AMA with Issuu: The Evolution of SaaS and Aligning Subscription Pricing With Value
The global Software as a Service (SaaS) market size is projected to reach USD $307B by 2026, from $159B in 2020. To learn more about how the SaaS industry has evolved, we virtually sat down with Joe Hyrkin, CEO of Issuu - a Recurly customer since 2014 and pioneer in the SaaS space. And, as a testament to his leadership, Issuu doubled its growth rate in 2020, which during a global pandemic is no easy feat.
In this virtual AMA, Joe shares how the SaaS industry has evolved when it comes to subscriptions and how Issuu is using subscriptions to fuel its rapid growth.
With 25 years of experience in SaaS e-commerce, how have you seen the subscription industry evolve over time?
Joe: I got into the SaaS world long before SaaS was even a known acronym. I joined a company called Varage, which created software for publishing and managing video content. We realized that we could sell this software to large media companies to help them get their content shared on the internet. We uploaded customer content and charged them a subscription fee. In some instances, we were doing rev shares around content where they were getting advertising. Then, over the next couple of years, Salesforce began to operationalize and institutionalize the notion of SaaS and subscription-oriented software.
Fast forward to today, when companies are basing their entire business models around subscriptions. We've watched businesses like Adobe completely transform from being packaged off-the-shelf software to being subscription-based. The subscription business model provides a whole range of flexibility for software creators and for tools providers. You can build features that you charge a subscription for that leverage other subscription products.
The flexibility around your pricing strategy and how you're integrating with other partners is what makes the SaaS model so appealing and so useful.
How has being a 100% self-service business enabled you to grow and scale effectively?
Joe: Issuu is very much a self-service model. We don't have an external sales force. We don't have a sales team that's meeting with customers; that’s enabled us to scale significantly.
From the start, we've been a digital sales-oriented business. We use a variety of tools to help enhance the subscription sales process. Most importantly, we leverage viral word of mouth. Our customers are telling other customers about the value of using Issuu, and rather than have to make an appointment with a salesperson, they can come to our site and get access to the information they need. They can see examples of how it works and buy the tier or the package of tools that makes the most sense for them. All of this happens online.
How important is a seamless checkout experience?
Joe: It's our business. Our entire business revolves around the transaction process being really easy. The magic of a system like Recurly is that it just works in the background; our customer doesn't know that it's Recurly powering our subscription transactions. All they know is that they can get rapid access to the features and capabilities they need. They can scale up and down as they need. They can put their credit card in and get the tools they want.
In the end, we're all about creating a great set of products and tools that are so meaningful and valuable to our customers that they're willing to pay for it and build their business around it. And the only way that can happen is if there's a very efficient, seamless system to help them understand what the tools are, how to pay for them, and what the fees are. This experience makes the difference between someone starting to buy software before getting bored or frustrated and abandoning their cart, and completing the purchase.
How do you look at the value that subscriptions deliver?
Joe: One of the big challenges that I see in the SaaS world is there are pretty standard ways that companies offer subscriptions. Most companies have three or four tiers. They bundle a bunch of stuff into each tier. That can be a good starting point, but they miss the notion of what the real value is in the overall set of tools that they’re delivering and optimizing for that.
Aligning pricing with the value that’s being delivered is the most important thing that a SaaS company can do. If you demonstrate to your customer that they're paying for something that’s an integral part of their business, they’ll continue to pay as long as it's valuable to them.
For SaaS companies that are looking at pricing, having the flexibility to adjust what goes into each tier and each package — especially as you grow and evolve — is critical. What was super valuable three years ago may now just be table stakes. You need to constantly adjust how you're charging and how you're creating tiers based on what the market and the ecosystem look like. For example, an integration that was unavailable three years ago may now be the cornerstone of why someone is starting to use your services or it may be the launchpad for rapid growth.
You have to understand what pieces are driving growth and the appetite for your product. If you can understand those elements, you can start to create the right tiers. It goes without saying that having a subscription platform that gives you the flexibility to make adjustments on an ongoing basis is invaluable.
What changes do you see on the horizon for SaaS subscriptions?
Joe: One of the big lessons from 2020, on a business side is consumers have demonstrated a willingness to pay for content that they used to want for free. As businesses, we have transcended the notion that valuable content should automatically be made available for free. People are now willing to spend money on the products and content that matter most.
I believe we are going to see the industry evolve into a whole range of interactions and product purchasing decisions that used to only happen in person or were expected to be made available free of charge. Because of the flexibility available with the subscriptions, there's the opportunity to experiment and test with your specific audience. You can charge what you want based on what the market will bear and based on the value that you're delivering, and you can rapidly adjust those prices based on data.
To hear the full conversation with Joe and gain more valuable SaaS takeaways, listen to the full audio recording of our conversation.