Anatomy of a Price Increase: A Nutshell Oral History

On June 1st, 2018—after a massive team effort—Nutshell rolled out a 15% price increase for customers on our “Classic” subscription.

This is the story of what happened before, during, and after that price increase, through the perspectives of everyone who was involved. What did it take to execute an initiative that was simple on paper, but complex in practice? And more importantly, what did we learn?

Cast of characters, in order of appearance:

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    Joe Malcoun, CEO

    “My main role in this project was director/choreographer. I was responsible for making sure we didn’t majorly [expletive] this up.”

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    ASYA SHARROW, BUSINESS ANALYST

    “I worked on the initial plan for what the price increase would be and how it would be applied, and forecasted the outcome.”

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    BEN GOLDSTEIN, CONTENT MARKETING MANAGER

    “I wrote the email series announcing the price increase as well as the explainer page on our website, and I worked with Mike on the copy for the ‘You’re a Pro’ upgrade campaign.”

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    REBEKKA KUHN, MARKETING DESIGNER

    “I designed all the price increase and upgrade emails, and scheduled them so that they weren’t overlapping any other customer communications that were happening at the same time.”

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    KATHERINE MAYS, HEAD OF CUSTOMER EXPERIENCE

    “I was focused on keeping customer churn to a minimum, which meant preparing the CX team to have conversations with potentially frustrated customers, and identifying which of our Classic customers would benefit from some one-on-one outreach in advance.”

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    AUSTIN PSYCHAS, SALES DEVELOPMENT MANAGER

    “I was the primary point of contact for our outreach to individual Classic users and for the upgrade campaign that was added later. My goal was to get in front of the price increase and use it as a springboard to make sure these customers were in the right plan.”

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    MIKE CARROLL, HEAD OF GROWTH

    “When I started at Nutshell, the team was already hard at work putting the price increase together, but I tried to make some helpful suggestions on things we could do, particularly with the upgrade campaign.”

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    IAN VANSCHOOTEN, SOFTWARE ENGINEER

    “I wrote the scripts that applied the new pricing to Classic customers within our billing software, and fixed a few surprises that we found after the pricing increase went into effect. I also handled a lot of the technical implementation involved in alerting users of their upcoming price within the app.”

CHAPTER 1

In the beginning:
How “Nutshell Classic” came to be, and why it needed to change

JOE MALCOUN: For most of Nutshell’s history, we had one product. We made some changes to the price and billing structure of that product over time, but no matter what price you bought it at, it was the same software.

At a certain point, we realized that there was opportunity in giving customers a lighter version of Nutshell and a more robust version of Nutshell—allowing them more options to derive value on their own terms—and in doing that, we decided we needed to create some distance between the two prices.

The problem was, there really wasn’t enough to distinguish our legacy Nutshell product from the full-featured Pro version that we were going to debut, at least at first. We didn’t want to take features away from our existing customers and force them into our entry-level Starter tier, but we also didn’t want to force our users into Pro, where they’d be paying more.

So, we decided to keep our early customers where they were, at whatever price they had been paying. After that, our new customers could choose between Nutshell Starter and Nutshell Pro. “Nutshell Classic” was no longer for sale.

ASYA SHARROW: Ever since I joined Nutshell in June 2016, raising the price of Classic has been a regular topic of conversation. We were adding new features to the product all the time, but only some of them were exclusive to Nutshell Pro—the rest were available to all our customers. As we added more and more features to the Classic tier, it became clear that we were providing a lot more value than what people originally signed up for.

JOE: [Nutshell co-founder] Guy Suter and I did a one-on-one offsite last summer in Torch Lake, where we wrote up what we called the “Torch Lake Memo.”

Basically, the point was that we wanted to get the company on even healthier financial footing. There were a number of ways we could reduce costs that I was committed to doing. For example, I cut my salary in half. It was something I could control, I could do it overnight, and it would be an immediate cost savings.

Increasing revenue is always trickier, but there was one thing that we could control, which is the price that we charge customers. As we looked at our customer segments across the board, it was clear that our Classic customers had benefited from a great deal of increased value in the product over time, without any price increase. Some of them were paying five bucks a seat, which is pretty crazy.

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    It became clear that we were providing a lot more value than what people originally signed up for.

Guy said, “Let’s look at what it would mean to increase prices on Nutshell Classic.” I was like, “All right, we’ll start analyzing it and see how it goes.”

