It's the Dumb Discount Season again ??

Hey folks,? One of our former competitors recently sent me this email...

Let me tell you a tale of two companies.

They started off in the same space, at the same time. Two user onboarding tools jostling for attention in an increasingly saturated market. But as time went on, the two companies grew apart.?One focused on startups like themselves. Self-serve, product-led deals. Quick to close - but also oh-so-price-sensitive - and quick to churn.

To stay competitive - they had to give more and more discounts.

?Meanwhile - the other company decided never to discount their prices, focus on enterprise product features and obtaining security and quality certification, and developing business in the mid-market & enterprise segments. They initially lost out in the startup sector.

Fast forward 8 years - one of the companies is now 10 x bigger than the other.?Guess which one.?

Discounting is a slippery path to hell.?

A video TL;DR for you as usual...

Yes, Black Friday may be approaching - but do you need to take part? It's a tasteless, B2C festival of impluse-shopping and unnecessary consumption. But real, especially larger companies don't impluse-shop. They make deliberate decisions based on a careful evaluation which product meets their needs best.? That's why Black Friday discounts are so useless when you want to grow your revenue sustainably:?

• You attract a ton of customers?who are signing up for a very bad reason. They are?price-sensitive, and ironically - tend to be a lot more demanding and create more hassle for your CSMs than people who made a value-based decision to buy your tool. And in the end:?they?churn?more, bring you less revenue, and generate more support costs.
• Your existing customers are feeling resentful. If your tool is very transactional and you offer monthly plans, they may even cancel their existing subscription and sign up again at the promotional price.

Here’s how you can do better:

I created a few examples of a more sustainable Black Friday offer you can promote to your users directly in-app, to drive?expansion revenue: ?

• Instead of offering discounts, add extra value to your plans?- e.g. access to premium features from higher plans in lower plans, add hours with a CSM, priority support etc. ?
• Instead of only chasing new customers, provide special offers to your existing customers to push for?expansion revenue ?as well: e.g. provide a special offer on upgrades to higher plans (e.g. by giving?extra allowance?like in the example below if your?pricing is usage-based ), or?upsell bundled add-ons ;

• With Userpilot , you can easily copy the slideout and customize the text on?for audience of each plan, and then target the offer to the right audience in the audience settings:?

• Team up with another company?(offering a complementary?product/service to yours) to create?a special reduced plan for both tools. You can then promote it in-app in both of your products, again, using audience targeting to exclude the?users who are already your mutual customers with tools like Crossbeam.

That way, you’ll actually create a more sustainable growth from your BF offer.

If you want to learn how Userpilot can help you with that -?Let's chat .

If you feel you have to discount...

Look - I won't judge.? Here's a handy guide we prepared together with Valueships on how to discount in a smart(ish) way (find the full guide here):?

Key steps before Black Friday for SaaS:

Define clear objectives for Black Friday/Cyber Monday deals:?

• Promotions should have specific goals, such as increasing sales, improving cash flow, or boosting brand awareness. Participating without a clear strategy may hurt profitability.?

Avoid deep discounts without justification:

• Large discounts (e.g., 50%) may increase sales volume but reduce profit margins significantly. Consider smaller discounts, such as 40% or less, to maintain profitability.

New revenue opportunities:

• Offering discounts during Black Friday/Cyber Monday can generate significant new revenue and attract customers who might not have otherwise purchased.

Timing and customer journey:

• Black Friday is a great time to tap into customers who are already in a buyer’s mindset. Ensure your offers are visible and easy to purchase during this period.

Target different customer segments:

• Use different campaigns and personalized messages for various customer groups (new, existing, trial users) to optimize engagement and conversions.

Be careful with monthly subscriptions:

• If customers can easily cancel, deep discounts on monthly subscriptions may not be effective. Ensure your product provides long-term value to avoid high churn rates.

Discount strategy types:

• Utilize a mix of discount strategies: blanket discounts (across all products), legacy discounts (on older products), and flagship discounts (on best-sellers).

Monitor the lifetime value (LTV) of discounted customers:

• While discounted customers tend to have lower LTVs initially, there’s potential for revenue growth through price increases and product expansions later on.

Consider offering discounts in kind:

• Instead of price cuts, offer additional features, users, or extended services (e.g., "buy one, get one free" or "more users for the same price") to protect margins.

Marketing tips for SaaS Black Friday deals:

• Start early, be clear and transparent in your discounts, create urgency with countdowns or limited-time offers, and use paid advertisements to boost visibility.

Review and analyze results:

• After Black Friday, assess your metrics like churn rate, customer acquisition costs (CAC), and lifetime value to see if the promotions were profitable and inform future strategies.?

Pricing thought of the week?

Food for thought: will recurring revenue go away with AI agents?????Kyle Poyar suggests that might be the case, at least for some SaaS companies:?

Hope this was interesting/helpful - and as usual, see you all next week!?

Emilia from Userpilot