Pricing Teardown: BarkBox

By Patrick Campbell
 

Deeper insights into BarkBox's Pricing

BarkBox is a six-year-old, New York-based startup that sends out dog-focused monthly subscription boxes to over 500,000 monthly subscribers. Achieving profitability in Q1 of 2017, the company is predicted to reach revenues of $250 million by the end of 2018.

Today, Patrick, Peter, and Sloan look at how BarkBox is using their understanding of their customer and pricing to build a profitable, growing company.

Retention baked into monetization

BarkBox boasts retention rates of 95%. That is a retention rate a SaaS company would be proud of—it is extremely high for a consumer company. For perspective, Blue Apron's retention rate after a year is just 15%.

Retention is built into the BarkBox pricing page. The first step of the signup process is to select the size of your dog:

Screen Shot 2018-03-29 at 5.28.31 PMThis seems like an obvious segmentation opportunity, but as the copy says, “All boxes are the same price, regardless of size.” The data shows that BarkBox is making the right decision not differentiating by dog size:

WTP by SizedDog (0;00;05;07)

Though owners of large dog breeds are used to paying more to look after their pet, that WTP isn't translated to the subscription box, meaning this isn't a good segmentation opportunity.

So instead, BarkBox use this as a retention opportunity. Co-founder Matt Meeker started the service because his 150 lb. Great Dane kept destroying toys designed for smaller dogs. By designing boxes for different dog sizes, customers are more likely to get treats and toys that are tailored to their pet in the very first box. Therefore, they will continue to order.

BarkBox continue to use their pricing strategy to bolster retention on the next page:

Screen Shot 2018-03-29 at 5.28.48 PMThis page is designed to get customers signed up for six months instead of just a single month, recurring. Though there are four plans, there are only three options here:

  • 1 month, billed monthly
  • 6 months, billed monthly (more expensive) or billed today (less expensive)
  • 12 months, billed monthly

The page is designed to get you signed up for six months, paying now. The “most popular” banner and the clear signal of how much it costs (“$138 billed today”) draw the eye to that option. This is a great example of pricing page design. With just two simple elements, BarkBox can get customers signed up for at least six months and get that cash in advance.

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Great WTP, with room to grow in both directions

In 1994, the pet market was under $20 billion. It now stands at almost $70 billion and growing:

Size of pet market (0;00;07;06)BarkBox is in a great position to take advantage of growth in the market with the right pricing strategy. When we asked 11,984 dog owners about their willingness to pay, the data showed that BarkBox is right on the money with their pricing:

PriceSens_Overall (0;00;05;00)
The median WTP for the group is $23.88, entirely in line with the $23/month box that the sign up flow pushes customers towards.

But the data also shows a wide range. The lower bound is under $15, while the upper bound is over $35. This means there is scope for BarkBox to “complicate” their pricing. Consumer products try and keep pricing simple to reduce the friction in the sign-up. This often leads to them leaving money on the table. Here, BarkBox has options at both the premium level and the lower priced level:

  • To capture some of the customers pushing towards the $35 price point they can complicate with an add-on. BarkBox is doing exactly that with a $9 additional toy. This leaves the base price simple but adds the option for higher WTP customers to get more value.
  • To capture some of the customers nearer the $15 lower bound they could complicate with differentiation. With the current pricing strategy, everyone pays the same price for a box. There is space for a mini-box with a lower price point that can bring newer customers into the product, ready for upsell later.

A customer journey that increases monetization

From all the pricing pages we have looked at so far, this is probably the best designed regarding monetization. Netflix was good, but perhaps too simple. Salesforce was a disaster. Even our favorite, Slack, had design flaws.

Everything in the BarkBox pricing page, or pages, is designed to keep you moving and make the decision to sign up easy and lower activation energy. They understand the customer journey. It starts at the homepage:

Screen Shot 2018-03-29 at 5.28.19 PM
“Get started,” “Give a gift,” and discounts. Any customer knows where they need to go from this page. Next up is the dog size page from above, then the actually pricing page. Once you have selected your pricing, you aren't taken to the checkout. Instead, they use this option to complicate:

Screen Shot 2018-03-29 at 5.29.23 PM
That additional $9 add-on to increase ARPU. Not every customer will take this opportunity. But the ones that pushed the WTP range higher in your survey will. This single step adds almost 40% extra to the price per month. Next step again isn't the checkout; it's to create an account:

Screen Shot 2018-03-29 at 5.29.31 PM

Consumer products know that until you enter your card details, you haven't made the decision. There will be a drop-off at that point. So this allows them to capture you in their system even if you don't complete the purchase. If you sign up after this, great. If you don't, then expect nurturing emails over the next few weeks until you come back and get the box for your dog.

Cat owners don't even like their cats

Ever wonder why there isn't a MeowBox. Patrick, Peter, and Sloan have the answer for this.

WTP cats vs dogs (0;00;04;13)

But for BarkBox, there are good dogs, Brant. As Patrick says:

“This is a very, very strong pricing strategy. They are clearly crushing it. They own the market. They are continuing to own the market, and I don't see someone else coming to get to them.”

It's not perfect—they are missing out on acquisition because of the focus on monetization and retention. But they really seem to understand what their customers want and the journey they are on. For consumer and B2B products, this is a great case study in pricing design.


Did you miss any of the previous episodes? Check them out here:

Episode 1 - Netflix Pricing Teardown

Episode 2 - Salesforce Pricing Teardown

Episode 3 - Spotify Pricing Teardown

Episode 4 - Slack Pricing Teardown

Episode 5 - Rent the Runway Teardown

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Patrick Campbell

SaaS Economist

Find Patrick Campbell on twitter or linkedin

   
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