The Journey To 2x+ Growth: 5 Steps To a Successful Pricing Overhaul
Product-led sales isn’t easy, but it’s worth it.
I run revenue at Disco, a data platform that enables direct-to-consumer brand partnerships. Last year, as we considered the macroeconomic climate and the need for efficient growth, we shifted to product-led sales. Through this process, we:
- Introduced a hybrid pricing model, increasing pricing by 5-10x
- Overhauled our data systems to better capture customer insights
- Aligned and trained customer success and marketing teams
- Redefined our marketing message and tactics
The results have been astounding. We saw greater than 2x year-over-year growth in 2022, and greater than 3x growth between Q3 ‘22 to Q4 ‘22. The pricing model change directly drove a 2x increase in our ability to monetize overnight. And this year, we closed Q1 ’23 adding over 80 new logos with about 2x revenue growth year-over-year, despite industry-wide macroeconomic headwinds.
Our shift to product-led sales is not yet complete. We’ve had some great wins, but not without growing pains and stumbles along the way. Here’s what we learned and steps we took along the way.
Step 1: Ask the right questions and invest in data-driven answers
When I first started at Disco about a year ago, there was one metric that stood out to me. Over 50% of our customers had joined Disco from customer referrals, which still stands as our core activation metric. Our customers were excited about our product and wanted to share it with others in the DTC community.
On the other hand, we had little understanding of other areas that would allow us to better operate the business. We needed answers to questions like:
- What did our pipeline look like?
- How efficient and how large was our funnel?
- What parts of the platform were customers spending time in?
- What was our customers’ time-to-value?
- Why did customers churn?
Without a data-driven approach to answer these questions, we were blind.
We urgently needed to implement analytics and reporting capabilities that would allow us to track critical KPIs on a daily basis. Only when we systematically looked at what our customers were telling us were we able to refine our ideal customer profile and persona definitions, which were the first steps to driving a true product-led sales motion.
To this end, we took the following measures to better understand these business drivers:
- Analyzed correlations between customers’ gross merchandise value and their Disco-related spend. This allowed us to more naturally tier our customers across our CRM and business intelligence tools to better analyze time-to-value, win rates, and reasons for churn.
- Implemented a forecasting tool. We ultimately went with Gong Forecast, but we also loved Clari. This tool sat on top of our CRM to drive visibility into key sales drivers like pipeline growth, pipeline coverage, and activity tied to deals with upcoming close dates.
- Regularly interviewed customers. We started interviewing our customers and community members and disseminated learnings throughout our organization. We noticed customers of similar sizes shared themes and challenges, which influenced both our product development and our sales and marketing positioning.
Step 2: Tie pricing to customer outcomes
We invested time, resources, and energy into onboarding and connecting critical tools (e.g., HubSpot, Gong, Looker). As we started to look at the data, and as our teams began to capture customer feedback, we realized that our pricing model was at odds with what our customers needed.
Unfortunately, our previous setup caused difficulties for our core users (marketers) to quantify the value of the money they were paying Disco, which we knew would eventually lead to churn.
We knew it was time to switch to a hybrid pricing model.
Changing our fees to match customers’ business needs
Historically, we charged customers a merchandising fee that seemed vague and disconnected from what they wanted (and we wanted as well): profitable growth, which more and more DTC brands are focused on, including the fast-growing men’s apparel brand, True Classic.
In other words, we were charging our customers on a CPM basis to display across our customer network, which didn’t actually give us any real incentive to ensure that we were always recommending the right brand to the right shopper.
While we continued to charge a nominal network fee to all our customers (which covered access to our community and valuable benchmarking and customer insight data), we replaced our merchandising fee with an outcome-based pricing system. Our customers only paid us if we were successful in helping them acquire shoppers at costs that they set. And if we were unsuccessful, they didn’t owe us anything.
We knew this was risky, but with some backtesting, we were willing to bet on our ability to deliver this specific outcome. Most importantly, we were now fully aligned with our customers’ outcomes.
Offer defined price ranges and tiers to guide change
Several customers that had been working with us for nearly two years were enjoying up to 100x ROI on what they were paying us. With the shift in pricing, these customers were going to go from paying us ~$500 per month to paying us five to 10x that.
That definitely caused some sticker shock for this subset of customers, who understood that Disco was a valuable platform to work with, but were reluctant to pay significantly increased costs due to expectations set based on past history.
But in order to protect our customers from unanticipated costs (i.e., if we were driving them hundreds or even thousands of new customers in a month), we also gave them the ability to set a max monthly budget if they wanted.
