An Inside Look at How SurveyMonkey Overhauled Pricing After 10 Years

July 3, 2020

Just about everyone’s heard of SurveyMonkey—and most of us have likely used it. But what you may not know is how dramatically the product has changed over the last 20 years, or that the company recently implemented a truly comprehensive pricing and packaging update.

I had the opportunity to talk with two of the people who were instrumental in that project on an episode of the BUILD podcast. Pri Carr leads SurveyMonkey’s business strategy, operations and corporate development teams, and Jordan Nolff heads up the company’s monetization and pricing strategy. They shared their story of tackling pricing and packaging after 10 years without any updates (something they do not recommend, by the way).

Related read: The Ultimate SaaS Pricing Resources Guide

Our conversation covered the research and preparation, execution and rollout that went into the launch of the new pricing and packaging. They were able to shed a lot of insight on how to successfully evolve your pricing to more accurately reflect the value your product delivers.

Changing pricing is always a touchy subject, rife with the potential for internal upheaval as well as customer backlash. But if you approach it in the right way, you can—as Pri and Jordan proved—use this powerful lever to make an enormous contribution to the company’s bottom line.

Recognizing the signals of change

The first step in the project was realizing it was time to make a change. There were a few indicators that tipped Pri and Jordan off:

  • Competitor prices were changing while SurveyMonkey’s stayed the same, illuminating a shift in the market that represented a ripe opportunity.
  • The sheer velocity of value growth in the product combined with customers’ lack of full awareness of that value also pointed to a major opportunity. When SurveyMonkey asked customers what features they’d most like to see added to the product, the majority of features named were ones that already existed. There was clearly a gap between what the product already offered and what customers were actually using. More importantly, the exercise highlighted customers’ willingness to pay more for these features.
  • An early survey of a large number of existing SurveyMonkey customers uncovered the fact that the majority (more than 80%) use the software to serve a business need rather than personal or educational purposes. This insight not only influenced the decision to make pricing and packaging changes, but also directly affected the product road map to include more enterprise-grade features.

In addition to these external signals, there was also some internal evolution happening, including some new product launches and an extensive rebranding initiative. All of these factors combined to make a strong case for re-examining the pricing and packaging that had been in place for so long without any substantial updates.

Validating the hypothesis

With all these flags raised, the team moved on to the second step in the process—validating the hypothesis. They knew they had to clearly understand what the situation was and possible outcomes. To clarify the opportunity, they did a preliminary customer research project that included:

  • Customer Segmentation: This phase involved taking a detailed look at who customers are and how they use the product. An additional element of the segmentation piece that proved very valuable in the long run was creating a prospect segment. This allowed Pri and Jordan to compare not only different types of customers, but also existing customers versus future customers.
  • Qualitative Interviews: Building on the segmentation exercise, the team then conducted more than thirty in-depth interviews with existing customers and prospects. The goal was to get some clear insight into people’s perceptions of the product, more detail on survey use cases and direct feedback on proposed pricing and packaging models. The input collected from each interview was then mapped against the segments to build a deeper understanding of who these individuals were beyond the quantitative data.

In addition to customer-side validation, the team also needed to win buy-in from internal stakeholders. The “aha moment” came with the visualization of the supply and demand curve based on responses to four questions in a van Westendorp pricing sensitivity section in the quantitative study:

  • At what point is this so cheap you wouldn’t consider it a quality product?
  • At what point is this considered a bargain?
  • At what point is this starting to become too expensive?
  • At what point is this so expensive that I wouldn’t purchase this?

The visualization clearly illustrated the range of willingness to pay across different customer segments and the opportunity was clear. Moving ahead with the pricing and packaging overhaul was the right thing to do.

Building around strategic pillars

It’s always a challenge for a product-led company with a viral element to balance monetization and acquisition goals. At times, these two objectives can seem directly at odds with one another. As Pri and Jordan moved into the execution phase of updating pricing and packaging for SurveyMonkey’s massive user base, they needed to be constantly aware of both these parts of the business model. To help them keep perspective, they designed their strategy around four strategy pillars.

