There are only two things certain in life: death and taxes. So, when Mark Faggiano founded TaxJar, a sales tax automation platform for ecommerce businesses, he had a pretty good feeling about it. “Sales tax came up a lot in previous businesses as a pain point. When the timing was right and we decided we wanted to start something, that was the one we really wanted to tackle,” said Mark on the formation of TaxJar. He launched the company with others he had worked with throughout his life—a motley crew of problem-solvers who specialize in “building products that solve administrative backend problems” for small- to medium-sized businesses and share “a handful of successful exits” between them.
And while Mark was certain TaxJar was a sure thing from the get-go, he also was certain it was going to be tricky: “We wanted to tackle something super complicated that would really make an impact and save business owners a ton of time. Sure enough, this has been the most complex thing any of us have ever worked on.”
Initial Pricing: A Tale Of Instinct And Anecdotes
One tricky thing Mark wasn’t so certain of: pricing. “The pricing we originally launched the business with—there wasn't a whole lot of thought that went into that.”
TaxJar determined its initial pricing much like most SaaS businesses do: “As part of customer development, we asked folks, ‘What would a product like this be worth to you? Would you pay this? Would you pay that?’ That was pretty much the extent of the research.” But, TaxJar wasn’t an in-use product then, and the research was limited and anecdotal.
TaxJar also didn’t have any direct competition when it launched. “There were entrenched players in the space that were going after a customer that was significantly out of market from us,” explained Mark. “So, we knew that we would be disrupting from a price perspective right away.” In a nutshell, TaxJar was cheaper than the enterprise providers that existed, but the team had no direct competition to benchmark and compare their pricing against.
Like many startups, TaxJar’s initial pricing system was based on instincts and anecdotes. And trusting their guts worked out pretty well at first. “We made up new pricing tiers as demand came along. Our pricing is based on transactional volume, and every once in awhile, we would get a question around, ‘Hey, I do so many transactions, I don't even see that as a choice.’ So, we’d come up with a price for that…As long as that made sense for that first customer, we just went with it.”
Shift Of Pricing Tides
In the beginning, TaxJar’s primary focus was customer acquisition. “We weren't really focused on revenue at all,” Mark said. The TaxJar team knew, though, that at some point the focus would shift to revenue, and in the back of their minds, they also knew that their pricing was off. “We had a pretty good feeling that our pricing was not reflective of how much value we were providing our customers.”
In the past, the TaxJar team had relied on their guts, and their guts were now telling them that their pricing was undervaluing their product. “When we thought about how much time we were saving people—and they would tell us how much time we were saving them—and we’d think about what they were paying us relative to that,” explained Mark. “We had a good idea that we would be able to charge more.” In fact, they had more than a good idea; they had feedback: “We got a lot of folks saying, ‘you guys are charging that? This is too cheap; you could charge me a lot more, and I would still pay for it!’”
To truly adjust pricing, though, the team needed more than instincts and anecdotes. “We wanted to confirm our instincts…[And] we needed help figuring out the right number—the right set of pricing to go to from where we were at.”
If you've got any sort of trepidation or questions around how your SaaS business should be priced, you absolutely have to go to Price Intelligently. It's an absolute no brainer.
Enter Data-driven Pricing
Mark received a referral for Price Intelligently (PI) from a fellow SaaS executive and was immediately pleased with the process. “We didn't really have to do a whole lot,” Mark said of the collaborative, methodical, and organized style of PI. “It was all very well laid out for us. “ Mark particularly liked that PI partnered with TaxJar to outline expectations, and then aligned those with the pricing research and analysis process. Even better? “Never at any point did I feel like we were put through any unnecessary hoops or had to do inordinate amount of work.”
Of course, Mark wasn’t blind to the risk that comes with pricing changes. In addition to sharing his gut instincts with PI, he also expressed his concern: “In the back of your mind, there is that feeling of like, ‘We're taking a risk here. We're on to something good; we've got product market fit already; we don't want to scare away what customers we have.” But PI provided its track record of data-driven pricing fueling positive growth, and TaxJar was put at ease. “Price Intelligently had the experience, and we were impressed by the process.”
Validation Creates Confidence
Gut instincts proved reliable for Mark and TaxJar. “The results came in pretty darn close to what we expected,” said Mark. But that doesn’t mean PI was all for nothing. “The process itself was worth it, because we validated our instincts.” And that gave TaxJar the confidence to move forward with the recommendations.
One of the most significant recommendations from PI focused on repackaging the pricing. TaxJar restructured its tiers to create three standard packages and three enterprise plans; they also altered the number of transactions within each tier to best reflect their customer base. This simplified the process of actually changing price points.
PI worked with TaxJar to ensure announcing and communicating the pricing change went over smoothly. While TaxJar experienced some churn as a result of the pricing change, the company was prepared for it, confident that “in the end, our accrue was going to increase so significantly that we were going to come out winners and get the ROI we were looking for.” And ultimately, the majority of customers told TaxJar that they thought the pricing change was “fair.”
“Our MRR just since the end of last year has tripled,” said Mark. TaxJar has reinvested that additional revenue into growing the business. They’ve been able to increase their hiring efforts, which has enabled them to support additional use cases. The pricing change also hasn’t hindered TaxJar’s ability to convert free trials into customers, thus validating the product’s value. “Price Intelligently was a hugely valuable exercise for us. And the results speak for themselves. I’m really glad we did it.”
Experience Leads To Insights
“If you've got any sort of trepidation or questions around how your SaaS business should be priced, you absolutely have to go to Price Intelligently. It's an absolute no brainer. They're the pros—the experts,” said Mark. While he is certainly happy with the growth TaxJar is now achieving as a result of the pricing changes, he’s also thankful for the insights: “You discover how your customers perceive your product and what they would pay for it—all backed up by data.”
Businesses are always evolving—especially in SaaS—and that means pricing has to evolve, too, to serve the customer, product, and company goals. But this notion doesn’t scare Mark: “We'll probably need to review pricing again in the next couple of years, and when we do, we’ll go right back to Price Intelligently. We would put it in their hands, let them drive, and look for the results, so that we can just follow them.”
Price Intelligently gave TaxJar the data and recommendations necessary to triple its MRR and fuel its growth. Curious as to what Price Intelligently can do for your SaaS business? Request a pricing optimization assessment now.Back to Customer Stories