Integrations: A Necessary Evil?
Integrations have become a key necessity for Cloud Business apps. For certain verticals like sales, a CRM can't get off the ground without providing integrations to the salesperson's calendar, email, or task manager.
So, if you have to provide integrations due to customer demand, are integrations a “necessary evil.”
The Wrong Framing
Integrations are often perceived as a cost-centric feature which makes them unattractive to SaaS founders. The goal then becomes to minimize integration costs.
Worse, building integrations in-house can easily take bandwidth away from your core features which is another negative.
We think both of these approaches are backwards and they significantly limit what a SaaS company can do with integrations.
So, what's a SaaS to do? Let's start with the business case for integrations and how they impact your bottom line. We'll then talk about how you can package integrations in your pricing and finally how do you manage your integrations portfolio with Integry.
The Business Case for Integrations
Let’s talk about a common situation: a user is trying out your app, they don't like their current app and are considering switching. Since your app is new, they have to set everything from scratch. This can work out to be a lot of work if the user has invested significantly with their current app.
An import integration would help your user get up and running quickly and ensure they don't churn plus if they bring in the bulk of their data, they would automatically hit a tier pricing limit on your app, pushing them to upgrade.
Cutting Down Churn
Integrations have been shown to reduce churn by 40%. A user that sets up an integration continues to benefit from your app even when they don't log in.
Typeform conducted a research where they observed behaviors of two user groups, as shown below.
They calculated the churn rate between the user group that had one or more integrations and the user group with no integrations. Integrated users had a 40% lesser churn rate as compared to the user group with no integrations at all.
While Zapier is great, it's hard to set up for users and it doesn't support bulk import or data syncing. So, the biggest challenge here is getting users to successfully create an integration. That's where Integry comes in, more on that later.
So integrations reduce churn. It makes you wonder if integrations would also help in growing your revenue? Are they willing to pay more for new features?
Thanks to the folks at ProfitWell, the above graph shows you how integrating with a single app can increase willingness to pay. A single integration increases the willingness to pay by 10%. Each app a user integrates to, after the first one, increases the willingness to pay by 3% to 7%.
This implies that integrated users have a higher conversion and upgrade rate. This is great news, especially if you look at the historic trend: willingness to pay is at an all-time low. The same research by Profitwell shows that decline in the graph below.
Over the past 4 years, the willingness to pay for SaaS apps has reduced up to 70% which makes it even more difficult to increase revenue solely on the basis of your core features.
Thankfully, the antidote for this decline lies in integrations. Each integration that a customer connects to increases the willingness to pay primarily because it enables your app to fit right into customers’ stack. When your app makes it to the customers’ app ecosystem, customers stick around.
So, bottom line, an integrated-user can be monetized higher. if you aren't incorporating this in your pricing, you're leaving 10-30% revenue on the table.
Working Integrations into Your Pricing
Users understand the importance of integrations. They know it will save them time, reduce errors and help them get more out of your app.
In the SaaS space, the best companies review their pricing every quarter. That gives you the opportunity to adjust pricing for all the new features you roll out.
What this means is that you want to align integration usage with your pricing. The more integrations a user wants or uses, the higher the pricing tier you want them on.
Let’s look at some popular industry examples of the kind of paywalls commonly used by popular SaaS companies
1. Paywall on Apps
Slack uses integrations as an incentive to upgrade to a higher tier by applying a paywall on a number of apps. The free users only get access to 10 apps but once you upgrade to a paid tier, you can use all the apps they offer.
If you want to deep dive into segmenting apps, Calendly has been able to do that neatly by adding more apps as your upgrade with the most crucial apps being available only on the highest tier.
Did you know that users who set up a Google Drive integration on Slack drive 2x higher revenue for Slack?
2. Paywall on Usage
If your pricing model primarily has a few usage elements built into it, testing out a usage paywall may also sound like a great idea. When users get into the habit of using more features, they don’t mind paying more for continued usage. That’s where you can think about monetization.
Shown below is an example of how Front app has seamlessly used API calls as a usage metric to segment their integrations. To make it even simpler, you can use the same usage metric we use here at Integry.
In case there's a significant price difference between your tiers, you may want to introduce Add-ons to be subscribed separately specifically for integration usage, which Front App also does. Shown below is an example of this.
3. Paywall on Apps and Usage
If it makes sense, why not use both the paywalls to make it more interesting? Shown below is an example of how Coda has put it together with Automation Quota and App Packs segmented by pricing tier.
How Integry Fits
Putting this all together: having integrations make great business sense: they reduce churn and give you the opportunity to increase your revenue.
That's all fine, but the key question decision-makers face is: how do we implement this. The options are limited here: dedicate in-house resources, hire external consultants, or use off-site integrators.
In-house is the most time consuming but gives you the results closest to what you want.
Working with external consultants is the most expensive and requires significant oversight to ensure compliance, code standards, security, and testing.
Off site integration platforms like Zapier are a great starting point, but a lot of your users will find it too daunting and you will not be able to do the most requested features: data import and sync.
Integry strikes the right balance of giving you access to a growing selection of integrations, quick setup, and usage-based billing. Whether you are looking for in-app integration or a marketplace of integrations.