Saassy nuggets: Leaders, Fillers & Killers 🍔
💡 To complement the hefty Saassy guides, Saassy nuggets highlight frameworks and concepts I have recently discovered that made my brain go “aha!” 💡
Today’s nugget focuses on the pricing & packaging framework, Leaders, Fillers & Killers, originally attributed to Simon-Kucher & Partners.
À la carte vs bundling
There are two key ways to package your products and services: à la carte, i.e. selling all the items separately, or bundling, the popular option in SaaS.
While à la carte provides a greater pricing transparency and freedom of choice for buyers, bundling is more convenient. Buyers don’t have to deal with different providers or contracts for different capabilities, and the bundle is already tailored for their buyer segment, simplifying their purchase decision.
Bundling enables vendors to sell more at a lower cost because buyers end up with more than what they would have chosen à la carte. Bundling also benefits from economies of scale, and reduces marketing and distribution costs. In addition, vendors may introduce a capability to a new group of customers. Finally, bundling can make it easier for vendors to focus on the value of the package, rather than the technical aspects of each feature within it.
But there’s one trick to bundling: what capabilities do you include in which bundle? This is where the concept of Leaders, Fillers, Killers comes in.
Leaders, Fillers, Killers
When bundling, you should ensure each tier includes a Leader and Fillers while avoiding Killers. This concept is often explained using fast food:
🍔 Leaders are the must-haves. They are the primary capabilities, the main reason why customers choose the bundle. They are the hamburger of the packaging.
🍟 Fillers are the nice-to-haves. They are the capabilities that customers appreciate having, but they wouldn’t buy the bundle just for them. It is the fries or the coke of the bundle. You order a burger and fries, not fries and a burger (Kevin Cohn). Fillers increase the average revenue because these are the items that customers may not have picked in an à-la-carte pricing.
☕ Killers are the don’t-wants. They devalue the bundle. They are the capabilities that customers don’t want to pay extra for - and including them in a bundle may put people off altogether. This is the coffee of the value meal. There will be a handful of caffeine-starved customers who do want the coffee, though, and they can purchase it a la carte outside of the value meal (Kyle Poyar).
Source: Simon-Kucher & Partners presentation (2015)
Finding your Leaders
Whether a capability is a Leader, Filler or Killer depends on the buyer. What is considered mission-critical for enterprises may be an overkill for start-ups and freelancers - in other words, a Killer of one bundle could be the Leader of a more expensive bundle.
Figuring out whether a capability is a Leader, Filler or a Killer for a particular customer segment requires rigorous research through surveys and interviews. There are two particular research approaches that are relevant here:
Van Westendorp’s Price Sensitivity Model
This is a very straightforward approach to understanding customers’ willingness to pay for a capability. It is a survey with four simple questions:
What price would you consider too cheap (e.g., you’d question the quality of the product)?
What price would you consider acceptable?
What price would you consider expensive?
What price would you consider too expensive?
The answers to these questions give you a range of acceptable prices constrained by two points. The Point of Marginal Cheapness is at the lower end, determining the cheapest price. On the other end, you find the Point of Marginal Expensiveness, which provides the upper limit for your pricing. Beyond this threshold, most buyers would find the product too expensive.
MaxDiff (Maximum Difference Scaling)
MaxDiff is a survey where respondents have to determine which features are most and least valuable or critical for them. You have a list of features (ideally between 13 and 18). You will show groupings of these features to respondents who vote on them, across several screens until all the combinations have been exhausted. This enables you to identify the leader (most valued), fillers and killer (least valued).
There are other approaches you can use (check out the Monetizing Innovation book for more details), but using these two will take you a long way to figuring out what your Leaders, Fillers and Killers are!
Resources to go deeper
The BUILD podcast, episode 58 with Amanda Kleha, Figma’s CCO
Kyle Poyar: Insights from 100 SaaS Companies: Why It’s Time to Rethink Your Packaging Strategy
Madhavan Ramanujam and Georg Tacke: Monetizing Innovation