by Adam Juda on Wednesday, December 31, 2014
This article is part of a series of pricing teardowns for companies and their products. I have no private information about their profitability, no knowledge of their business goals and (possibly) no particular background in their industries. I intentionally avoid performing research on what others have said as well as writing in the companies' blog posts and twitter feeds. I do this so as to ensure that my evaluation is based entirely upon their websites. As such, this analysis may contain invalid assumptions and plenty of guesswork. Fortunately, this makes the resulting analysis much more fun.
The new year is almost here, and I'm sneaking in one more pricing teardown before 2015 arrives.
This report will continue the tradition of investigating the pricing used by Y Combinator-backed startups. The subject of today's teardown is none other than SketchDeck: a "design-as-a-service" company. Let's see what we can learn.
Before I look at prices, I try to understand the nature of the offering and attempt to understand its value proposition. How well does the product serve its customers' needs? Many companies fail to provide a value proposition and potential customers are left to figure it out for themselves.
At the very top of the page, I saw the firm's tagline: "SketchDeck: design on demand." Not bad. From the outset, I had an idea of the type of services that SketchDeck offers. My assumption upon reading the tagline was that the SketchDeck probably sold logos or website redesigns. Although my assumption was in error, I was at least pointed in the right direction.
Scrolling down, I learned that good design is valuable because it will improve my "sales, marketing and business outcomes."
I found this language to be ineffective at best. I did like how the firm attempted to demonstrate value by showing benefits rather than features. However, SketchDeck would have been better served by focusing on end-goals of its customers (such as profitability) rather than business activities like sales marketing. At the end of the day (as a business owner), I really don't care how good my marketing is, as long as large amounts of cash are deposited into my corporate coffers. Nevertheless, my interest was there. I continued to read.
The next section told me exactly why I should use SketchDeck:
- Design is important
- SketchDeck is flexible and scalable
- SketchDeck is quick and convenient
This section was rather weak. At this point, I haven't been presented with any information to help me understand why "design is important." It may very well be, but the case has not been made yet. Service characteristics like flexibility, scalability, quickness and convenience are surely nice-to-haves, but they don't motivate me to reach for my wallet in and of themselves. As an example, my dentist does a great job, but I have to make appointments six months in advance and drive out of my way to see him. He's neither flexible, nor scalable - not quick and certainly not convenient. Yet, I'm loyal to his practice because he has a great reputation and provides an excellent service at a reasonable price.
As an aside, the statement "design back in as little as 12 hours" made my skin crawl. As a self-certified expert in weasel words, I automatically translated "in as little as 12 hours" to "you will never receive your products in less than 12 hours." Rather than being interpreted as a message of speedy delivery, I saw it as a disclaimer of slowness.
Scrolling down further, I finally saw SketchDeck's product description. They are offering to "cover all [my] design needs." Apparently the firm will design my
- reports/white papers/eBooks
- custom (whatever that means)
Clicking on any of them showed the company's general workflow. I liked the diagram, though I was surprised that each offering allowed for (presumably) free iterations of designs and tweaks. Such opportunities should have been highlighted on the front page, as they can be quite valuable to customers.
Scrolling down further I saw a partial list of the companies that were using its service. This was a nice touch and served as social proof. Though hardly unique, it was a great idea to include this information.
With a solid understanding of the type of product being offered, I then moved to the examples page. Everything was pretty theoretical at this point. I wanted to see what these folks actually did.
There were three examples. I have a complete lack of knowledge in the field of design, so I will not belabor the quality of the examples. What I saw looked both reasonable and professional. Though no red flags were raised by its examples, I was shocked by the testimonials.
As can be expected from any self-selected sample, each affidavit was a glowing testament of appreciation. I saw references to the firm's speed and ease of use. I saw praise of the firm's products. But there was something I didn't see. Not a single testimonial discussed how SketchDeck allowed a firm to meet a business objective. Did any firm save money by outsourcing its design work? Did any firm see its salesmen close more sales as a result? Fast and easy can be great, but customers don't pay for fast and easy. Customers pay for results. What were the results? The closest I could find was a testimonial on a different page. It was a statement from a customer stating that his "internal team saves a lot of time" by using SketchDeck.
A little note at the bottom of the page stated that SketchDeck had worked with hundreds of clients and completed more than 1,000 projects. Surely the company can find a handful of examples that allowed a client to meet a business objective. The closer to a business objective that a company can position itself, the higher the rates it can charge. A little investigation and research could be worth quite a lot!
The Pricing Page
With my survey of the product complete, it was time to research the pricing. Not only did I experience my usual excitement at the appearance of dollar signs, something else piqued my interest as well. The page's headline said "Our pricing is simple and straightforward. Each project is priced automatically."