Understanding, through research, how pricing changes would impact the business

The team had to get really specific about what tradeoffs they were willing to make between monetization and acquisition. They needed to be clear and aligned about where they were willing to take a hit. The customer segmentation work they had done was crucial here. While everyone knows how hard it is to acquire a new customer (meaning you need to be very protective of your existing customers), there was less certainty about which other customer segments were the most critical to business sustainability and growth. Being able to refer to the segmentation data helped the team identify the most valuable customers and prioritize them.

Timing the pricing changes to correspond with an increase in value for the customer

The team was able to avoid any meaningful drops in acquisition numbers by offsetting substantial price increases with corresponding increases in customer value. Based on the vast amount of research they had done, they were able to create tiered packages that were tailored to the specific needs of each customer segment. By building these new packages around the exact features each segment valued most, Pri and Jordan were able to establish an entirely new value perception with customers. Then they capitalized on that perception by highlighting the key features in all customer communications.

In addition—though many might consider it a risky idea—Pri and Jordan launched the new packaging and pricing at the same time SurveyMonkey revealed a comprehensive brand relaunch. The intention was to take advantage of the excitement around “the new SurveyMonkey.” On the day of the launch, everything was new – the website look and feel, messaging, features, packages, pricing and so forth. This helped position the pricing change within a larger context that was all about how the brand was taking things to the next level to deliver more value. Postmortem analysis showed that combining the brand relaunch with the pricing changes was one of the main reasons the initiative was so successful. By making changes across the board, it shifted the value of the product, making it easier for prospects and customers to justify the price increases.

Making sure existing, loyal customers are treated thoughtfully and differently from new customers

While it was important to understand how the pricing change would impact acquisition, the team never lost sight of the fact that their most valuable revenue comes from their existing customers. With this in mind, they made sure to take a very different and very gradual approach to raising prices with this group. The initial research had uncovered key differences between the mindset and perceptions of their existing customers versus the general market. Based on these insights and detailed consideration of the current pricing model and existing customers’ propensity to churn, the team moved forward with a carefully orchestrated transition. The grandfathering strategy moved existing customers up to new pricing in gradual steps to avoid sticker shock, and included a comprehensive communications plan. In the end, they saw barely any churn.

Ensuring a holistic pricing story across the products and packages

Throughout the process, Pri and Jordan needed to create consistency across the entire SurveyMonkey ecosystem. Each package price needed to make sense not just on its own, but in relation to the other packages. From self-service to sales-assisted enterprise solutions, there had to be a logical and coherent pricing story that would make sense to the market.

Owning the process

As anyone who has ever tackled this kind of project knows, pricing can be a pretty sensitive topic. It tends to shine a light on internal conflicts between functional groups—things like sales wanting everything to be monetized while product wants to get as many users on board as possible. Because of this, it’s important to put a neutral party in charge. Who this is will vary by company. In SurveyMonkey’s case, it landed with the business strategy and business development teams.

This was a good choice because, in general, you want the responsible people to have purview over a large portion of the organization. They also need to understand not only the inner workings of each individual function, but the big picture direction of the company.

That said, pricing is something that affects every part of a company, so it’s important to get everyone involved. SurveyMonkey’s pricing stakeholders included at least one individual from each department, and they all worked together:

  • Research provided crucial support with the initial legwork, including designing the quantitative study and helping with analysis and segmentation work.
  • The product team helped drive and design the packages from a technical perspective.
  • The engineering team executed on those designs.
  • Product marketing took on the job of ensuring that the packaging choices made sense.
  • Marketing created all the collateral needed to announce the changes.
  • Sales proactively studied the impact the changes would have on lead generation, comparing the new self-serve options to the sales-enabled packages.
  • The legal and finance groups did the due diligence to make sure the new pricing matched terms, financial models, and forecasts.

The project was a truly cross-functional effort that involved every team in the organization. And it went as smoothly as it did because Pri and Jordan were intentional about involving everyone upfront and getting buy-in at all the critical junctures.

Taking a new approach to pricing

It’s clear from the story Pri and Jordan shared that they spent a lot of time thinking through how the pricing and packaging changes would impact customers. They put a lot of work into figuring out how to make the changes in a way that would minimize churn and drive growth. It’s also clear that all their hard work and careful attention to details paid off because, at the end of the day, they didn’t suffer any major setbacks in either retention or acquisition.

