On freemium: "sell order, give away chaos" 🧹⛈

The problems with metering and feature gating, how the ideal sales process isn’t about you, and deploying customer feedback as the gift that it is.

Nov 09, 2022

Welcome to the 59th edition of The SaaS Baton. A fortnightly newsletter that brings you three, hand-curated pieces of advice drawn from the thoughtful founder-to-founder exchanges and interviews taking place on Relay (curated with 💛 at Chargebee) and the interwebz. So, stay tuned!

In this edition, you’ll find the following instructive and inspiring pickings:

#1: Balsa’s founder and CEO (previously Sr. Dir. PM at Slack), Paul Rosania, proposes a pricing and packaging rule of thumb that can help set the perfect, friction-less stage for free-to-paid expansion.

#2: Pilot’s co-founder and CEO, Waseem Daher, examines a lost, “slam-dunk” deal and reminds us that the most resonant, well-tested pitch made to the most ideal customer can still fail, if you miss this one (obvious yet easy-to-forget) thing.

#3: Jam’s co-founder, Mohd Irtefa, on defining and designing a feedback system that allows their early-stage team to be consistently “maniacal” about customer satisfaction.

🗞 Recently on Relay:

Heuristics and Hunches — Evolving the Many-Sided Levers of Positioning and Expansion with Slite’s Co-Founder, Christophe Pasquier

Around the same time, products such as Notion and Coda were beginning to explode. That changed things. For the longest time, we had been passive on the differentiation front, because being the only product in the category, it was all being done for us. Now, we had to proactively convey our particular stance.

#1: “Sell order, give away chaos”

(From: Balsa’s founder, Paul Rosania) (Source: Twitter)

My absolute favorite SaaS pricing and packaging principle is, “Sell order, give away chaos.” Easy to remember, super effective. It sounds cynical but I promise it isn’t!
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If you’re building freemium enterprise software, you’re probably (hopefully!) thinking about what to charge for, and what to give away.
One common strategy is metering: the customer can use your product up to a point, and then they have to pay. Maybe they get 10 seats free, or 10 GB of storage, whatever units are relevant to your product.
The problem with this approach is it interferes with your best free customers’ use of your product. It’s tempting to think, “hey, they use this a lot, it’s time for them to pay up.” And there’s truth to that. But you’d be surprised the ways customers will work around you.
At Slack, a ton of our free users were sitting riiiight at the file storage limit, and we regularly got support requests from these users asking for tools to manage their file storage, to stay under the limit.
These were suuuper happy retained customers! They just didn’t want to suddenly switch their whole team from free to paid in order to store one more file.
Another common strategy is feature gating. Have something new and exciting? Put it in the paid bundle. If folks want the value, they can pay to unlock it.
This approach is better in some ways. The tradeoff is now direct, instead of marginal: pay X for feature Y, instead of pay X all of a sudden because you reached a marginal limit on a feature you already have.
The challenge with feature gating is, if the feature is amazing, you’re better off letting your free users use it, so they can experience the benefits of your product! After all, experiencing the benefits of your product is the main thing that retains leads in the first place!
This is where “sell order, give away chaos” comes in. The principle is: give away all your features — but charge for capabilities that make managing your product and features easier.
For example, Slack charges for sidebar customization. This works well because early customers on free plans don’t have enough channels to care, and by the time it’s a problem for you, the value of Slack is typically well understood.
By charging you to gain “order” in your sidebar, Slack also gives you something new for paying. This is a much more compelling reason to put in your credit card than simply “I want to store one more file, and I’m maxed out.”
(I hate to be the bearer of bad news, but this is a huge reason why SSO and SCIM are almost never free: customers start clamoring for them when they’ve gotten serious about adopting your product broadly, and at that point they’re happy to pay for “order”.)
If you’re building enterprise SaaS, I promise there are tens, probably hundreds of ways to apply the “Sell order, give away chaos” principle. Folders. Templates. Workflow customization. Audit logs. Etc etc etc.
As you’re thinking about pricing and packaging, think remember, “Sell order, give away chaos.” It’s a powerful tool for driving paid conversion without walling off your best features or creating friction in day-to-day use of your product.

