Leveraging customer research to make smart packaging & pricing decisions.
How Glofox, the all-in-one gym management system leveraged comprehensive customer research to inform its packaging and pricing.
Aggelos Mouzakitis (AG) is the PLG & Pricing lead at Glofox and an expert in customer research.
Andreas Panayiotou (AP) is the Director of Pricing & Monetisation at Notion Capital, helping founders to drive growth through pricing and monetisation excellence.
Key takeaways and highlights from my conversation with Aggelos at Glofox:
AP: Could you tell us a bit about Glofox and how they go to market today?
AG: Glofox is an all-in-one gym management system, helping gym operators to manage bookings and payments, automate marketing and sales, and drive cost and efficiency savings. To date, it operated a purely sales-led motion, offering three different packages silver, gold, and platinum.
AP: Aggelos, could you give us a bit of context over the opportunity for Glofox when it comes to its packaging and pricing, and why now was the right time?
AG: Every business which achieves product-market-fit, and is growing with scalable and repeatable sales motions almost certainly has an opportunity to optimise packaging and pricing. We had reached that point at Glofox. The timing was right for us.
Secondly, we wanted to revamp our go-to-market by complimenting our sales-led motion with a product-led motion to facilitate our next stage of growth. Pricing is ultimately a growth lever for businesses at the growth stage. It is inherently part of your product, your offering. No matter how good your product is, when you want to make changes to how you go to market, you have to rethink the trade-offs between value and price.
AP: How did you structure the project, particularly the customer research portions?
AG: We started with a number of exploratory interviews with customers, followed by some internal product data analysis, workshops with customer-facing functions and then a quantitative survey.
AP: Why was it important to you to lean so heavily on customer research rather than internal data and subject matter expertise?
AG: We wanted to understand the buyer psychology of our customers which you can only do by talking to them. I believe buyer psychology operates in the following way, they decide on the value they want, and then they consider the trade-offs they need to make given the options available to them. So they might accept less value than they originally wanted depending on the trade-off. We wanted to understand the trade-offs our customers make so that we could develop the right packages and price points.
AP: What was the rationale for conducting customer interviews first rather than analysing readily available product data, and could you share any tips on how to conduct these exploratory interviews?
AG: I advocate conducting interviews first so that you go into those conversations with an open mind. Had we analysed our product data first, we may have taken certain biases into those conversations and been less open to what customers were telling us. So we preferred to use internal data to validate what we were hearing rather than the other way around. I also don’t think you need to conduct 100s of these interviews. Seven to ten per major use case is enough.
In terms of tips, you’ve got to have an open mind in the interview and follow the conversation naturally. It would be a mistake to be overly rigid and structured in your approach. Yes, there are certain questions you want to be answered but you also have to be open to exploring topics you didn’t initially consider.
AP: It’s relatively easy to interview and survey existing customers, but it's often more interesting to speak to prospects. That’s typically harder to do, how did you solve that?
AG: You’re absolutely right, it's much harder to recruit prospects, and we didn't want to interrupt the existing sales motions. To get around this, we squeezed some questions into the existing sales motions to build up some insight without disrupting the customer journey.
AP: What were the key things you wanted to learn from the customer research?
AG: I see pricing like a pyramid. At the bottom is segmentation and positioning, then packaging, and then price on top. We wanted to explore all three topics through our research. Arguably the most important key questions we had was finding out who our best customers are, which customers we may not be delivering on our promise, what the customer journey looks like, what their purchasing criteria are, and what characteristics separate segments. Answering these questions helped us to segment our customers based on what they want from us, and guide the packaging design.
AP: How did you decide to segment customers, and how did that help you to inform your packaging strategy?
AG: We looked at a number of potential metrics and segmentation criteria, such as the number of members, revenue etc. and found that the number of transactions reflected customer needs most effectively. Small customers tend to care about growth and operations, whilst larger customers care about managing their community and a large franchise/network of gyms, and integrations with partners. These insights were critical to helping us develop a packaging lineup that reflected our customers' needs depending on their maturity and size.
AP: How did you decide which features to allocate to each version of your packages?
AG: It’s important to keep in mind that there is never a perfect answer to pricing, there are different directions you can go with pros and cons. We leveraged what we learned through our data analysis, and customer research to understand which aspects of our product were more or less valuable. Then we ran workshops with our customer-facing teams to review different versions of the packaging design to get their perspective.
Overall we wanted to make sure that we included a sufficient level of value in each package to meet the needs of the segment it was intended for, and hence achieve package-segment fit. There are individual features and decisions you debate and aren't sure where to place, but that’s part of the process.
AP: Sales and Customer Success are important stakeholders and valuable sources of input, but is there a risk of relying too heavily on their views, especially as their incentives may not be aligned?
AG: Great question. Sales tend to want to keep the basic packages very basic so that they can drive up-sell to larger packages. Customer Success wants to ensure there is enough value in the basic package so that customers are happy and support tickets are minimised. This is a potential source of friction. The best tip I can give is to ensure leadership has clearly communicated what success looks like. By getting internal teams aligned around a common view of success it’s easier to make decisions and achieve agreement.
Sales also had strong views at times, but it's important to respect these views even if you disagree, as they know the customer better than anybody. Ultimately I was developing these new packages for customers and for Sales to help them win in the market.
AP: How did you validate your new packaging design?
AG: We ran a quantitative survey where we asked customers questions that allowed us to segment them. We then presented different package versions and asked which package they would pick. Customers picked the packages we predicted. At that point, we knew we had achieved package-segment fit.
AP: How did you validate the prices you wanted to charge?
AG: We also tested prices in the quantitative survey by leveraging the Van Westerndorp approach. It involves asking customers what price they regard as expensive, fair and cheap to triangulate sensible price ranges. It’s an easy-to-use and widely accepted price research methodology I recommend considering.
AP: Where did you land with your new packaging and pricing?
AG: We introduced an essential package on a PAYG model based on the number of transactions. We actually made the package free to use until you hit a certain transaction threshold to support a frictionless land and expand PLG motion. We also made some tweaks to our other packages to better align with segment needs. Overall the survey validated our price level, so we did not make significant changes to our fees.
AP: Thank you Aggelos, I think there’s a lot early-stage businesses can take away from your approach and insights. It also underscores the importance of putting customers at the heart of your packaging and pricing strategy and how one can go about doing that.
If you want to learn more about how to make smart packaging and pricing decisions check out the Principles of Pricing.