When I asked Pri and Jordan to boil their learnings down to three key lessons, they offered up this good advice:

  • Don’t wait to get started. Pricing and packaging isn’t a one-and-done thing. It’s iterative. They readily admit that they waited far too long to tackle their pricing project, and that set them up for some heavy lifting. Going forward, they will be treating pricing like a practice, not a project. Knowing that the load will be lighter if they are consistently checking in with customers, they have set up a regular cadence of customer interviews and—of course—surveys.
  • Invest in customer research. Neither Pri nor Jordan could overstate the importance of getting good information on who your customers are, how they use your product, what they’re willing to pay, which value metric makes sense to them and so on. The research SurveyMonkey did uncovered a wealth of opportunities that would have otherwise gone undiscovered. You never know until you ask.
  • Know how you will define success, and then revisit it frequently. Before you get started, take the time to define what’s okay and what’s not in terms of tradeoffs between different business goals. Once you know which business goals you are optimizing for, that should be your north star for future packaging and pricing changes.

Pricing is a powerful lever for creating value for your customers and your business. When you have a passionate team that can convey the possibilities to the entire organization, it won’t take long for the pricing bug to spread. At SurveyMonkey, they not only assembled their cross-functional team, they also worked hard internally to generate ongoing awareness, participation and excitement, even creating a big countdown calendar to get them over the finish line as a team.

Ultimately, going through the process led to a critical shift in the way SurveyMonkey incorporates pricing into the building and launch process for new product offerings. In the past, they focused primarily on product-market fit; but now they also consider price fit. They have flipped the whole thought process to put pricing at the front rather than on the tail end. The old way was to build a product, establish customer need, and set a price. Now, the team determines how they want to monetize a particular market, identifies the type of product that will make sense and maintains pricing as the constant thread throughout the product development cycle. It’s a whole new way of doing things, and so far it’s working out really well.

One year later: How pricing changes reinvigorated SurveyMonkey’s growth

When a public company like SurveyMonkey overhauls its pricing strategy, it can take months to see the full impact. Now that we have over a full year of data, we checked back in on how SurveyMonkey’s pricing changes were received by the market. These findings come exclusively from publicly available sources like earnings call Q&As, company earnings releases and the SurveyMonkey website. Three key changes stood out:

  • 85% (?!) of SVMK’s customers are on annual plans: SurveyMonkey now has nearly 750,000 subscribers buying through their high velocity self-service channel. Self-service subscriptions can have notoriously high churn, especially if a portion of subscribers are consumers rather than businesses. SurveyMonkey proactively pushed customers from monthly to annual prepaid plans with the launch of their Teams packages and pricing. Today 85% of subscribers are on annual plans, up from 77% at the end of 2018. This shift to annual has proven to be extremely beneficial for keeping churn low in the midst of COVID-19.
  • Increased average revenue per user (ARPU) by 14%: Usually companies offer discounted pricing when customers buy annual plans rather than opting for month-to-month. SurveyMonkey has actually been able to strategically increase their ARPU by 14% even as more customers opted into annual. ARPU is up to $483 per year (Q1 ‘20) compared to $423 per year (Q1 ‘19) and appears poised to continue increasing in future quarters.
  • Built a better pathway from self-service to Enterprise: SurveyMonkey employs a Product Led Growth strategy to acquire a massive self-service user base and then migrate a portion of those self-service users into Enterprise customers. The new Teams plans, which require a minimum of 3 users, provide a more natural upsell path for customers over time by encouraging them to share SurveyMonkey with additional people inside their organization. Despite headwinds from COVID-19, SurveyMonkey has reported record enterprise pipeline and faster enterprise adoption in the quarters since they launched Teams. In Q1 2020, revenue was $88.3M “driven primarily by enterprise sales, which increased 128% and accounted for 29% of total revenue compared to 16% in the year ago period” according to CFO Debbie Clifford.

SurveyMonkey’s success shows that pricing and packaging is a fundamental building block for overall company success. It also proves that you can indeed have your cake and eat it, too. Who doesn’t want healthier customers who are paying more and more likely to buy more products over time?

Editor’s note: This post was originally published in August 2019 and updated in July 2020.

More posts on SaaS pricing

Kyle Poyar

Partner at OpenView

Kyle helps OpenView’s portfolio companies accelerate top-line growth through segmentation, value proposition, packaging & pricing, customer insights, channel partner programs, new market entry and go-to-market strategy.