No one prints and signs documents anymore.
In this episode of Pricing Page Teardown, we are bringing you not one, but two pricing pages. We square the incumbent, DocuSign, up against the insurgent, PandaDoc, to show how these two companies in the same space, but at different stages of growth, are thinking about pricing.
DocuSign has filed for a $100 million IPO with revenues up 36% in 2017 to $518 million. It is rapidly expanding away from just offering eSignatures to offering payment options and managing the entire lifecycle of your documentation.
This has left room for new kids on the block such as PandaDoc. Started in 2013, the company now has 8,000 customers and is growing with the help of a $15 million Series B round in 2017, which included investment from Microsoft and HubSpot.
Let's put these pricing pages up against each other and show how both could be getting more of this growing market.
Features vs. outcomes
Everything on the DocuSign pricing page is about eSignatures:
“Choose the #1 eSignature solution” and “send documents for signature” show that DocuSign wants to push you towards them as the leader in the space. This makes sense—they are the leader in the space.
But this leads to the pricing page feeling prosaic. You'll know you can send documents for signature, you'll know that you can use their mobile app, you'll know your documents will have “basic fields” (protip: “basic” is not a good word for when you are designing your pricing page). It feels very functional. It also feels a little dated. When looking at the page, Peter notes:
“I will tell you this, though. We've been a customer of DocuSign for a very long time, since inception in 2012 or so. The color scheme, the design—nothing has changed in those six years.”
He is only slightly off. 2014 was their last major site redesign. The pricing page has been basically static ever since:
Though they have added that great word “basic.” The actual pricing has changed slightly, as have the names of the tiers, but you wouldn't be able to tell if you were on the 2014 page or the 2018 page at a glance.
The PandaDoc page takes a different approach:
It looks like 2018 SaaS. And in 2018 SaaS, features are table stakes. It is now all about the customer and their outcome. As Patrick says,
“Outcome-based pricing is what you want to get to and if you are in a commoditized market that is the next echelon of growth.”
PandaDoc is outcome-based pricing. All plans offer unlimited documents and signatures. Instead, they concentrate on how PandaDoc can make the user's life easier with document templates and analytics. They are saying to their customers that the signature is just a function of what you really want to do, which is share and understand great documents. PandaDoc wants to make sure any prospective user understands that.
Anchoring vs. freemium
In the past four years, DocuSign has kept their Individual/Personal plan at the same $10/month price point. That is because it exactly aligns with the willingness to pay for their customers:
At the higher end, they are leaving ARPU on the table. For unlimited documents, the willingness to pay is as high as almost $70 per month for one user, and $60 for 3+ users. The medians are lower at approximately $45, but DocuSign's pricing is lower than this. Their Standard plan is just $25, while their Business Pro plan is $40.
To take more advantage of the fact that customers are willing to pay more, DocuSign should make better use of the anchoring bias. The anchoring bias is our tendency to latch on to the first piece of information we come across and use that as the reference for all other decisions.
In pricing, this usually means we focus on the lowest price and use that to evaluate other prices. For DocuSign, there is a 4X increase between the lowest price and the highest price. A customer evaluating this pricing page isn't just looking at the features of the Business Pro plan and deciding based on that information. Instead, they are looking at the Personal plan and wondering if the Business Pro is worth 4X as much.
By narrowing their pricing, DocuSign could use this to their advantage. We ran a test of 20,122 e-signature decision-makers asking them to choose between two plans:
One group was asked to choose between a $40 plan and a $60 plan
The other group was asked to choose between a $50 plan and a $60 plan
When the jump was $20, 64.3% chose the cheaper plan. When the jump was $10, 60.19% chose the more expensive $60 plan. The anchor in the second version wasn't so far away, so the shift seemed more logical.
If DocuSign's pricing was $10 (as this is spot on), $35, and $45 for the Personal, Standard, and Business Pro plans respectively, they could increase ARPU with a marginal hit on leads coming through the door.
PandaDoc does have narrower pricing. But they don't have such a close understanding of their customer's willingness to pay:
The willingness to pay is lower overall due to branding but they are still widely underpriced. They could charge $10 more per user per month and still retain their conversion rates.
Likely, they have lowered their pricing to increase acquisition. Instead, they could be using freemium. Freemium is for acquisition rather than revenue, so it is ideal here for allowing PandaDoc to use it to get leads through the door and free up their pricing for monetization.
This approach will require more work in terms of filtering out bad leads, but that should be paid for by the increase in ARPU through monetizing the best leads better.
The incumbent and the usurper
“I love outcomes. It's so important. You want to align with your customer. If your value metric, what they need to do to stay retained, and what they need to do to be acquired are all aligned and that's the outcome? That is the game, friends.”
- Patrick Campbell
In their own ways, both PandaDoc and DocuSign are doing a great pricing job. DocuSign knows what its customers want to pay and PandaDoc knows how to appeal to its customers.
In their own ways, both PandaDoc and DocuSign could improve their pricing strategies. DocuSign needs to think about anchoring and PandaDoc needs to think about freemium.
We use DocuSign, but PandaDoc is making us think again. As a pricing company, we should support companies that think a lot about their pricing strategy. What PandaDoc is doing isn't perfect, but they know that outcome is going to win long term. Which technology you have is no longer enough. Pricing and SaaS isn't about function anymore—it is about the outcome.