There was just one problem. The pricing didn't seem so simple at all. For starters, each project's price would be based upon variables such as:
- delivery speed
- design level
Since I don't have the information on how the formula works, I doubt it is simple. Even assuming that there were no other variables to be considered and a mere three options per variable, this would put the number of prices at 81 (3*3*3*3) - far too many for an outsider to keep in his head while deciding whether or not to purchase SketchDeck's offering.
Fortunately, I was presented with three examples of orders and their associated prices. At least I'd be able to get a gut feel for how pricing worked, right? No! None of the three examples specified the values for each of the four pricing variables! The examples proved to be of little value because they could not be used to help me estimate how much the firm would charge for my particular order.
Stymied, I scrolled down further to learn that some additional work is charged by the hour. Presumably this refers to additional design iterations, but the exact nature of these charges wasn't clear. For all I knew, orders would be subject to up-front pricing that would be difficult to estimate as well as additional hourly fees that would be impossible for me to calculate ahead of time. As an outsider to the design field, I had no idea what the difference was between the nature of "production" work versus "design" work vs "design lead" work. The large spread between the rates for each would probably make me a bit nervous about unexpected charges for touch ups.
I scrolled down a bit further and found another surprise! The "simple and straigtforward" pricing had become a bit less "simple and straightforward" yet again. Before me were three account levels.
Those who were utilizing the payment levels listed above were automatically placed into the "lite" plan. That "plan" wasn't really a plan, because it conferred no benefit on the part of the consumer. It was simply a place holder for "no plan selected," so that it could be compared to the two actual plans that incurred a monthly fee.
I found it odd that each plan included all features of the less expensive plans, yet the text for each benefit was not repeated. This made it less obvious that each increasing tier was clearly "better" than those below it.
Further, some of the features listed in a given tier were significantly more valuable than others. In the "lite" tier, for instance, one of the bulleted items was "web interface." Is that going to make anyone more likely to purchase a package in this tier? Is it particularly valuable? No? Then why include it at all? All it does is make the list more complex for the customer and dilute the value of the other features in the plan.
I found it very difficult to understand the two highest tiers (professional and enterprise). I had no idea what some of the terms meant (custom projects, custom workflows, custom integrations). When pricing items at $12,000 or $120,000 per year, it is a good idea to explain what you're offering - especially if it is desirable on the part of the customer.
Given that pricing page linked to a description of the professional plan, but not the enterprise plan, I'm assuming that no one has ever purchased the enterprise plan. I may be in error, but few design firms would spend time to create a page describing a middling plan but not the high end plan. Further, there isn't any explanation as to why a firm would want to pay $120,000 per year (plus project costs) for design work rather than hire a topnotch designer in-house. There may be benefits to outsourcing work at that level, but no case for such has been made.
I find it very odd that the professional and enterprise plans are competing on functionality as well as price. Each of the higher two tiers contains project discounts (10% and "custom project pricing" respectively). Yet I wonder if companies willing to spend such large sums on design would even notice such discounts. It looks like SketchDeck might be giving up free money for no reason.
The benefits of its offerings need to be made crystal clear to potential clients. If the firm can't appeal by demonstrating how business objectives can be met with its services, then it should appeal to emotions. A simple side by side picture with a flustered businessman presenting a poorly designed slide on the left and a happy businessman presenting a beautiful slide on the right might work well. Throw in a caption that says "We make stressful presentations rewarding" would get the idea across that the firm's designs are worth purchasing.
Customers also need to know what is expected of them. The company workflow states the clients provide the content, while SketchDeck makes it look good, but what does that mean? Can a customer provide a document and receive a slide deck in return? Or must a client create a draft slide deck in order to receive a prettier one?
Finally, the pricing model needs to be simplified. I would recommend removing all talk about plan and rates. Offerings should be productized and the pricing standardized.
I suspect that the pricing model below would work quite well.
Every order comes with 2 iterations of touch ups. Rush jobs - add N% to the cost.
- Slide Decks - $x/slide
- Posters & Infographics - $y
- Other items - ask us
Additional work and monthly retainers could then be sold upon delivery of the first order. It's much simpler to upsell an existing customer than it is to sell something expensive to a new one. A quick note like the one below could do very well:
Oh, hi there! We know you loved our products. For just $Z per month, we'd do so much more for you!
As an added bonus, making its plans private would allow the firm to utilize value-based (custom) pricing. I'm willing to bet that if a company is willing to shell out $10,000 per month, it would be willing to spend even more for a truly customized offering. Keeping information private would also allow the firm to sell other plans (perhaps a $5,000 per month plan to a smaller but growing company).
This newer billing model would allow for significantly higher profits at no additional cost to SketchDeck. Not only could the firm capture a higher percent of the consumer surplus for each customer, but it would likely increase the number of sales as well. The simpler the checkout process, the more likely a firm is to make a sale.
I think that SketchDeck has some serious potential. There are many companies out there that need professionally designed materials but don't have talent in-house. The firm just needs to make its case more clearly and simplify the buying process.