Pricing Loyalty
How Rivo's product-plus-pricing efforts translate to DTC
If you’re on LinkedIn at all, chances are you’ve seen Stuart Chaney’s build-in-public posts on Rivo, a loyalty and referral software.
Among his topics? Pricing and positioning.
While we’ve talked to DTC brands to start this newsletter, we’ve felt Stuart’s posts around pricing offer a framework for thinking about price, along with when and how you might want to trade margin for growth. He’s covered everything from market analysis, to TAM sizing, to where he’s looking for brand awareness to create business impact. And he’s often talking about all of this through the lens of price.
Consider a recent post, where Stuart talked about the challenges of charging “50% as much” as incumbents while trying to move to the upper end of the Shopify ecosystem:
“This is where I really dropped the ball in the first year. I wasn't quick enough to shift from the transactional mentality of SMB to a mindset where most of our customers aren't actively in the market for our product.
The brand we build in the meantime is how they'll remember us if/when they eventually need our solution in 6-12 months.”
The lessons here aren’t just for software. They’re applicable across the board. Read on for the interview.
The place to start is kind of a funny place that we normally wouldn't start at, but … why are you so darn cheap? We’re curious where that comes from in terms of whether it's an analysis of the market or an innate belief of what this category should cost.
Trying to compete on price and being the cheapest—It's an absolute graveyard. We want to be the best and the cheapest at the same time. When you compact the two of them together, especially in 2024, that's when people start really migrating over.
The biggest problem that we find is that setting up an account is not like a one day thing. Some of these take months to actually migrate, set them up, do all this design. And those switching costs are real. So we're trying to minimize that.
Especially in the last nine months, when people are really looking at their bottom line, we've had amazing brands switch over— and price was a driving factor. It just so happens that I humbly believe the product is a lot better as well.
So I mean, that's one side of it. That's the market telling us that they want cheaper.
It is helping us win those big logos at the moment that we need to be able to have the social proof inside of this small circle we're in. A lot of our deals are $12k ACV (annual contract value) deals when we could probably get $20K. So, I've been fine eating that and, you know, keeping things about break even as possible for the next year or even two.
When you think about the one side of the equation, which is the incumbents just kept raising their prices to a degree that became unpalatable, there's another side to it, which is macro-economic conditions changed such that, perhaps, even if incumbents didn't raise their prices, folks would be looking to go cheaper, anyway.
How much of it from your perspective is it “I don't like paying for this because, I don't think it drives value” versus “I need this, but it is too expensive because it eats into my margins”?
Over the last two years, if you go on DTC Twitter, someone's questioning loyalty programs, because they don't run hold out tests and the thought is, “hey, these people are going to buy anyway.”
The thing is nobody knows. And I've never heard of one person who’s run a hold out test to see if their loyalty program was worthwhile or not. But, at the end of the day, you know your loyalty program is set up as another option to make more money in 2024—because some of the other channels have dried up.
At the moment, we've got 7,000 loyalty programs. We're starting to skew more towards a lot of them being in Shopify Plus, where the numbers are already substantial. And the data can we get together here, we’ll be able to say, “Here's the real data across all these stores.”
But, to come back to your original point, when people come to us, they're bought into the idea, at least, that loyalty is something that’s valuable and they want to migrate over to us because they can get better results for cheaper.
What percentage of your deals are competitive in nature, where you're pulling them away from another provider versus people doing a loyalty program for the first time?
Seventy percent, I'd say, are migrating over. We're trying to reduce friction and stuff like that to help migrate people over, just because that's where the majority of our business is coming from.
Launching a product and trying to win business away from an incumbent with lower prices is a specific decision to make. Is that because you felt like the prices were unfair? Or did you think, at some point, the market would wake up to that, too?
Put another way, were you willing to trade your margin as a sort of growth strategy—that being cheaper would lead to more referrals and word of mouth?
Honestly, it's the whole reason to start the company.
It wasn't my passion for loyalty or for all programs. I was running another bootstrapped SaaS startup, and I would hop on calls, trying to get a read on what people need. I was looking for something new to do.
And it kept coming up, which is, “Hey, our loyalty software, the prices keep going up, and the products keep staying the same.” And that was the most consistent thing I heard across all the different verticals—loyalty, reviews, whatever it was. And it's still the same case today.
Looking back, that was basically it. It was the product versus price, and if you can nail the two of them and put them together it's very hard not to win.
Right now, the things I'm actually excited about are reducing assistance to get started into minutes. It can take weeks. And that's where a lot of margin gets eaten up.
So, the first thing is: what’s it like if shrunken, using technology, right?
And that's what we need, because that's why people refer us to friends.