A lot happened the following spring, and I was hesitant to start working on the project. But then I was talking to my brother about it one day, and he said, “What do you mean, you’ve never raised prices? Are you kidding me? It’s the right thing to do. It’s the right thing for the product, it’s the right thing for the company, and frankly, if your customers really value Nutshell, it’s the right thing for them as well. You have to do it.” That’s what encouraged me to get moving.

CHAPTER 2

“The simplest way is the best way”:
How the price increase was determined

ASYA: Around December of last year, Joe approached me and asked me to do some research: “Can you figure out how much of our current revenue comes from Classic customers? How many actual users do we have on that product? What do they look like?”

I pulled all of our Classic customers and divided them out by price per user, to see how many fell into each price point. It turned out that we had 10 price points for Classic users, ranging from $5 to $22 per seat.

In the very beginning we thought, “Maybe we’ll just move everyone up to the most recent price point,” but once we started to lay it all out, that idea flew out the window because it would have meant bumping those $5 customers—the people who had been Nutshell customers longer than anyone else—up to $22 per user per month. After years and years of being with us, there was no way we were going to go to them and say, “Hey, we’re raising your price by 450%.”

excuse me surprised guy

Joe and I shared ideas back and forth for a couple months. Along the way, we came up with the idea of basing the price increase on our customers’ “health score”—the percentage of an account’s enabled users that had logged in within the last 30 days. Classic customers with health scores of 50 and above would get a 20% price increase, and everyone else would get a 10% increase.

The idea was that the price should reflect how much each customer values the tool, and that those who really value Nutshell should get a higher increase. But I was always hesitant on using health scores to set price increases, because it’s such a rough metric. It can change drastically in a single day for smaller teams, and for single-seat accounts, it’s completely useless.

JOE: Finally we just said, “This is too much complexity. Let’s make it a flat 15% increase across the board.” If we had stuck with the health score plan, it would have been 10 times more complicated in how we communicated it, how we tracked and implemented the price increase, and everything else.

There’s no question that if we had done it that way, we would have gained more incremental revenue—if someone’s paying $5 per seat and they have a really high health score, we probably could have doubled their price. It would have allowed us to squeeze more juice, so to speak, but I just think it was too complex in terms of execution.

ASYA: It would have been a mess. Sometimes, the simplest way is the best way.

CHAPTER 3

“A kick in the shins”: Defining success and failure

JOE: Realistically, the worst-case scenario in my head for the price increase was major, major churn from Classic customers, like a number that we couldn’t have predicted. Failure would have been if we churned out an amount that was more than what we gained. Obviously, that would have been not just a loss in terms of revenue, but it would have been a lot of team effort spent just for a kick in the shins.

When all of this was said and done, I didn’t want to have to go to our Board and say, “Well, we lost all of our customers.”

Listen to Joe Malcoun’s complete interview for this article in the embedded player below:

ASYA: It was really tough to forecast the customer churn that this would potentially create. I did a bunch of research on other companies that had rolled out price increases, but it was hard to find actual churn numbers for companies like ours.

So I kind of took a back door to come up with our forecast. First, I found our break-even point—at what level of churn would we make zero money? Based on that, it looked like we could go up to 12% churn of Classic users without hurting ourselves. Nutshell has a really low monthly churn rate compared to our industry, and Joe and I both agreed that there was no way we would hit 12% from this.

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    I didn’t want to have to go to our Board and say, ‘Well, we lost all of our customers.’

I did take into account that customers with lower health scores would probably churn at a higher rate than customers who have more of their team invested. Ultimately, I settled on a midway point between our normal monthly churn and our break-even level and forecasted that the price increase would generate about a $11,500 increase in MRR.

JOE: I wanted to make sure that we did everything in our power to minimize churn, but I also wanted us to do that without being evasive, or undermining people. It was genuinely important to me that we pulled this off in a way that our customers still respected us. And in the end, we felt confident that we did the right thing and treated people fairly.

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CHAPTER 4

Because we’re worth it:
Crafting the communication plan

BEN GOLDSTEIN: To start getting the word out to our Classic customers, we put together an email series that would drip out from mid-April to the end of May.

The goal of the first email was to break the news as clearly as possible: 1) your price will be 15% higher on your first bill scheduled on or after June 1st, 2) we’re doing this because we’ve made continued investments in the growth of our team and improved the product along the way, and 3) if you’re happy with your Nutshell Classic subscription, you don’t have do anything. But by the way, we have this other, more powerful product called Nutshell Pro, and we’ll give you a discount off your first year’s subscription if you upgrade before the price increase goes into effect.