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#2: “That time we lost the sale”

(From: Pilot’s co-founder, Waseem Daher) (Source: Startup Real Talk)

The prospect in question was an early-stage startup that would have been a slam-dunk fit for Pilot. 100% our ideal customer profile. We would have been able to serve them super-well. And yet they chose to go with an alternative.
This happens so infrequently that it piques my interest when it occurs—I had to learn more. So I got in touch with the founder, who was generous enough to walk me through her decision-making process. After the call, I wrote an email to the team: we lost this sale, and we should have lost it.
Here’s the simple thing we missed on this particular sales interaction:
This process isn’t about you at all.
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In this particular case, we had an advantage right out of the gate: the founder had already heard great things about Pilot, was familiar with its reputation, and one of her investors had given us a hearty endorsement.
Said another way, this was ours to lose. And we did.
On our call, our rep launched into our then-standard talk track: Here’s Pilot, we work with thousands of startups, we have deep expertise, we can scale with you from pre-seed to Series D, and we have marquee investors. In short: “Here’s why Pilot is great.” Note the most common word here: “we”.
By contrast, the other provider didn’t talk about themselves at all. They asked about the founder’s business, and chimed in along the way with things like “Oh, we have this other client with that same business model. They made this one mistake on their tax forms, so be sure to double-check that.” The conversation was much more consultative: “Here’s what we think you need, and here are the pitfalls to avoid.”
At the end of the process, we were both comparably priced (they were a little more expensive), and the prospect selected the other vendor.
I asked the prospect where we went wrong, and what she said was: the Pilot sales process (and the Pilot sales rep) just felt too salesy.
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Of course, the most frustrating thing here is that we work with literally thousands of companies like hers. Did we have a deep understanding of what her company’s needs were? Yes. Would we have been an excellent fit? Yes. But we didn’t communicate that deep understanding, and we instead spent time talking about ourselves…

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#3: “How to always stay on top of customer feedback”

(From: Jam’s co-founder, Mohd Irtefa) (Source: Jam Blog)

At Jam, we are maniacal about customer satisfaction. Here’s how we do it: The first step is to make sure we never lose customer feedback. The second step is to address the issues. And the third step is to let them know when their feedback is addressed.
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Define goal
The thing that I wanted to make sure of was if and when a customer shares feedback, we record it, when fixed (or built if it’s a feature) we reach out to them and share the good news.
Start small
When we first started we had a simple google sheet. This wasn’t deliberate. It purely started from a fear that we need to make sure we don’t lose track of customer feedback.
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There are two reasons to do that:
1. Every week or so we get to share with our customers a list of things we completed for them. When a customer sees a long list of things that you’ve done for them, they appreciate our effort and have the confidence that we can deliver more things for them in the future.
2. It’s exciting for the engineering team to see how they’ve directly contributed to our customer’s success. This is important especially in the early days because you only have a handful of customers using your product and seeing how the engineering effort is impacting them is powerful.
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Identify the sources of feedback
We set up a private slack channel with the early customers. So it was easy to capture their feedback because it was only one source. Once we opened the floodgates to all the self-serve users, the number of sources from where we received customer feedback grew. Here’s what it looks like:
Slack connect channel: We still have a private slack connect channel with our customers. If you use Jam and want to participate, let me know!
Drift: We have a Drift bot that runs on our landing page. We get questions and feedback from new and existing users from Drift.
Grain: My cofounder and I will get on customer calls. We record these calls with Grain to document their feedback.
Email: Users will send us feature requests and questions over email.
Automate sending feedback
I wanted to try a new tool that had some automation features and could handle our customer feedback load. I set up a Coda table where all the feedback will now be captured from the different sources of feedback. But how do these feedback end up inside Coda?
I set up a Zap for each of those sources. Then, I set up triggers inside Slack, Drift, Grain and Email where certain tags or messages get routed to Coda with the following information:
1. Raw notes about the feedback (this is what the customer usually writes to us).
2. Email address (if available).
3. Source of feedback (just for me to analyze where most of our users feel comfortable sending feedback from)
I still have to ‘capture’ the feedback but it’s usually a one-click job for most of the feedback sources. For capturing feedback from email, I forward a feedback email to an internal email at Jam, which then routes to the Coda table. From here on I am going to refer to the Coda table as our customer feedback hub.
Why not use Salesforce or HubSpot?
It’s too big (and heavy) for our current setup. I am sure we will use one of those CRMs when our current customer feedback hub can’t keep up anymore.
Why not use a smaller CRM?
At this stage, I am not looking for a whole lot. I need flexibility in the tools that I am using without breaking the bank. As you’ve seen in this post, I only started adding automation when I needed them…
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We will continue to iterate and make small changes as we run into newer problems. This system works for now but it’s probably going to break when we bring in customer success and support people. But that’s a problem for another day.