Growth Newsletter #063

In a survey of ~600 SaaS companies, nearly half (45%) had usage-based pricing in 2021— that’s up from 27% in 2018.

What is usage-based pricing? It’s charging for customers’ use of or transactions with your product. The more they use it, the more they pay.

Examples:

• SendGrid users pay for emails/month.
• HubSpot users pay for marketing contacts.
• Wistia users pay for videos or podcast episodes.

Usage-based pricing is generally considered the SaaS gold standard. When you align your pricing with product value, users stick around. They came to your product because of the value it offers, and they’ll stay if they’re paying for what they’re getting out of it.

If usage-based pricing is right for your business, the first step is to figure out what you’d charge for—what your value metric should be (like “marketing contacts” for HubSpot). Here’s an abbreviated version of a framework for that process:

1. Define your job-to-be-done: what it is your customers “hire” your product/service to do. Example for a language-learning app: “self-paced language learning.”
2. Convert your JTBD into proxies. Examples for the language-learning app: courses taken, live classes scheduled, test score improvement.
3. Answer these questions for each proxy: Does it align with customers’ needs? Is it scalable? Is it clear? Does it make sense as a way to acquire and retain customers? Do price and value scale proportionately?
4. If any of your proxies have all “yes” responses to the above questions, include them in a customer survey. Use max-differential sets to find the right feature for your value metric. These force respondents to pick the most and least important item from a list, helping to identify what your audience truly values (and they’re available in survey platforms like SurveyKing).

We get much more in-depth with this framework in our Growth Program’s pricing module, where we also help you determine whether usage-based pricing is right for your startup. But these four steps provide an overview of the customer-first approach you should take with usage-based pricing.

When it’s done right, cold email is one of the highest ROI activities for growing your business. In fact, good cold emails get response rates between 2% and 10%—and even better ones get rates above 40%.

Here's the framework we use to write emails of the latter caliber:

• Opening line: Your first sentence must grab attention. Since it also appears as your email’s preview text in the inbox, your goal is to intrigue readers enough to open your email. We recommend personalizing this line so it doesn’t read like the other poorly written cold emails people get in their inboxes.
  
• Context: Why you’re reaching out. For instance, because you noticed that the recipient is using a particular tool and might have a certain pain point. The more specific, the better. This is also a good place for a quick intro.
  
• Value proposition: How you offer value. Don’t be salesy. Focus on describing your product’s benefits rather than its specific features. If true, highlight the fact that your product genuinely solves a problem for your recipient better than an alternative they’re already using.
  
• Wrap-up: One clear call to action. If this is your first email, ask for someone’s interest instead of their time. “Think we might be a good fit?" works better than “Let’s book a call” since replying “yes” is lower friction than immediately booking a call with a stranger.

Note that it’s not enough to just write one email in hopes of reaching your target audience. Write multiple—test different opening lines, value props, etc. Create different versions to experiment with.

For inspiration, take a look at this cold email that uses this exact formula:

Read more about sending better cold emails here.

Product seeding is the act of sending your product to influencers so they'll promote it to their audiences—organically. Some call it gifting.

Most brands approach seeding by immediately pushing contracts or content obligations on influencers.

We advise taking a more hands-off approach instead. That is, identify relevant influencers that align with your brand. Send out your product and make it clear there are no strings attached. Then see which influencers create content about your product without being asked. Use a tool like Archive or MightyScout to track influencer stories and posts that mention your brand.

Product seeding has three major benefits:

1. It has a higher potential ROI than traditional influencer marketing, which often requires a large upfront investment. Though product seeding means giving away your product for free, organic exposure from just one influencer can quickly offset this cost.
   
2. It identifies influencers who genuinely love your product—creating the perfect foundation for an effective, long-term, and mutually beneficial relationship. Example: After the Rowing Blazers team got word that Pete Davidson was wearing their apparel, they reached out for a collab—and got a very enthusiastic response.
   
3. You can easily repurpose this user-generated content for other channels, like ads. This is where serious growth comes in. You can get loads of high-quality, influencer-generated content, for free, from genuine product adopters. Taylor Lagace scaled Animal House Fitness from 0 to $1M in 4 months by using this seeding and ad approach.

We’d recommend seeding micro-influencers (those with under 50k followers). Big-time influencers who create for a living expect to get paid for their work upfront, whereas smaller influencers might appreciate the free product. For more insights on influencers, check out our creator marketing playbook.