaging and just some real good sound methodology. Miguel, thank you for joining the show, man.
[00:29:05] Speaker C: On the contrary, thank you for geeking out on pricing.
[00:29:07] Speaker B: Oh, man, I'm a geek too. Before we wrap up, what was your favorite song? I always hit everybody with this at the end. What was your favorite song growing up?
[00:29:15] Speaker C: Growing up well, my favorite song today is dance Monkey.
[00:29:21] Speaker B: Nothing wrong with dance Monkey. I bet you there's nobody listening who wouldn't start tapping and nodding their head to dance monkey man. So that fabulous song. Bonus points for having something that's a classic too 90s. So dance Monkey everybody, Miguel Dergal's favorite song growing up learned a little bit about you today. And team, thank you for tuning in listening. A lot of great knowledge. Put it to work and start shifting from that guesswork to framework, guys. Okay, until next time, thank you and.
[00:29:50] Speaker A: Much love for listening to the street pricing podcast with Marcos Rivera. We hope you enjoyed this episode and don't forget to like and subscribe. If you want to learn more about capturing value, you pick up a copy of street pricing on Amazon. Until next time.
