Optimizing price levels to boost gross margins for a popular ecommerce retailer
How researching pricing sensitivity across segments, modeling price elasticity with machine learning, and designing a system for ongoing optimization helped a brand unlock new growth
The Client
Client is a $7M+ ARR provider of end-to-end tax planning tools for financial advisors.
The client has strong traction with customers and has built on top of its core tax offering with property & casualty insurance and estate planning products.
The Context
The company has grown revenue by 50%+ in the prior year, but sees clear pricing opportunities to accelerate growth by:
- Capturing additional willingness-to-pay. Feedback from customers has suggested that the tiers today are significantly underpriced for the value they provide.
- Redefining packaging. The client recently launched a state tax product and was in the process of defining and launching additional products, including insurance and estate planning. While packaging works today for a single product offering, it will need to be evolved to allow customers to seamlessly buy across a suite of solutions in the future.
- Identifying the right metric(s) and architecture to scale price. Number of uploads is being used today as a capacity gate for its federal tax product, but it is unclear whether this is the right metric to use for its state tax product and the growing suite of additional capabilities
The Monevation
Identified number of households as the primary metric across the portfolio to better match customer preferences and streamline cross-sell opportunities
- Market research showed that 85%+ of customers viewed household-based pricing as acceptable, predictable, and directly tied to value across tax, insurance, and estate planning products.
- Shifting to a household-based model provided the greatest long-term flexibility as the client expanded its financial advisor tools beyond the existing uploads-based metric.
Analyzed customer willingness-to-pay and recalibrated price levels with price books for both SMB and Enterprise customers
- Conducted customer interviews and pricing surveys, revealing that willingness-to-pay (WTP) was 2–3x higher than the client’s current pricing for its core tax product.
- Internal data analysis and survey results showed that Enterprise customers had significantly higher WTP than SMBs, reinforcing the need for separate price books to maximize revenue capture across segments.
Established a 3-tiered packaging structure to encourage upsell and enhance positioning of platform product
- Conjoint analysis provided insights to structure feature placement in a way that aligned with WTP and encouraged upgrades.
- External research confirmed that Estate Planning was perceived as a premium use case, making it an ideal fit for the highest pricing tier to enhance upsell potential and reinforce value differentiation.
The Impact
- +30% in total expected ARR lift
- 85% retention after price increase