We included a pair of coupon codes that Classic users could use on their billing page if they wanted to take advantage of the upgrade discount—one code for monthly subscriptions and one for annual subscriptions—and we plugged the four key features in Nutshell Pro that Classic users lacked: multiple pipelines, our funnel report, click-to-call, and the sales automation suite that we had just started rolling out to new Pro users.

REBEKKA KUHN: For a lot of our Classic customers, it probably didn’t even occur to them to think about what they might be missing, because they’ve been with us for so long and they might be focused on the price. We wanted to get them to take stock of what they had and want they didn’t have.

BEN: The first announcement email linked to a more detailed explainer page, where we laid out the connection between the price increase and the increased value that Classic users had accumulated over the years. We made it clear that this would allow Nutshell to continue to hire a world-class team to support the product and our customers’ success. It wasn’t just to line our pockets—Classic users would be getting a return on their investment.

JOE: The overall message was: We respect you. We know that this may seem or feel unfair. We’re aware of that, but we genuinely believe that our product is worth it. And in order to be the best we can be for you, this is something we have to do.

KATHERINE MAYS: We knew there was a lot of upside in doing individual outreach to Classic users as well. Whether the conversation led to an upgrade or simply retaining them as customers, we’d rather stay in contact and on good terms than lose people over a small price increase.

ASYA: In particular, we needed to reach out to our annual customers because they were going to see their entire price increase in one lump sum. It wouldn’t be as big a deal for month-to-month customers—they might see a $20 to $30 increase in their Nutshell bill—but for some of our annual users, it was a matter of hundreds of dollars or more.

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    It wasn’t just to line our pockets—Classic users would be getting a return on their investment.

KATHERINE: I did the initial pass on putting together our outreach list. First, I focused on customers who had been with us for a very long time. Using our own product was really helpful for that, because I was able to sort our customers within Nutshell by lifetime value, date created, and number of users.

Then, I looked for Classic customers who had been in frequent contact with us over the years. There are a number of customers who we know really well. We’ll see their number on the caller ID and we know exactly who it is, and everyone on the team knows them by name. We wanted to make sure we spoke to them personally, because we had a close relationship with them.

AUSTIN PSYCHAS: Email was the initial touch. My list was more focused on user-count—any customer with 25 seats or more—because in addition to not wanting to lose them, we also knew that getting a few of them to upgrade would have a big impact, financially. If we could identify a reason why upgrading would make sense for them based on how they were using the product, they got pushed to the top of the list.

Basically, the emails said, “We value your business, and there’s a good chance that you would get a lot of benefit out of bumping up to Pro. Why don’t you give me a call and we can set up some time to talk about how you’re using Nutshell now?” And of course, we already had a lot of data from the product to help us facilitate those conversations.

I might look at the notes on a customer’s account and say, “Hey, I see that you’re doing two different pipelines. Do you want to report on those separately? Well, let’s talk about getting you into Pro, then.”

CHAPTER 5

“You’re a Pro”:
Turning a pricing campaign into an upgrade campaign

MIKE CARROLL: My first day at Nutshell was April 16th—about a week before the first price increase notification went out to customers. The last thing I wanted to do was come in all cowboy-style and assert myself into what was already happening. But it seemed like a unique opportunity to move our Classic users to a more feature-rich version of Nutshell. We would have their attention rather keenly during this campaign, and it would be a good opportunity to make a stronger case for upgrading.

So, in addition to the three emails that the team had already scheduled to alert our Classic users to the price increase, I started sketching out a four-email series specifically focused on the upgrade messaging. We wanted to communicate the advantages of coming on to Pro because it’s where the coolest and most innovative features of our product live, and Classic users would continue to miss out on a lot by staying where they were. They were pros already, but they should be using pro tools.

BEN: The first “You’re a Pro” email featured a video that Katherine made covering the differences between Nutshell Classic and Nutshell Pro. The next three emails took a deeper dive into the value of each individual feature. So, if you’re an outbound seller who makes a ton of phone calls, here’s why click-to-call would save you a lot of time. If your team has to manage different kinds of sales efforts or you do a lot of reselling to existing customers, here’s why you’d need multiple pipelines. And for each of those emails, the recipient had the option to go to their billing page and upgrade directly, or schedule a one-on-one consultation with Austin to discuss it further.

