Adspert Optimizes SaaS Packaging and Pricing with Support from AWS SaaS Factory

By Tomaž Perc, SaaS Business Lead – AWS

Adspert

Software-as-a-service (SaaS) packaging and pricing is one of the most sought-after topics the AWS SaaS Factory team discusses with software companies building SaaS.

It’s a cross-functional topic, touching product, marketing, sales, customer success, finance, operations, and engineering teams. It impacts the business and technology side of the SaaS delivery model, from the way you invoice your customers to how you need to architect your solution and define the metrics in your SaaS solution.

The same applies to the ad tech industry. With the internet advertising market size valuated at $438 billion in 2021 and expected to grow at a CAGR of more than 9% during 2021-2030, having attractive SaaS packaging and pricing is not a nice-to-have, but a must-have.

Adspert took part in AWS SaaS Lab, a six-week virtual experience dedicated to Amazon Web Services (AWS) customers and partners who are building new products, migrating, and modernizing existing software for SaaS delivery model, or optimizing existing SaaS offerings on AWS.

Adspert supports e-commerce companies in maximizing their profit on Amazon, eBay, Google, and Bing by optimizing their pay-per-click (PPC) campaigns. More than 300 brands and agencies globally trust the artificial intelligence algorithm of the Berlin-based ad tech specialist to improve their advertising performance and save time in their day-to-day operations. Adspert was founded in 2010 by applying these best-in-class algorithms of the financial world to the online advertising market. Adspert’s goal is to simplify the process for users while optimizing ad campaigns across different platforms.

The AWS SaaS Factory team spoke with Harald Bartel, CTO and Co-founder of Adspert and Neza Skorc, Head of Product at Adspert, about the transformation their business went through in the last six months and the process of changing their SaaS packing and pricing changes, outcomes, impact on their product strategy, and business model.

Q&A with Adspert

AWS SaaS Factory: How would you describe your initial pricing model and what was the impact on your product and business strategy?

Harald Bartel: When we first went live with our SaaS approach, we had a three-tier pricing model. Basically, it was €99 up to a specific, quite low, ad spend threshold. Then, a combination of a €399, plus 1% of attributed sales or ad spend, depending on the advertising account; and lastly, a more flexible option for our enterprise customers, which was negotiable, but had a much higher entry threshold.

We felt this option would be interesting for smaller businesses; a segment we had quite a few challenges attracting in the past. For the first two segments, Lite and Standard, we had monthly contracts in place, so customers could cancel whenever they wanted. For Enterprise, we were usually looking for a longer commitment to offset for the pricing flexibility we offered.

SaaS Factory: What were the issues and challenges that triggered the quest for updating your pricing?

Neza Skorc: By far the biggest issue was the upgrade from Lite to Standard. Customers found themselves looking at a €400+ increase in their monthly invoice for a very non-proportional increase in ad spend. That, understandably, caused quite a bit of frustration on their end.

In addition, we opted to go into this model with very limited automation. We had to do the upgrades manually—inform the customers, have the tough conversations, fall into a loop of objection handling, and basically selling to them. This was expensive for Adspert because first, we had to invest two or more hours of Adspert’s Solution Specialist’s time to perform the upgrade. Second, it meant admitting the fault in our model and leaving the customers on the lowest €99 tier for a longer period of time. Finally, we had a model that didn’t scale.

With plans of increasing our marketing expenditure, which would then in turn increase our sign-up numbers, we needed a different model. One that would not be hurdle in getting customers on board and grow them once they got past the initial learning months, and would also make it easier for us to handle an influx of users without additional manual work.

SaaS Factory: What steps did you take in the process of changing your pricing?

Neza: This was quite a project to undertake. We all agreed it was urgent to do something, but nobody was quite sure what. So, we did what we always do—we started by taking a look at what our competitors are doing. We did a full market pricing analysis to understand where we could fit in and how we’d compare to our competitors. Not only in terms of invoice sum, but also pricing structure, basing it on the assumption our customers would react better to a structure they’re already familiar with.

Once we did that, we applied the models that looked most interesting to our existing customer base, trying to see who ends up winning—us or the customers—and by how much. We knew we wanted to migrate all non-Enterprise customers to this new model, so ensuring that there would be a benefit for this disruption for them was key, and they couldn’t be the ones taking the hit by receiving substantially higher invoices than what they expected.

So, we took a look at invoice changes on an individual level to make sure our customers are protected, and then checked the sums to see what our revenue would be, so the hit wasn’t too significant for Adspert. Basically, we tried finding the best possible balance with a simpler way of growing our customers, while keeping the baseline much more user friendly for both ourselves and our customers.

Harald: By pure chance, all of this was happening while we were participating in the AWS SaaS Lab. Once we were given the opportunity to have a conversation with the SaaS Lab Pricing experts, we leaped at the chance and ended up having a long conversation. On one hand, it confirmed our approach. On the other hand, it opened our eyes to different perspectives for once we had pricing in place; especially in regards to growing the customers’ individual usage.

We delved deeper into usage-driven pricing, the tradeoff between usage-driven pricing and recurring revenue, as well as possible gamification approaches to encourage users to increase their usage. This conversation definitely brought some much-needed structure, which helped us take the topic to the next level, get a better understanding of what we were about to do, and that the adventure doesn’t quite end there. It also helped us understand that there’s still a lot we can do after the new pricing is in place.

SaaS Factory: What were the key learnings that impacted the way you designed your new SaaS pricing?

