John Bonini recently talked with ProfitWell Founder & CEO, Patrick Campbell, for an episode of the Metrics & Chill podcast. Patrick shared how ProfitWell grows one metric that’s crucial for both them and their customers: revenue per customer.
ProfitWell offers a handful of products designed to help mid-market and larger subscriptions companies optimize their pricing strategy and grow revenue. They know the power of revenue per customer—and they’re uniquely well-positioned to grow that metric for themselves.
Read on for more details, or listen to the full episode here:
The Metric: Revenue Per Customer
Whether you call it ARPU, ACV, or any number of other acronyms, Patrick and team know that revenue per customer holds the key to unlocking revenue growth. Once you hit a certain point in customer acquisition, growing revenue per customer becomes the easier, more effective way to grow.
It’s also a metric that many companies overlook or ignore. According to Patrick, that’s because there’s a perception about revenue per customer being hard to influence. But in his experience, that just isn’t true.
The Growth Opportunity of Revenue Per Customer
ProfitWell is in a unique position where they have access to a lot of pricing data and metrics. That’s a big part of how Patrick identified the relationship between revenue per customer and overall company performance and growth.
“What I found really early on is, if you look inside any business, that’s the number that’s always flat,” Patrick said of revenue per customer. “When you look in businesses that are really growing, that number is always going up.”
There’s a reason for that, as Patrick points out: Revenue per customer has the power to impact so many other metrics “in a really positive way in terms of growth.”
ProfitWell’s 3-Pronged Approach to Growing Revenue Per Customer
About 85% of companies I talk to are underpriced.
Patrick and team took a simple, 3-pronged approach to growing their revenue per customer.
The steps are simple, but still, most companies don’t want to take them. According to Patrick, that’s because they “sit at the nexus of uncomfortable and important. You don’t want to talk to your customers about price.”
Revenue per customer is influenced primarily by price and the number of things you’re selling to customers. So the 3 levers ProfitWell pulls to grow it include:
- Value-based pricing
- Raising the price and going upmarket
- Offering more products
From the beginning, ProfitWell based their pricing on the value their customers get from the product. “We charged based on a floating number, so as they used more, as they got more value, they paid us more. That was really powerful because it baked this expansion revenue into how we made money.”
Next, Patrick and team took a more proactive and deliberate approach to customer acquisition, defining baseline criteria for the companies they target and actively pursue. “From a target inbound and target outbound perspective,” Patrick explained, “if you’re doing less than $10M in revenue, we shouldn’t be actively pursuing you.”
That conscious move upmarket allowed ProfitWell to raise the price for one product every single quarter.
Lastly, they unbundled a handful of features from their core products and began selling them as separate add-ons.
As Patrick said, “You have customers who are happy—sell them more things.”
His recommendation to identify features or pieces of your product that fewer than 40% of your customers use. Those are good candidates to pull out and charge customers more for.
“We looked at a bunch of support data, we went out to our customers and our prospects and collected data around what they preferred, where willingness to pay was. And then we made a decision on what the structure looked like.”
For ProfitWell, that meant offering priority support and real-time data ingestion, among other features, as add-ons to their core products.
Patrick and the ProfitWell team have been taking several steps to move upmarket and grow deal sizes, so their revenue growth can’t be 100% attributed to the approach above.
That said, Patrick told John their ACV has continued to grow with every single deal over the last 3 years. “We’ve quadrupled our revenue per customer in the past 12 months,” Patrick said.
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