A SaaS company bundled a high-value feature into standard tiers instead of selling it as an add-on, costing millions in lost revenue. Unbundling could have raised net dollar retention from 100% to 120% and added millions in annual recurring revenue, but engineering killed the project after six months to focus on core product work.
Chapters
And it was a, to me, a multimillion-dollar missed opportunity. So for anybody who has really kind of thought about pricing and packaging in software, they will know that an add-on is typically something that is extremely high value, if not near must-have, for a subsegment of your customer base. So not everybody's going to need it or want it, but some people are going to desperately need and want it. And what we were doing at that company is we had functionality of that nature bundled into our kind of traditional good, better, best offering. And there was an obvious opportunity to unbundle that functionality into an add-on. If we did that, we could drive material cross-sell or upsell, is what we described it as. And, you know, if we had several thousand customers and we were able to drive that attach— attach rate is what we described it as. To 500 customers, it meant, you know, many millions of dollars in increased revenue expanding the customer base. So, you know, what were the implications? It meant our net dollar retention could grow from 100% to 120%. Like, it was massive for the enterprise value of the business. So at that particular company, We ended up 6 months into the effort to introduce a third tier and an add-on, and we eventually, at the 6-month mark, scrapped the add-on. Um, I believe that that lost us several million dollars in ARR. Um, and why did we scrap it? Because we couldn't implement that in our product. We couldn't continue to pull engineering resources off of core product to support this change. So the business lost patience and we moved on, and it was a— to me, a multimillion-dollar missed opportunity.