Our original plan was to offer Classic customers one free month of Nutshell Pro if they upgraded. Mike and Joe decided to up the ante to 25% off the first year—in other words, three free months—which would be a huge financial incentive for customers with a lot of seats.

MIKE: I remember asking Joe in total candor, “Do we have the formula necessary to determine what an acceptable discount would be?” That matters a lot more in the context of paid acquisition, but it didn’t as much in this case because these are existing customers. They’ve long ago paid for themselves from an acquisition cost perspective, and anything beyond that is gravy.

ASYA: Email segmenting became very important. Not just making sure we’re reaching out to the right customers, but also not sending them another message like, “Hey, your price is changing!” if they’ve already upgraded to Pro. We were constantly combing through our list to make sure it was nice and clean, and that no one was getting the wrong emails, which could potentially be a disaster.

REBEKKA: Nobody ever wants to get an email that says their price is going up, but we never wanted to dance around it too much. We tried to make the announcement emails as straightforward and simple as possible, without a lot of extra jazz. But with the upgrade emails, you’re selling somebody something, so you have to create a little more excitement and urgency.

The challenge was that there were so many messages that had to be conveyed in these emails, between the different promo codes for monthly and annual users, and the CTAs to schedule a one-on-one consultation with Austin or visit your billing page or watch the video explaining the differences between Classic and Pro.

It was a struggle to articulate all that without it feeling like there was too much to absorb. “Am I a monthly customer? Am I an annual customer? Do I want to stay where I am? Should I upgrade to Pro?” It forces the recipient to do a lot of personal reflection all at once. On the other hand, you don’t just slap a customer with a price increase without giving them any options.

AUSTIN: About 15 customers took me up on the offer to set up a one-on-one phone consultation, and those were the people who were really interested in upgrading. We walked through their current process and how they currently use Nutshell, and we discovered a few teams that weren’t using the product to its fullest potential. They were able to get a lot more value out of Nutshell after our conversation, whether they upgraded up or not.

We’ve always had this mindset at Nutshell that we want you in the right product and on the right plan. If Classic is a great fit for you now, that’s awesome. So it was never an upsell conversation unless I saw value in what they needed. I wanted to have honest conversations with customers about which plan fit them best, and encourage them to use the right product. And if they didn’t upgrade, they at least came away more comfortable with the price increase for Classic than they were before.

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    You don’t just slap a customer with a price increase without giving them any options.

CHAPTER 6

About that coupon field…

BEN: In all of the announcement emails I had written, we were telling people, “To upgrade to Nutshell Pro, just go to your billing page and punch one of these codes into the coupon field.” Then, two days before the first email was scheduled to go out, we realized, “Oh yeah, there is no coupon field.”

captain picard star trek tng facepalm

IAN VANSCHOOTEN: The coupon field was only on the billing page for new trial users. Existing customers didn’t have it, so I had to add it to the form. That also meant adding some feedback that explained what the coupon was doing, so if the user entered gibberish, it would tell them, “Sorry, that isn’t a valid code,” or it would say that they didn’t have the right coupon code for their plan.

You’d think that adding a field to a form—what could be easier, right? But it took some effort because our billing page has some of the oldest React code that we have in the app. A lot of it is confusing, and we found better ways to do things as time went on. So, one of the first things I did was clean things up a bit just to make it easier to work in the code.

The other part was getting used to the module that handles the interactions between Nutshell and Recurly, which was a new piece of the code for me. Since I wanted users to be able to type in a code and see the status of it, we needed to have that two-way communication between our server and Recurly in order to supply the description. It took a few days, but it wasn’t too hard.

CHAPTER 7

In which the price increase is officially announced, and the gang finds an unexpected opportunity

JOE: When our first email announcing the pricing increase went out to all our Classic users, I was just immensely proud of the team. I watched everyone put this thing together for weeks and there was a lot of heavy lifting, so it was great to sit back with everyone, watch the email go out, and relax a little.

I was definitely nervous, of course, but I was also excited. There was a bit of an adrenaline rush, like, “What’s going to happen now?”

kristen wiig nervous excitement

ASYA: Within a day or two of the first email going out, we saw a handful of Classic customers update their subscriptions from monthly to annual, likely to get the annual discount and offset some of the impact of the price increase. This is something we didn’t anticipate, and we thought, “What are we going to do with these new annual accounts? Are we just going to raise their price on June 1st like everyone else, or will we wait?”

That turned into a huge opportunity to reach out to all our month-to-month customers and say, “Hey, by the way, if you don’t want the increase right now, you can lock in your price for a year by going annual.” That way, they’ll have another year at their current price and we have another year of commitment from that customer.

