In “The Innovator’s Dilemma”, _ says that one reason companies loose their leadership position to disruptive competitors is that the established companies base their product designs and strategies on the needs or current customers and existing markets. Disruptive competitors, meanwhile, don’t have long-standing relationships with existing customers upon which to base their decisions and are often going after non-existent markets that cannot be analyzed at any rate.
His is sound advice: if your company is simply an order taker from existing customers, you likely will not be tomorrow’s leader in the marketplace.
Make sense so far? While it does to me too, I find that personally it is much more enjoyable to have ongoing conversations with people and to see their joy in a product when their ideas and feedback are quickly implemented. While there are those that say it may not be the best competitive strategy, it is the best approach for me because one has to enjoy their work to be good at it. I enjoy that continuous cycle of discussion, product enhancements and feedback with people.
So, for PlaybookIQ, I’m considering ignoring that prevailing wisdom and instead going the opposite extreme: limit the number of people using the application so that everyone’s voice is heard.
Why Limit Subscribers?
50% of Revenue from 11% of Customers
SaaS providers offer a wide range of subscription offers in order to appeal to as many people as possible. Yet, look at this breakout of number of users per plan from Ryan Carson. He reports that “50% of our revenue comes from only 11% of our customers”. Now, that other 50% from 89% of the customers is nothing to ignore in the long run. But if one purposefully wanted to start slow and small, to ensure the people who do subscribe are as satisfied as possible, then it makes sense to start with those 11% of customers that bring in half the revenue. Ryan stated the case well: ”$5 plans are a lot of hard work, for very little money.”
Homogeneity
So, offering just one price plan will naturally limit customers anyway. Why not present the limited price point choices as an advantage for people that do sign up. I would offer just one pricing plan in order drive toward a more homogenous user base so that say, the feedback and requests of a “one user” subscriber would not compete with those of someone leading a team of twenty. With one price-point, the product and product roadmap are more likely to satisfy their expectations than that of an application aimed at a broader audience.
Salesforce has over 32,000 customers, Freshbooks has over 190,000 users, Basecamp has over 1 million users, and 37signals has over 6,000 registered users on their forum alone. How would one person’s voice filter through that of 32,000, 190,000 or 1,000,000? A limited subscriber base keeps the conversation manageable.
Can It Work? Has it Been Done? Is it a Stupid Idea?
What do you think?
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