How we raised ACV 10x and hit 45% quarterly growth with a pricing re-design of Contractbook.com - and then how we raised prices another 70% the following year.
Company: Contractbook.com
Stage: Scaleup - Series B (via Tiger Global)
ARR: $1M (when we started).
Product:
Contractbook.com delivers a contract management platform to the SMB and Enterprise market that handles contracts from legal setup, through negotiation, signing and subsequent filing, access and management.
Situation:
“We had one sales model, one pricing model, centering on one feature pack, which was not scalable. And we were not charging enough for our products” – Viktor Heide, COO & Co-founder.
Contractbook had had a lot of initial traction with their product which led to raising a €3.5m seed round from a syndicate led by Gradient Ventures - Google’s AI Fund - together with Nordic VC-fund byFounders and a group of key angel investors. The immediate goal post-close was to ramp up sales over the next 1-2 years aiming for a Series A funding round.
It was clear, however, that the current packaging and pricing model would not support the ambitions to scale: the sales cycle was slow and costly at 30 days as the customer had to buy a combination of user types (admin-user, pro-user and basic-user) to create their setup. The Annual Contract Value (ACV) was also far too low in the SMB segment at only €228 annually, as customers were afraid to ‘over purchase’ users they wouldn’t need.
Furthermore Contractbook had onboarded a few customers who had used their API together with a Zapier setup to create automated contract workflows processing 1000’s of contracts a month – often with only a minimal purchase of a single Admin User. It was clear that the contract automation had the potential to be monetized far better.
“We had one sales model, one pricing model, centering on one feature pack, which was not scalable. And we were not charging enough for our products” – Viktor Heide, COO & Co-founder.
What we did:
A design-sprint with the CEO, COO and CPO to re-package the value propositions to the SMB segment, redesigning the pricing model and spinning out several of the value-adds such as automations.
We also sketched out a validation and implementation process to test the new packaging and pricing in live-sales before a full scale roll-out – including forcing legacy customers to adopt the new product and pricing scheme.
The COO, Viktor Heide, had a direct line to me for 3 months after the sprint to support validation and implementation.
The result:
“We came out from the design sprint with something, everyone was very wildly excited about." – Viktor Heide, COO & Co-founder.
“We came out from the design sprint with something, everyone was very wildly excited about. We had already identified our challenges. Now we had the necessary tools to work with those challenges. We completely redefined pricing and opened our eyes to a different way to look at packaging.” – Viktor Heide, COO & Co-founder.
The new packaging created a tiered pricing structure along some clear demand-centred use-cases: Basic contract management, Collaboration in larger teams and, finally, Integration into business systems. The pricing still centered on a price-per-user, but was now sold in brackets with 5 users as a minimum to minimize micro-optimization by the customer and API pricing was priced separately.
The new product and Pricing model had several key impacts:
45% growth per quarter with a tripling of ARR in the 12 months after implementation.
Sales cycle reduced by 30% and an increased conversion rate as product was easier to explain and customers felt no need to optimize their purchase.
1000% price increase with new ACV of €1500+ annually on the same customer segment.
“The most visible result is that we are growing. We have experienced a 45% growth for the past two quarters, our revenue will triple within the year" – Viktor Heide, COO & Co-Founder.
“The most visible result is that we are growing. We have experienced a 45% growth for the past two quarters, our revenue will triple within the year, and a big part of that we can trace back directly to the collaboration with Ulrik and Behavioural Strategy." – Viktor Heide, COO & Co-Founder.
The new pricing model enabled Contractbook to hit their targets for a Series A round 18 months early.
“We are now selling more to the same market with a 1000% price increase. After this process and seeing what it has done for us I’d recommend startups within the industry to look at an investment in pricing the same way as they would look at an investment in organic traffic.” – Viktor Heide, COO & Co-Founder.
UPDATE 1:
I continue to work with Contractbook.com. In January 2021 we launched v.3.0 of their packaging, removing the lowest priced option, raising average selling price by another +70%. Three months later, in April 2021, they secured a $30M Series B funding round from Tiger Global - the world's leading Enterprise SaaS VC fund. They still grow 300% a year.
UPDATE 2:
2022: I continue to work with Contractbook.com, now as a long-term advisor. I support their US sales efforts and all of their internal pricing work. Annual Contract Value is further up from the original $228 to about $10K - 40x increase.
More Cases ?
I do about 20 SaaS pricing projects a year and function as an advisor for about 5-10 SaaS companies on an ongoing basis, many of which I'm also an investor in. That said, most of my clients do not want to publish their results as openly as in this case (check logos on my front page) so if you can't find a case that matches your particular vertical or pricing issue - simply reach out and ask.