Increase Your AOV

Let's make more money

Author

Rameel Sheikh
May 01, 2024

Having “the talk” to increase AOV

Insight from Kyle Poyar

I bet you were wondering why I reached out earlier this week about chatting

Talking to your audience is the best way to uncover insights.

Like me, have you ever considered tapping into your customers to fine-tune your pricing and bump up your Average Contract Value (ACV)?

It's a goldmine of insights. But here's the catch: don't straight-up ask them, "How much would you shell out?" You're bound to get answers that are on the low end.

Kyle Poyar has noticed a pattern in the data from over a thousand SaaS startups. As companies scale from $1M to the stratosphere of $100M+ in Annual Recurring Revenue (ARR), ACV soars by 100% or more.

Here is the typical ACV Growth Journey of a SaaS Startup:

From Seed to Post-Product-Market Fit: ACV climbs by 60%

  • B2B customers aren't as price-shy as startups or individual consumers.

  • A solid product-market fit gives you a clearer picture of who your ideal customers are—those who see the value in what you're creating and are willing to pay a premium.

  • New customer cohorts won't bat an eye at price adjustments. For them, it's just the way things are.

When going from the Expansion to the Growth Phase, the ACV bumps up by 40%

  • You likely have untapped potential to capture more value from your offerings.

  • As evidence of your product's ROI piles up, and you get better at engaging with the decision-makers, you can refine your pricing strategy.

  • ACV growth now leans more towards smart packaging and usage-based models rather than straightforward price hikes.

Sure, the advice to chat with users to grasp their needs and pain points isn't groundbreaking.

Yet, a crucial piece often missing from these discussions is the willingness to pay.

You've got to ask the right questions to unearth those insights.

Some friendly advice before you dive in:

  • Don't label these chats as "pricing talks." Position them as general feedback sessions.

  • Engage with folks who have a say in the spending. In product-led growth (PLG) scenarios, your user might also be the buyer. In enterprise settings, it could be someone different.

  • Steer clear of leading questions. Keep them open-ended and neutral. Embrace the silence that might follow a question. It's all part of the process.

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