This ensured that customers would never get charged more than the max that they were willing to pay. It did limit the upside opportunities they had with Disco, but we were also able to tier our customers based on things like:
- Size of customer
- Importance of network
- Churn risk
- And more
Explaining this change to over 1,000+ customers, while also capturing required data from them (i.e the price each customer was willing to pay to acquire shoppers) was not painless. It required a herculean customer success and marketing effort and took us several weeks, with bumps along the way.
Step 3: Align CS and marketing messaging to assuage customer fears
Given our operational limitations, we knew we could not have 1:1 conversations with each and every customer but we did need every customer to agree to our terms, provide payment information, and submit a form indicating what rates they were willing to pay per customer acquired.
We also set up QBR-like meetings with ~75 of them to walk them through historical performance and also the new pricing model and its implications.
For the rest of the customers, we sent semi-personalized emails to each of our points of contact to let them know that pricing changes were coming at a future date. It was important to us that our customers were not caught off guard by a pricing change. And in fact, we did a lot to make sure that was the case.
We sent messages throughout the product and additional emails, with instructions for required actions and guidance provided via Zendesk.
We left no stone unturned. We’re talking about sending emails and follow-ups three times, answering dozens of questions that came to our support team, and more individualized follow-ups to the ~20% that still had not taken any action.
And for the remaining few that did not, we continued to do semi-personalized outreach articulating what would happen on the cutoff date, which helped close the gap.
Step 4: Create leverage for your sales team
Needless to say, we knew that some of these customers would churn. But as we emerged into the second half of 2022, we discovered that we had an even happier customer base—one that was more aligned and more understanding of the value exchange they were unlocking by working with Disco. And one that was willing to pay.
We also gained operational leverage, allowing our sales team to almost entirely focus on net new customer acquisition (as opposed to selling and reselling into our existing customer base). With their newfound time, our lean sales team started to focus efforts on closing deals with the largest DTC brands in the country, leading to Q1 ’23 customer wins with brands like Dr. Squatch, Willow, and Dakine.
These brands typically required longer sales cycles, necessitating a multi-threaded approach across customer organizations that had a myriad of urgent priorities.
Step 5: Scale up your marketing
Scaling our marketing efforts are also vital, especially as we need to keep expanding the top of our funnel. We deliberately spent time ensuring we understood our core ICP through a variety of analyses.
Disco re-launched a simpler, more customer-facing website with optimized lead capture that we can measure, because what’s the point of expanding the top of the funnel if it’s not efficiently captured? And now we’ve started investing in paid marketing, including sponsoring certain events and newsletters.
And the area that we’ve seen the most success thus far has actually been through co-marketing with ecosystem partners.
Match your messaging across all departments
Lastly, while our shift to product-led sales has increased our operational complexity—from major commercial changes to significantly more cross-functional execution— there was still one thing we underestimated.
The first touch point with all of our future customers, regardless of whether it was a sales-led or product-led motion, had to be consistently right.
We actually launched a small but cross-functional task force to answer the age-old question of “Who are we?” and ensure that every interaction our future customers had with us was what we wanted it to be. This means making sure everything was consistent across things like:
- Sales collateral and pitch
- Product description pages
- Community interactions
Without consistency across our touchpoints, we started to notice customers onboarding with varying expectations of outcomes and value. And we’ve seen some encouraging signs, with NPS scores rising in Q1 ’23 coupled with almost zero churn in our Tier 1 and Tier 2 customer tranches.
In fact, making some of these adjustments led to more than 3x growth between Q3 to Q4 in 2022. And that’s something to be proud of.
5 takeaways on implementing product-led sales
- Make sure you listen to the data, no matter if it’s qualitative or quantitative. We invested time and resources analyzing our onboarding methods and any connected tools. Our customer feedback helped us realize that our pricing just didn’t match our customers’ needs.
- Align your CS and marketing efforts to soothe any sticker shock. Once we discovered the type of change we wanted to make, we wanted to bring our customers in for the transition and be as transparent as possible. That meant lots of emails, calls, onboarding and consistent product messaging, and customer follow-ups.
- Use your new leverage to focus your sales team on new logo acquisition. Even though we couldn’t bring everyone along, we did see that our pricing model made some significant contributions to our ARR. Product-led sales also meant our sales team could pivot to new logo acquisition as opposed to spending energy on upselling.
- Moving toward more hybrid models means upselling. Don’t just set your growth motion and forget about it. Tweaking the customer journey can also provide opportunities to help your customers gain more from the product.
- Ensure your messaging is consistent across all functions. Product-led sales also offers a lot of entry points and interactions with all departments. Meet with your teams regularly to connect on messaging and band together around agreed customer outcomes. Use tools like Gong to coach your teams.
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