JOE: We were so focused on not screwing up this one thing that we didn’t think about the ancillary opportunities that it created. I think that was one of my favorite parts of the whole project—the way you can surprise yourself in the middle of the campaign like, “Holy shit, there’s a really cool opportunity here.” Offering customers the opportunity to lock in their old Classic price for another year by updating to annual was a great example of that.

The customer doesn’t churn for a year, we get the cash up front, and they get a lower price for another year. It’s a win-win-win, right? And of course, since their price is going up, the incremental difference between Classic and Pro gets that much smaller, which gives us an opportunity to convince them to leave Classic altogether and level up. We didn’t fully understand the value of telling that story at the outset. Those were great surprises.

AUSTIN: I had a safety net on every single phone call, because if a customer was upset that their price was going to go up, I could offer to lock them into their price for one more year—all they needed to do was sign up for an annual subscription.

REBEKKA: It was only through the discovery process of talking about the price increase among the team that these ideas surfaced. Upgrading monthly Classic customers to annual subscriptions wasn’t a primary message at first, but it turned out to be the most successful part of the campaign.

CHAPTER 8

Preparing for pushback, and learning from it

KATHERINE: There are a few things that the CX team always does when we know something big is coming, whether it’s a feature release or something else that might shake our users up a bit. The first thing we’ll do is create a “macro” in Zendesk. It’s a canned response that the team can use and customize based on any incoming questions, to keep everyone on the same page about what message we’re sending and speed up our responses.

That’s important because there’s always a significant increase in support request volume for us when these types of events happen, which can really slow down the team when it comes to delivering technical support and troubleshooting. So we prepared a couple of macros for some of the most common objections that we anticipated hearing about the price increase, the main one being, “Hey, you said you’d never do this.”

When we first introduced the Pro and Starter plans, we sent a message to all of our existing Classic plan users saying, “These new tiers are available, and you can upgrade to Pro to get some additional features, but don’t worry, we’ll never raise the price on your current plan.”

The biggest fear was that we were going to get a lot of people saying, “You lied to us. What’s up with that?”

gus fring breaking bad explain yourself

JOE: There was never a legally binding statement that we wouldn’t raise prices on our Classic customers. It was more of a belief that Nutshell held—and one that we held naively for a long time. If you want to go from being a hyper-growth company to being a well-sustained, financially secure company, you have to make some different choices and decisions. And honestly, they’re better choices for the customer, in terms of the sustainability of the product and the stability of the company that provides it.

The cost of building and supporting a product inherently goes up over time, and that’s supposed to equate to value. So I just felt like, “Yeah, we may have said, ‘We won’t raise your price’ in the past, and we’ll take our lumps from those who call us out on it.”

KATHERINE: We had discussions with a couple of larger customers, where we were open to reducing the price increase or waiving it altogether. But what ended up happening was that during the course of those conversations they realized how small the increase was, relatively speaking. In some cases, it was less than a dollar per user, and they felt a lot better once they got that perspective. So it was helpful being able to say, “Oh yeah, your price is only going up to $5.75 per person.”

AUSTIN: I talked to one guy whose company was actually rolling out a price increase at the same time as we were, and he gave me a ton of really candid feedback in terms of how he felt about Nutshell, and what he liked and didn’t like about how we were communicating the price increase.

When he got our first message, he told me, “Hey, 15% looks very scary to people in an email. If you tell them, ‘We’re raising prices but we’re only raising your prices a dollar per person per month,’ that comes off as much more approachable. A dollar is nothing, right? But when you’re a business owner or sales manager and you’ve got a bunch of bills on your desk, sometimes you don’t remember how much you’re paying for everything, so 15% seems like a lot.”

Those are great lessons that we can use moving forward. It wasn’t that the price increase scared anybody, right? We all know that things increase in price over time—it happens. But it opened our eyes to the fact that the language you use in emails and the numbers that you decide to push will really change the way that people receive the message. People can’t always wrap their heads around a percentage. It needs to be a figure they can understand.

BEN: We had a couple more announcement emails on the schedule that were just supposed to remind our Classic users that the price increase was happening, but now we had to pivot in light of new information. We went back and added two things to those emails: First, that monthly customers had the ability to lock in their current price by going annual. And second, we wanted to show our Classic users exactly what “15%” meant in actual dollars.