Neza: It was all about tradeoffs for us, a game of compromises and deciding what we’re willing to give up and what we want to be stricter with. As a company in the very exciting, but also quite nerve-wracking stage of growth, we didn’t want to give up the monthly recurring revenue, not entirely at least, because we didn’t have the self-service customers numbers to fall back on.

We needed a minimum to count on. But, we couldn’t make it too high, because that would be quite an entry hurdle for the smaller customers, or those that didn’t want to commit from the get-go, opting to build trust slowly. We also had to accept that not everyone will like our new pricing, and the change might cause them to churn. Not ideal, but we believed in what we were implementing, and went for it nonetheless.

SaaS Factory: What were the short-term and mid-term outcomes that AWS SaaS Lab and subsequent discussions influenced?

Harald: SaaS Lab came at a perfect time for us. Aside from being in the middle of the new pricing discussions, we were all also getting closely acquainted with the SaaS business model after following a software-as-a-managed-service model for nearly a decade. It was a big change for us, and getting to go through the SaaS Lab as a team, helped us both short- and mid-term.

The most obvious short-term impact had to do with our pricing change, but it wasn’t limited to that. We also got a better understanding of what the self-service business model means and how it should be handled following the SaaS best practices. Overall, it helped us get deeper into the product-led SaaS mentality in our day-to-day. This enables us to move forward in a more efficient manner.

SaaS Factory: SaaS packaging and pricing strategy must adapt with customer needs evolving and the competitive landscape changing. How will you drive your packaging and pricing evolution in the future and which metrics, market changes, etc., are you monitoring?

Harald: While we’re quite happy with our pricing at this stage, it will not stay like this forever. We’re keeping an eye out for any tendencies that can help us inform our future decisions. We are investing in better understanding our self-service customers, as they’re a brand-new audience for us, with different values and expectations than we’re used to, and with which we use different communications channels.

We also need to consider the technical possibilities offered to us by the platforms we support. So far, what we’ve put together, and already implemented, is that e-commerce and search platforms are not one and the same—they’re used differently with different purposes, and having different pricings there makes sense from a users’ perspective, as well as what’s possible for us.

In more practical terms, this means billing based on paid sales on e-commerce platforms and based on ad spend on search platforms. It’s a model that’s quite well-received, especially on the e-commerce side, because it’s based on actual results and not just on spending the budget. We can spend all the budget, but if what we bid on gets the customer no results, they’ll pay the minimum fee and that’s it. So, we essentially grow when our customers grow, focusing on our customers’ success and building on it.

Neza: Also, to match our performance-based pricing, we opted against having many tiers. We understand the benefit of that, and for a good while we were quite tempted by it, but ultimately, what we want to focus on is delivering performance. The maximum results for every Euro we get to spend on behalf of our customers, and jumping between tiers just makes it more complicated for us to handle technically, as well as for the customers to wrap their brains around.

Instead, we only have two models: self-service for SMBs and Enterprise. The self-service one is further divided into Lite and Standard to clearly mark the automatic month-to-month adjustment if the usage threshold is met. Enterprise, on the other hand, gets more flexibility in their pricing as per their request, but also commit to a long-term relationship and a higher minimum fee. It’s been working great so far, but we’re checking our KPIs and will review our pricing and packaging regularly.

To develop the last point a bit further, as soon as we changed our pricing, we were checking our sign-up numbers, as well as conversion rates, to make sure the new pricing was not dissuading customers from signing up and later on starting a subscription. We are checking all the usual SaaS metrics, such as churn and net retention rate. Our new pricing model improved all conversion metrics significantly—sign-up to won opportunities increased 36%.

In addition, we give our self-service customers various channels to submit feedback or discuss their concerns—from fully-automated product channels, like churn surveys and product requests, to having a dedicated team of Solution Specialists support them via chat or videoconference whenever needed. All outcomes are funneled to the self-service dedicated task force to discuss and see if changes are needed and where exactly.

Harald: With this in mind, it’s difficult to predict what the future will bring, because it is in many ways dictated by our users and their demands, mixed with our own strategy and what’s technically possible for us to support in an efficient and scalable manner. We continue to monitor the situation weekly and research the competitors’ changes.

In addition, we are looking into improving our post-subscription engagement to encourage customers to optimize more advertising campaigns with us by gamifying their Adspert lifecycle, and increase their investment in our product.

About Adspert

Adspert supports e-commerce companies in maximizing their profit on Amazon, eBay, Google and Bing by optimizing their PPC campaigns. More than 300 brands and agencies globally trust the artificial intelligence algorithm of the Berlin-based ad tech specialist to improve their advertising performance and save time in their day-to-day operations. Adspert was founded in 2010 by applying these best-in-class algorithms of the financial world to the online advertising market.

Adspert’s primary goal is to simplify the process for users while optimizing ad campaigns across different platforms. This includes the use of information gathered across the various platforms balanced against the optimum budget set on a level above each platform. Adspert’s focus is to optimize customer’s goal attainment, regardless of what platform is used. Adspert continues to add platforms as necessary to give our customers significant advantages.

For more information, visit the website.

About AWS SaaS Factory

AWS SaaS Factory helps organizations at any stage of the SaaS journey. Whether looking to build new products, migrate existing applications, or optimize SaaS solutions on AWS, we can help. Visit the AWS SaaS Factory Insights Hub to discover more technical and business content and best practices.

SaaS builders are encouraged to reach out to their account representative to inquire about engagement models and to work with the AWS SaaS Factory team.

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