1. More users make you sticky. As one CS professional at our portfolio company Apptopia shared with us: “More users on the platform cost us nothing but make us very sticky. We now have 20 champions at the customer as opposed to just a senior level champion that may not be using the product as much as personnel below them. If we’re in multiple departments in an organization with many users, it becomes much harder to say no one is getting value.”
3. Per user cuts both ways. If you charge per user and your customers are expanding, you benefit. However on the flip side, if you charge per user and your customers shrink, you get hurt. Your dollar retention metrics suffer not because your product is deficient but because your pricing is deficient. In a recession, software companies that price per user see the ugly side of per user pricing.
If you’ve got a churn problem, offer your customers unlimited seats. Price based on value to the customer and to you. Said another way, price based per product, not per user. Your gross and net dollar retention metrics should improve markedly. Shoutout to our portfolio companies Apptopia.com (mobile data on every app) and Divvyhq.com (content marketing collaboration software) for inspiring this article.
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