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    People can’t always wrap their heads around a percentage. It needs to be a figure they can understand

Now, we couldn’t customize all the emails to show each user their exact price, but we could do it by placing a customized banner on their billing page, and directing them there to see it. It was another thing that Ian had to knock out in a hurry.

IAN: We wanted it to be a very specific experience for each user, and display the actual dollar amount of their increase. Another important element to that was showing each customer the date that the price change was going to take effect for them, because even though the increase was scheduled to roll out on June 1st, the actual date you’d see it in your bill was different for everybody. If you were a monthly user who paid on the 15th, your price increase would go into effect on June 15th. If you were an annual user, your next billing date could be months into the future.

The final piece was making sure that that banner went away after the effect took change. We wouldn’t want to keep telling a customer that their price was going to increase by 15% after it already happened.

CHAPTER 9

The clock strikes midnight

joker here we go the dark knight

IAN: Pushing the button on the price increase script was a little nerve-wracking. We’d been testing it in a dry run to see what its effects were going to be, but once you ran it, there was no undo mode. It’s the kind of thing that would be tricky to roll back. We had done all the logging so we knew what everyone was paying before the increase went into effect, but even so, you want to make sure you get it right the first time. You don’t want a thousand people calling in the next morning saying, “What the hell?”

The other thing we wanted to make sure of is that nobody was going to get an email at midnight when we ran the script, telling them they were getting a price increase, because they had gotten plenty of messaging from the marketing team already.

We wrote the script to do this automatically with Recurly, so some of it was like, “What’s Recurly gonna do?” and some of it was checking to make sure that all of the customers were being correctly identified, that they were all active customers, that all the corner cases were being handled—just trying to think through all the pieces.

Plus, the whole company was watching, so if it had been screwed up, we would hear about it.

KATHERINE: There were a few cancellations early on when we first started sending the announcement emails, and then when the price increase officially went into effect on June 1st, we were all holding our breath, like, “Oh no, are we going to lose a bunch of customers today?” But that’s not really how it turned out. Classic customers didn’t actually see the price increase until their next bill, so the increased churn was spread out over two or three months.

And realistically, it wasn’t the price increase that was driving the churn, it was the realization among some of our customers that they didn’t really need the tool anymore. We saw the same thing reflected in user-contraction as well—the increase gave some people a reason to look at their number of users and decide how many paid seats they actually needed.

Beyond that, a lot of people contacted us asking for clarification on their options, or they chatted in to ask, “What’s going on? How do I keep my price the same?” But it was always something that we were able to work out pretty quickly with a conversation.

JOE: There was way less pushback than I expected, in terms of actual verbalization and outreach to us. Some of the customers who were angry at first just didn’t fully understand what we were doing, and how much their subscriptions were increasing by. And then there were others who understood completely, and voiced their opposition, and we did our best to explain our position while holding true to the commitments we made to ourselves.

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    Once you ran it, there was no undo mode…Plus, the whole company was watching, so if it had been screwed up, we would hear about it.

CHAPTER 10

“I didn’t want to blow a gasket in front of everyone”:
Cleaning up the messes

IAN: We applied all the pricing increases as pending changes on our Classic customers’ accounts, which would take effect on their next billing date. The same thing happens when a user downgrades and decreases their number of users—we apply a pending change, and the customer gets refunded in the next billing cycle.

However, baked into the software was a way that a user could downgrade, change their mind, and cancel that downgrade just by clicking an X, and then their plan wouldn’t change at the start of the next billing cycle. We didn’t immediately realize it, but that meant Classic users would be able to cancel the pending change that we had applied on their account to change the price.

The day after the price increase went into effect, I was still in the code looking at things and I saw the X, and I thought, “Huh. I wonder what would happen if I click on the little X…oh, right. Great.”

It wasn’t a disaster because we caught it pretty quickly, but there were a handful of users who had actually done this already. And if they changed their number of users or made other pending changes to their accounts, it would have also overwritten our pending changes. So, we had to take away our users’ ability to cancel their pending price increase, while still letting them cancel things like pending user count changes, which got a little complicated.

KATHERINE: Updating everyone’s price was a challenge from the beginning. Recurly does not make it easy to make changes for a plan where everyone is paying a different amount.

We currently have Nutshell Classic as a plan in Recurly that costs $22 per month, or $20 when billed annually. So if a customer was paying $7 per user per month and wanted to upgrade to annual to lock in their price, suddenly they were being billed at $20 per user per month.

