Speaker unverified: recommendation

Transcript context

…are totally unrelated to the first business, the number of people who bring up, “Oh, and we invent an AWS.” It's like, okay, you need to use a noncliche example if you’re going to make that argument. And they could have killed themselves if they had gone in every other direction and they would've lost their edge in some sense. Figma is a great example for me of permission to expand in that, they literally nailed to a point of no credible competition, this idea of just the Photoshop killer basically, let's just say. And now they can talk about slides and text-to-app builders and every other dimension they want to go and everyone's like, “Yep, that's great.” Because you guys make great software. I think you have to first be known for, I'm trying to think—if Stripe launched a payroll product, it would carry the brand of Stripe in the sense of being, well, it's probably really good, really reliable, really fast. It probably has really nice APIs, it probably works really well, Workday, blah. You can almost impute all the ideas that would be carried into it. And I just think you have to get to that point before you have permission to make that bet. Obviously, it's a lot easier, if it's like stablecoin or whatever, but what kills me is when—I don't even want to name a weak SaaS company—but pick your favorite mediocre SaaS company and anything: is there any direction you would allow them to expand in your head? No, it's the short answer. Yeah, that's interesting: who are you really excited to adopt new products for versus who are you steering clear of the new products? Like if Linear launched a, I don’t know, let's just say a source control tool, like, yeah, it's probably going to be really, really good. I remember Seth Godin has this hilarious point where he talks about the value of brand once it's weaponized, and he describes Nike and Hyatt hotels, and he says, “If Nike opened a hotel, you can close your eyes and see it. You know exactly what the corridors are going to look like, the vibe of the whole place, you know everything it's going to be. If Hyatt launched a sneaker, you're like, ‘What?’” And it's just, that's the difference, because Hyatt has a logo and Nike is a brand, and that's the difference. A version of this actually, maybe quite literally, is I know I saw Equinox launched a hotel—which is a pretty good idea because, the design center there for the hotel is, you just want to be able to get a good night's sleep. And it's funny how that's like a differentiated product in the hotel space of, “Don't give me any of that other shite. I just want to be able to go to my room and not have a super loud noise outside the window or weird light coming into the room.” You just want to be able to get some sleep. Precisely. Yeah. Yeah. I thought that was funny. And you're mentioning Stripe’s expansions, and so this may be a good segue into your pricing model change. You guys are the poster child for the move from per-seat SaaS pricing—the old way of doing things—to usage-based pricing. Maybe you can describe a little bit about that and then how you implemented it and what you're doing with Stripe. he move from per-seat SaaS pricing—the old way of doing things—to usage-based pricing. Maybe you can describe a little bit about that and then how you implemented it and what you're doing with Stripe. Yeah, sure. Our pricing journey is long and complex, and a lot of your listeners or viewers will know— Intercom pricing is a charged topic at Intercom. Not anymore. We've turned a corner. Let me just back up a bit. So when we had too diverse a product strategy, we were trying to do sales software, marketing software, support software, and sales software is typically sold based on leads, creative and marketing was charged by how many contacted people you want to send, and support was sell by seats. So we had this extremely, let’s just say, detailed but unnecessarily complex pricing setup. And we lied to ourselves and said, “Don't worry because there's always going to be a human to help people navigate this, because you're never going to have to self-serve this.” But ultimately, people were just like, “I have been refreshing this for seven minutes and I can't understand a word of it.” And that was just one of the few things we got wrong in our first move up market. When Eoghan returned, one of the decisions he made was just like, “Hey, we need to sort out pricing.” And we handed back, truly handed back, I think about $50 million of revenue. I think— Was that controversial, like with the board, with investors? We had support for it. I think it was like, people don't really—people massively underestimate what it means to have a really happy customer base. It’s because word of mouth doesn't have an attribution or a UTM code, if you know what I mean. So they don't understand how to think about happy customers. So making the decision to basically standardize on an easy-to-understand pricing that's fair, transparent, predictable, et cetera—that was the first decision that we made. This was before AI, right, and that was us returning to Stripe, was a large part of that. In fact, as a small segue, I think a couple years prior, I had said to you or to Patrick, “Hey, you guys should actually build as part of your product offering a pricing page creator. ” And I think at the time though, I probably got one of those thumbs up replies or something like that. Was like, “Yeah, whatever Des.” It's on the list. I think you've done it since though. Yeah! But my thinking at the time was, basically some version of this: you need to not let your customers go wild with pricing. You need to actually put some sort of guardrails onto how they think about pricing. Otherwise, they're going to go and invent stuff that you guys don't support and then you're going to move all your business logic across— Pricing is writing checks. onto how they think about pricing. Otherwise, they're going to go and invent stuff that you guys don't support and then you're going to move all your business logic across— Pricing is writing checks. Yes. Yeah, exactly. And I remember sitting in a Stripe mini all hands, or whatever, explaining that, “Hey, now none of our business logic runs through Stripe.” And either you or Patrick was saying some version of, “That's not a good thing.” I think, generally speaking, my advice to any software company is, “Don't afford yourself too many degrees of freedom here. You'll actually cripple yourselves in a quagmire of complexity that'll take you many years and ultimately many tens of millions of dollars to get out of.” It's a weird failure mode that every single company falls into, which is, you start signing deals that have some super creative pricing structure and the customer negotiates A, B, C, D and E. And it's like, it is built in Microsoft Word, but it is actually—it’s just not built practically in code because it just exists with this one customer. And it may not even be possible to build in codes. Sometimes it's kind of ambiguous. And if in the subsequent year this happens, then we go back to the prior year and we do an adjustment— I call Rick and he decides what the discount is— There's like a time travel component to the whole thing. And then they obviously have this, again, we see all customers running into it, these kind of manual billing issues where there is a guy who has to deal with all these contracts that were agreed during the sales process. And so as you're saying, an opinionated billing engine is actually pretty important, assuming you believe that billing should be automated. If you're happy manually getting out the calculator for every single customer month, then that's fine. And probably got a large deal desk function and doing all the work behind the scenes. So anyway, that was the first piece of our pricing. And then the second piece was obviously when we launched Fin, then it was like, “Hey, how do we charge for this,” because we're replacing seats. And at the time—it has improved out this way fully—but at the time Fin looked like it was going to be pretty cannibalistic to Intercom. It was like, “Hey, if we're automating—at the time, what we thought was 25% of your revenue—we assume that means 25% less seats in the future.” Or at the very least what it would likely mean is the growth rate or the NRR of the seats model will be affected by the fact that Fin’s doing all the work, and now at 65%, you'd expect it to be even further true. So it was like, “Hey, how do we charge in a way that makes sense?” And then also how do we be aggressive? As in, we really wanted to put a mark on the market that sort of says we're very AI forward. I think what Eoghan and then Darragh came up with was just like, “Hey, let's just charge per literal resolution, like every time we do work, we charge them. When we don't, we don't.” It was a bet.…

Stored transcript either side of the excerpt. The highlighted words are the published quote; the surrounding text is unedited source, never generated.