Reach Target Market Through Pricing, Constraints, and Self-selection


In the first years of growing Braintree we focused on finding a very specific type of customer that could help us reach the profits we needed to scale the company. At the time, we had too many prospects that consumed our time and didn’t generate revenue. We didn't have the money to hire more sales people because we were determined not to take any outside capital. We had to work within our constraints. Here are the three methods we tried.

Method #1: Add constraints to your offering

To address our constrained resources and growing demand, we decided to add a minimum processing volume requirement of $250,000. This would allow us to focus our limited resources on high volume merchants with true pains and problems that we could solve. It was a difficult decision because we loved working with start-ups. We just didn’t have the capacity to make the investment for a future return (note: we now work with companies of all sizes).

Our change had the intended effect; inbound inquiries from new and lower volume merchants decreased. We did, however, receive some angry emails from prospective merchants. We would try to explain our predicament and some would understand while others would continue to express frustration and or anger. Maintaining a good reputation was extremely important to us, so having upset prospective customers was unsettling. We knew that we couldn't be all things to all people, which is why we had added the minimum volume requirement. It was just disappointing for us and we figured that there wasn't much we could do to further assuage miffed merchants.

Method #2: Hand-select new leads

With increased revenue, we hired additional sales people which allowed us to start fielding leads from merchants processing less than $250,000. However, based upon expected lead flow, we didn't think that we would be able to handle all new leads and still ensure that we had enough time and resources to provide a high quality experience.

We wanted to hand select new leads and determine those we thought were the best fit. To do this, we added some additional text on our contact form that was only shown when the lower volume tiers were selected. The message stated that we would review their submission and get back to them within 24 hours regarding our ability to work with them.

This accomplished our purposes, but it perturbed many we declined. No matter the circumstances, people hated getting declined, especially when the decisions were subjective. Many merchants got upset when we told them that we were not the best fit. We explored referring the denied applications to an appropriate provider, but we didn't know of anyone that we trusted enough or that maintained pricing and business practices that we could endorse.

In retrospect, it is impossible to make everyone happy. You can't be all things to all people, and with limited resources, you have to make tough decisions that will inevitably leave some upset.

Method #3: Let merchants self-select

It didn’t take long before we eliminated our internal selection process and implemented a flat-rate monthly minimum to maintain an account with us. We hoped this pricing would deter merchants that didn't appreciate our value. This would free our time to work with merchants that did.

Our plan worked better than expected; most merchants self selected and we were able to quickly sift through the others. It was a huge efficiency improvement and made our sales conversations much easier and shorter.

We still got to work with newer, bootstrapped merchants too, but only the ones that valued us at a slight premium, despite maintaining lower volumes in the short term. They've told us that it's too risky, too painful, and too costly to choose the wrong provider for such a small amount of money. We love hearing that.

To be clear on our price positioning in the market, we've always been competitive. Merchants regularly put together pricing comparison spreadsheets and we're consistently in the middle if not a little less than most of our competitors. It may not look that way because our pricing is fully disclosed and honest and nearly everyone else we know uses deceptive practices. Our monthly minimum is usually the only thing that's higher. The minimum no longer applies once a merchant starts processing a few thousand a month.

Final Word: Don’t experiment too much

One of the unforeseen consequences of our ongoing pricing evolution was online discussions. Merchants had been posting questions to forums or making statements about our minimum volume requirements, selection process and now monthly minimum. Each post became out of date as soon as we made the next change. Even to this day, we deal with some confusion as merchants read these 2-3 year old posts and assume the information is accurate.

We learned several valuable lessons during this process:

  1. You can't be all things to all people, and with limited resources, you have to make tough decisions that will inevitably leave some upset.
  2. Structure your offering so that the right prospective customers will self -select.
  3. Price is a powerful tool to influence behavior and will do most of the work for you.
  4. Online content lives for a very long time, so think through every change you make.
  5. Play life like chess. Plan a few steps in advance (warning: easier said than done).

Image courtesy of ogimogi via Flickr

Braintree We enable beautiful commerce experiences so that people and ideas can flourish. More posts by this author

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