How To Determine A Pricing Model For Your Startup with Assistly CEO Alex Bard

September 23, 2010

12:00 am

We saw our first glimpse of Assistly back in January as simple sketches which turned into a private beta. Assistly participated in our first San Diego startup mixer earlier this year and then moved their office to San Francisco and raised $2.2 million dollars from True Ventures and Social Leverage. This week the SaaS customer service dashboard launched to the public to help engage customers on everything from email to Facebook and Twitter. This means that any business can now give Assistly a test spin.

Assistly was founded by the team of Alex Bard, Gary Benitt, Jeremy Suriel and Brad Birnbaum who all worked together on prior startup successes. Three of the four were part of a team called Goowy Media which was acquired by AOL in 2008. I had the pleasure to work with the team at AOL and know from experience these guys are experienced and savvy entrepreneurs who probably don’t get as much of the limelight as they deserve.

Today we asked Assistly CEO Alex Bard some questions about how to determine a pricing model for your startup, based on his past experiences and the launch of Assistly with its newly revealed pricing structure.

Assistly CEO, Alex Bard

Assistly CEO, Alex Bard

TECH Cocktail (TC): How did you determine your pricing model for Assistly?
Alex Bard (AB): There are two components of our pricing model – traditional seat based licensing complimented by a unique option called “Flex”.  We believe that the traditional seat model makes sense for a business’ front line support staff.  However, we also feel that the model is prohibitive in terms of allowing other people in your business to participate in the support process.  During our private beta many of our partners asked if we could solve for the situation where they want the CEO, engineers, marketing, etc to occasionally log into Assistly, but to do it in a way that is not cost prohibitive.

We gave a lot of thought to this because we believe that bringing the voice of the customer to more people in your company will help your provide better support – which at the end of the day is our goal.   We gave consideration to a variety of models to support this including potentially limiting functionality, or giving a limited number of logins for these types of users but these options seemed too prohibitive and they were still rooted in paying something for named seats.  Finally, after a lot of thought we came up with “Flex” option which is rooted in one of our technical advantages – the fact that Assistly is real-time and is able to track every minute of activity or usage.

As a business you can create standard seats for your front line support team and then enable the “Flex” option for other users inside of your organization.  The “Flex” option enables you to buy time for other users in your company.  So this means that you can create any number of Flex seats for free and each time a Flex user logs into Assistly we track their time.  At the end of the month you see the total aggregate Flex time usage and are charged based on that usage.  We believe this is truly an innovative and elastic model.

TC: Assistly offers a free 30 day trial. Does that prove to be a valuable tactic in attracting new customers?
AB: We believe in our product and feel that the best way for companies to experience it is to use it.  In addition, our pricing model is monthly rather than forcing companies to commit to long term agreements.  This shows our commitment to earning your trust and business each and every day.  I believe in product and business model transparency rather than forcing customers through a complicated sales process, with canned demos.

TC: Assistly offers a few different pricing tiers, what tier in your pricing structure do you expect to see the most customers?
AB: I believe that early on a lot of our customers will fall into the basic and pro packages, but over time as we further develop Assistly, more companies will see value and select our enterprise plan.

TC: Pricing is so unique to every product, how should entrepreneurs get started with pricing?

AB: Pricing is both an art and a science – it can be a competitive advantage and lead to growth or it can mortally wound your business.  A few things to think about in terms of setting your pricing early on:

  • What are your production costs?
  • What are your service delivery costs?
  • What do you believe your customer acquisition costs will be?
  • Can you get to a point where your customer lifetime value is at least 3x your customer acquisition costs?
  • Can you get to a point where your customer acquisition cost is paid back in less than 6 months (if you are delivering a service)?
  • Is your revenue model scalable, profitable and repeatable (measure of a big business)?

There are some great resources online where you can read about different pricing strategies – this wikipedia article is a good place to start.  Another great read if you are running a SaaS business is here.

TC: Once you set the price, how do you know it is set correctly?
AB: Keep testing your assumptions, interviewing customers, measuring your conversion, A/B testing different aspects of the model.  Remember continuous improvement vs. delayed perfection.

Thanks Alex for taking the time to share your knowledge and insight on how to determine a pricing model for your startup.

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Frank Gruber is the cofounder, CEO and Executive Editor of Tech.Co (formerly Tech Cocktail). He is the author of the book, Startup Mixology, Tech Cocktail’s Guide to Building, Growing, and Celebrating Startup Success. He is also a startup advisor and investor to startups. Find Frank Gruber online and follow him on Twitter at @FrankGruber.

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