There were about 20 companies that had been mischarged, most of them significantly overcharged. Either we contacted them individually or in some cases they reached out to us first because they caught it right away and were pretty upset about it.

MIKE: For one account in particular, it cost them a couple grand. We charged them thousands of dollars because of a mistake, and the customer was not pleased. Luckily it didn’t end up impacting that many people, but when we first learned about it, I was pretty upset. I think I actually had to get up and walk out because I didn’t want to blow a gasket in front of everyone in my first eight days in the office.

jack torrance jack nicholson mad angry the shining kitchen

It seemed like the kind of mistake that could have caused a huge problem, and we should have seen it coming. However, I was so impressed with how cool and collected our CX team was in their response, and how capably they handled this customer. There was absolutely no reason to fret.

KATHERINE: We had to fix everyone’s billing manually. And from then on, whenever anyone wanted to upgrade, the process was for them to reach out to us directly and get our help manually setting them up. It was an unfortunate point of friction on our side, but the bigger problem was the friction it caused our customers.

REBEKKA: In a perfect world, we would have had things like the billing issue or the coupon code field seamlessly in place, but when we realized we didn’t, we’re a small enough team that we can just be like, “Hey, we need to get this done,” and everybody jumped in and cleaned it up. In a bigger company, with layers of approvals and paperwork, that might have been impossible.

CHAPTER 11

“It was hard and it was worth it”:
Evaluating the results

ASYA: Twenty-two customers upgraded to Pro before the price increase went into effect, which accounted for a $4,000 increase in MRR, and another 75 customers upgraded from Classic monthly to Classic annual. Ninety-three subscriptions churned—about 4% of the Classic user base, which was well below our 12% break-even point.

When you add the customers who just took the price increase, the grand total from this project was $7,800 in net additional MRR.

mick jagger whoa

We only hit about 70% of the original forecast, which was $11,500, but that projection reflected the price increases on all our annual customers. We won’t see all of those come in until May 31st of 2019, since their billing dates are scattered throughout the year. So, we’ll continue to see small increases from those annual accounts each month as their billing renews.

MIKE: I was a little disappointed that only 22 customers upgraded to Pro, because I had calculated that if we converted even 5% of Classic users to Pro, the upside from a revenue perspective was mind-blowing. At the time I thought, “Oh, we’re going to hit that number and then I can just take a vacation for the rest of the year.” That turned out to be a lot harder than I anticipated.

JOE: Overall, I considered the price increase to be a total success. It came out to about an $8,000 increase in net MRR, and the churn was lower than we expected, which was great. On the other hand, downgrades were greater than we expected, because we hadn’t accounted for our customers thinking, “Oh yeah, you just reminded me that I’ve got seats I’m not using.” But then again, the users upgrading to Pro was something we didn’t anticipate either.

ASYA: If there’s a $5 charge going on your business credit card every month, that can be really easy to overlook. We may have done people a service by letting them know, “Hey, you still have this, the price is gonna go up, so if you’re not using Nutshell anymore, cut the cord.”

MIKE: It was really fun to jump in on something that was so significant for the company, and it was also rather intimidating, to be honest. It’s one of those moments when you take on a new job where you could really screw up the process by leading people in the wrong direction. Of course, I didn’t have enough institutional knowledge to really be dangerous, but it was a nice trial by fire on day zero.

Plus, it was neat to see everyone come together. There was never any griping. Through all the fire drills, everyone just showed up and did the work.

REBEKKA: It was an all-hands-on-deck situation that touched everybody at Nutshell, and I was proud of how we could self-adjust and self-correct when we needed to.

KATHERINE: I was surprised at how calm most of our customers were about it. Whenever there’s any change happening to the Nutshell product, I’m used to hearing from 25 panicking people at once. And that didn’t happen, which was really nice.

But my biggest takeaway was how awesome it is that our team can pivot and react to feedback so quickly. And even though there were a lot of unexpected barriers along the way, I was so impressed with how everyone on the Growth team and the CX team took it in stride, because it’s stressful when something we’ve done is affecting a lot of people and they’re reaching out to us for answers.

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    Through all the fire drills, everyone just showed up and did the work.

JOE: I thought it a great win, not just for the company but for the team. Everybody had a role in it, and everybody could be really proud of the result. It was hard and it was worth it.

