Oct 3, 2023 · 555 shares
We know that:
Customers on the annual plan are more likely to stay with Groove for the long term. This fact is borne out by years of data. However, until now, we haven’t explicitly promoted the annual upgrade.
Currently, 18% of our customers are on an annual plan; the remaining 82% are on a monthly plan.
We understand that the Average Revenue per User/Customer (ARPU) will decrease when a customer signs up for an annual plan (due to the annual discount). However, Groove benefits because we are getting cash upfront, and an annual customer will typically have a longer customer lifetime.
We believe that:
If we explicitly promote the annual plan, more customers will upgrade to an annual plan. This will increase our upfront revenue and improve our customer retention metric.
Therefore we will:
Add a popup in the Billing section of the Groove app to break down how much the customer would save on an annual plan and invite them to upgrade by clicking a button.
Investment vs. Impact:
This experiment will require the design and development of the promotional popup, followed by a breakdown of annual savings. Overall, the effort of implementation and the cost of the experiment is very low.
We’ve rated the expected impact of this experiment as medium.
We definitely expect this experiment to have a positive impact on the business. Many of our customers on a monthly plan have been with us for several years. We believe that if they see the savings they can get on an annual plan, they’ll jump at the chance.
For Groove, more annual customers means more upfront revenue — which is obviously good for the business — and we also get that added benefit of increased customer retention.
So why wouldn’t we give this experiment 4 or 5 stars for impact? Only because this experiment is not driving new customer growth. Based on our metrics analysis, new customer growth is where our biggest opportunity for growth lies.
We will measure:
- The conversion rate of the popup
- The average number of annual upgrades per month, since displaying the popup
We are right if:
The average number of annual upgrades per month increases by any margin.
If this works, then we will:
Display the popup every three months for customers on the monthly plan.
How this will work:
- Design and add a popup behind the Billing section of the Groove app.
- Design and develop a cost savings breakdown when the customer clicks the button to upgrade. This breakdown will be specific to the plan the customer is currently on and the number of users in their account.
Results:
We introduced the popup on June 1st, 2023. Only three upgrades resulted directly from the button in the popup. As far as a conversion rate goes, that’s low.
But look at the number of annual upgrades in June 2023 compared to the previous 12 months.
Analysis:
In the 12 months between June 2022 to May 2023, we had 63 annual upgrades in total — that’s an average of 5.25 per month.
In just one month — June 2023 — we got 53 upgrades. That’s a 90% increase in annual upgrades.
While the conversion rate of the actual popup button was low, the increase in annual upgrades from the time the popup was introduced was huge.
You can imagine the scenario. A customer support agent sees the popup, but needs approval before they can upgrade. So they get the necessary approval, return to the Groove app, and then upgrade using the typical workflow.
The popup did its job — even if it didn’t happen in one click.
At the start of this experiment, 18% of our customers were on an annual plan. Now we have 25% of our customers on an annual plan. This far surpassed our expectations.
It’s had a very positive impact on the business, because as stated earlier, annual customers are more likely to stay for the long term. Also, we’ve received a sizable amount of upfront subscription revenue, which positively affects the business’s cashflow.
We are very happy that an additional 7% of our customer base is on an annual plan, particularly because it did not involve any major changes to our app or workflow. A simple popup was all that was needed.
Key Learnings & Next Steps:
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It might surprise you to hear that we disabled the popup at the end of June.
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While this experiment was a resounding success, we don’t want to overdo it. As they say, too much emphasis is no emphasis. If you’re constantly faced with a popup when you go into your Billing section, you’re quickly going to ignore it — or worse, get annoyed.
Monthly customers can upgrade to an annual plan at any time, but we’ve decided to only run this popup every three months. So a customer would sign up for a monthly plan, use (and hopefully love) Groove; then three months later, they’ll be reminded of the annual plan.
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