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50% growth in MRR and ARPU growth from €15 to €21… this case is just insane.
A Dutch TelCo Disruptor offers a virtual phone system (SIM-less) for mobile services aimed at businesses. They operate in a SaaS model and have over 10,000 clients who, as we’ve learned, consider the product more valuable than the price they are paying for it.
But let’s not get ahead of ourselves too quickly.
The results speak for themselves, but we can’t stress enough how extremely helpful the guidance and support were with the implementation. Despite the initial hesitation, the Valueships team reassured us about the process and made us feel comfortable with the level of changes in pricing.
The client’s decision to ask us for help was motivated by a few factors.
The most significant reason was the realization that the current pricing was far from perfect. It was based more on gut feeling than thorough analysis, and the company knew there was still a lot to improve in terms of prices and monetization. There was even an internal attempt to make some price adjustments a year before our partnership started, but the Client’s team wasn’t satisfied with the results, and neither were the clients.
So, with the increasing desire to grow and the understanding that it’s certainly within their grasp, our Client’s CEO asked us for help.
The initial plan was simple. Client’s goal was to achieve a 10% MRR (monthly recurring revenue) increase.
Of course, there were some additional expectations in terms of expansion revenue, churn and customer satisfaction, but the main target was as clear as a cloudless day.
What happened next exceeded everyone’s expectations.
Before we move on, let us explain what’s going to happen here.
In some case studies, it’s completely fair to leave out some of the details and exact steps to make the story more compact and focus on what’s most important. In this one, it wouldn’t be fair to do so.
The final impact of our project is so immense that we feel it’s only fair if we explain exactly what happened there and how those numbers were even possible.
The first phase of the project was very extensive. We knew that we needed to get deeper than in most cases due to the unusual nature of the product. We couldn’t take anything as certain.
The standard procedure included gathering and analyzing all the available client data to get a full understanding of the following:
However, in addition to data, we conducted detailed interviews with users, asking them about the key features, issues, and their opinion about the service. We wanted to know what exactly they value in Client’s service and what can possibly make them churn.
During the process, we discovered issues regarding legacy plans, add-ons, discounts, and more.
After we finished the first phase, we came up with quite an interesting conclusion. We realized that just by sealing the discounting policy, we could achieve 15% growth in MRR. And it was just one element. We knew that there was still a lot more to improve in terms of aspects like legacy plans and packaging issues. So, it became clear that there is a potential.
Competition analysis was a tricky challenge because the Client’s really has a couple of direct competitors, but indirect competition (big telco providers) in this case matters more than in classical cases. We compared their service to companies like T-Mobile and other mobile giants. While it wasn’t exactly an apples-to-apples comparison, it gave us a much better understanding of what exactly they provide that those companies can’t. At this point, we were ready to proceed to the final research and solution.
The third step brings all gathered data into action. In the spirit of the value-based pricing strategy, we’re aiming to determine the accurate willingness to pay (WTP) and create entirely new, data-based pricing that works both for our Client’s and its customers. More specifically, during this process, we came up with the solutions, tweaks, and exact numbers for elements such as:
Based on the research, we have co-created a new pricing strategy and operationalization model for them. We also estimated the impact for existing customers, as grandfathering was not an option. To be on the same side, we used Monte Carlo method to different price increase and churn scenarios. Our initial impact calculation predicted up to a 30% increase in revenue after implementing all the changes and accounting for potential churn.
The changes we proposed were quite significant, and there was slight hesitation on the client’s side. Their team was afraid of the client’s reaction and the possibility of major churn. But we were confident about the method and created a step-by-step strategy on how exactly Client's should communicate and upgrade each client to the new pricing.
On top of that, we conducted an additional analysis that factored in a possibility of a very high churn, and it still made the numbers work in the client’s favor. But, as we’ll learn in the next section, the fear was completely unnecessary.
Now, the madness begins. The growth surpassed even our most optimistic predictions.
After the implementation, we also helped them create entirely new pricing for their business expansion in Spain. But let’s leave this for another day.
+ 50% MRR Growth
Average Revenue Per User (ARPU) grew from 15€ to 21€
Churn rate increased only by a tiny margin: from 2% to 3,3%