It’s just one of those things that, as a leader, you wish you could package up and bottle and roll it out from time-to-time—that feeling of hard work followed by a reward that you could see and feel. It was so tangible, whereas so much of what we do isn’t. If my whole job could be finding ways to make the whole team get shared wins like that every day, I’d be very happy.

funny team celebration high five

CHAPTER 12

“If we had to do it all over again…”

BEN: The idea seemed very simple in the beginning—all we have to do is raise the price and tell customers we’re doing it, right? But in reality, it required a technical lift that not everyone anticipated.

Communication is usually the cure-all. We could have probably avoided a lot of the frantic moments if we had gotten everyone in the same room together much earlier to talk through all these issues. As soon as we had a marketing plan written out, we should have organized an all-hands with the engineering, sales, and support teams and said, “Okay, are there any problems with what we’ve just laid out? What actually needs to happen for us to get this program in place?”

ASYA: Since we added the upgrade element so late in the process, it felt like a scramble to get it all out the door. I think we could have gotten more people to switch to Nutshell Pro or a Classic annual subscription if we had thought that through in advance.

On the bright side, the price increase project helped us think about what an always-on upgrade campaign could look like, and how we would make that pitch to customers going forward. Some of the assets that came out of this will be used continuously going forward, like our video showing the difference between Classic and Pro.

JOE: In retrospect, I would have built in the “Lock in your price now'” message right away. That was an obvious one. And I would have been more deliberate in pushing people towards upgrading to Pro.

REBEKKA: I wish we had allowed ourselves more time to do the production of all the different emails, because we did talk about the price increase internally for a long time. Asya and Joe spent months crunching the numbers, but we didn’t actually write the content and set it all into motion until the three- or four-week time period leading up to April 24th. That’s where the crunch was.

IAN: There were a lot of potential user actions that Andy [Fowler, Nutshell Co-founder and CTO] and I had to quickly think through after the price increase was already announced. What happens if they’re annual and switch to monthly, or they’re monthly and switch to annual, or they add users, or remove users? It would have probably helped to think through all of the implications upfront.

Another part of this was just learning how Recurly works, and realizing that if you have a pending change, any other pending change isn’t additive—it just blows away the old thing to makes the new one.

MIKE: If we had to do it all over again, I’d want to map out not only the strategy itself, but also the entire customer journey—they get this email, they click on this link, they go to this thing, etc. You have to wireframe that stuff out in advance. But much credit to our engineering team for jumping in and creating what we needed in very short order.

AUSTIN: I wish that we would’ve had a little more manpower to individually call each one of our bigger Classic users. I was able to have really good conversations with a lot of customers, but I think being able to proactively reach out to your older customers is very valuable, especially as you’re making improvements to your product. Talking to our Classic users is a great way to learn what’s working with Nutshell, and where we should start to improve even more. I’d love to do a deeper dive into that cohort at some point in time.

KATHERINE: It’s important to have relationships with your customers where you’re not just talking to them when something’s going wrong—you’re talking about how they’re finding value in our system, how they’re utilizing the features, what they’re not using at all. That’s really amazing information for us to have, because it helps us do a better job of serving our customers. Going forward, I think we should put more focus on that.

MIKE: This might sound crazy, but I think we should have sent out more emails to customers. When I put together the plan for the Pro upgrade emails, I got some pushback on the frequency of those emails, like, “You want to send how many emails?” And I was like, “All the emails.”

Our users aren’t necessarily used to being communicated to with that level of frequency, but my argument was, “When we’re trying to get attention in someone’s inbox, we’re competing with all the promotional and personal emails that are flooding in all the time.” That’s a debate that still rages on at Nutshell.

JOE: In terms of protecting against churn and contraction, I don’t really think there’s anything that I would have done differently. I think there are companies that would have communicated with their customers less, and taken advantage of the fact that these people aren’t paying that close of attention to their emails.

If we really wanted to reduce churn, we could have written our subject lines less clearly, or tried to be a little more evasive. We could have sent only one notice instead of three. There are things other people would do that we would never do. It doesn’t feel right, and it’s just not us.

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Comments

Tommy says

October 20, 2018

Having led two major price increases at just-post-IPO SaaS companies (RingCentral & New Relic) I really appreciate this write-up. It's a project that can vary extremely widely in both complexity and impact (negative or positive), leading to a lot of sleepless nights and hours lost in excel, but when you pull it off, it can lead to tremendous results. Congrats on making it through with a minimal amount of thrash, and while hopefully it's not necessary to do again, great work documenting how you would improve the process.
-Tommy

RSoft says

November 1, 2018

I Found your article very interesting and helpful.. Well explained.. Thanks for sharing this amazing information.

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