In this post I make the logical argument for Alteryx to evolve their pricing model towards freemium.
Two years ago when I first came across Alteryx at a meet-up in their San Francisco office space, the product wasn’t as mature as I find it today. And returning just now from the Inspire 2015 conference in Boston, I'm quite pleased by both the scope & pace of recent developments, as well as the future product roadmap.
During these past two years, my Twittersphere has also been increasingly abuzz about Alteryx. In fact, given the strong endorsement it receives from people who’s technical opinion I rely upon, Alteryx is a tool that I would have tried again by now, if not for the entry price.
Below I will argue that tens of thousands of data workers exist in the world, just like myself, who are each potential Alteryx customers, but who will never try the tool in earnest until they have access to a more gradual on-ramp in terms of free & low cost pricing for simplified versions of the tool.
Back of the Napkin
To examine today’s pricing model with some napkin calcs, if we assume that a line of business data worker today earns roughly ~$100,000 per year with a 25% overhead, then Alteryx need only to save 75 minutes of that person's time per week to justify a designer license for them.
Given the higher salaries the Bay Area, we can adjust that number down to only 30 - 60 minutes of time savings per week as a break even point. Or in other parts of the world, the break even may land between two or two and a half hours per week.
Given the complex nature of today's data environments, and the challenges data workers face, this math is already powerfully persuasive.
Yet a data worker today, even one who wants to use a tool like Alteryx, must first convince their management to make a $4,000 annual investment. And to be convincing, they need to demonstrate that Alteryx will irrefutably bring about efficiency gains. They must use the software to solve a real-world problem. And to do that, they need to invest their time.
They need to try before they buy.
So at the outset of a 30-day trial period, said knowledge worker with the sincerest of interest takes two looks at the following to-do list:
- make the time
- learn the tool
- solve the problem
- package the results
- convince the decision makers
- circle back to persuade the skeptics
All in 30 days, and with the fair risk that some decision maker will still, for some reason, say "no".
For many, it’s a non-starter. This is a potential customer, who truly hopes that a tool like Alteryx can enable them to solve bigger problems faster. And yet, it’s not worth their time to investigate further because the on-ramp is too steep. The cost of their potential disappointment is too high.
Hence the demonstration of business value never occurs.
Alteryx in my opinion has two strong role models to follow as they mature as a company & product: Tableau and Salesforce. Tableau has proven that the "empowered business user" has traction in analytics & BI. And Salesforce has proven both subscription based pricing & the pivot of their product into a platform.
Thanks to their clever understanding of the eigenvector centrality principals at the heart Google's Page Rank algorithm, those tens of millions of hits driven daily by Tableau Public, a free public offering from Tableau, allow for Tableau to effectively own important organic search keywords of their choosing, like “business intelligence software”.
Tableau Public also provides an invaluable testing ground for new product features, a proving ground for scaling their server software, and intrinsic value to society by helping journalists & educators. Most importantly: Tableau Public generates brand recognition & good will.
Tableau also offers free desktop licenses to University students, another important freemium on-ramp to help newcomers in the front door.
Thus, I will argue: having embraced Tableau as a role model by placing the empowered business user at the heart of their identity, Alteryx would do well to further follow with an easy-entry freemium pricing model.
Salesforce has championed recurring revenue by pioneering subscription based licensing for software. And Salesforce have also very cleverly transformed their product into a platform, now at the center of a vibrant ecosystem.
And yet, Salesforce also strike an exceptionally low cost to get started. Among the many SFDC customers who spend six digits annually on their software, a great many started their journey spending only hundreds of dollars per year.
How did these customers get to where they are now, spending six digits annually? Gradually, one step at a time.
Salesforce makes it easy for new customers to get started because they know that once they’re positioned at the center of a key business processes within a growing company, then the recurring revenues will increase over time.
Having already embraced Salesforce as a role model by implementing a subscription based licensing model, I will argue: Alteryx would do well to further follow by implementing an easy entry on-ramp for potential new customers to try a simplified version of their product for free. And more-over, as the product matures, Alteryx should also consider pivoting to become a platform!
Salesforce also gives a free license of their software to non-profits, for which the tax benefits and good will are unparalleled. More than sound citizenry, this is a sound & proven business model.
The reality for the data worker today who wants to jumpstart their career & re-tool is that they can quit their old job, get started learning on a free version of Tableau, and re-enter the job market quickly & easily at a pay scale premium.
The reality for today’s data worker who wants to introduce Alteryx into their company’s toolset portfolio is that proving the value proposition can take months to accomplish, thanks to competing priorities.
The reality for a software company like Alteryx, seeking to scale, is that they need to place their product into as many interested hands as possible.
And the reality in today’s tech is that companies need to be giving back. Tableau & Alteryx would both behoove to embrace the Salesforce 1-1-1 model, leveraging 1% of the company’s product, equity and time to improve communities around the world.
Alteryx, especially, would benefit from a freemium & tiered pricing model:
- FREE & simple
- LITE for $99/mo. (perhaps with "pay-per-tool" ?)
- PRO unlimited
Word Count: 1,097
- "Alteryx", Intuitive workflow for data blending and advanced analytics, May 21, 2015
- "Analytic Independence", Inspire 2015: May 17th-20th,
- "Tableau Software", Visual Analytics for Everyone
Visual Analytics for Everyone, May 21, 2015
- "Salesforce.com", The all-in-one #1 CRM Solution, May 21, 2015
- "Eigenvector Centrality", Wikipedia, May 21, 2015
- "Page Rank", Wikpedia, May 21, 2015
- "Tableau Public", Data In Brilliance Out, May 21, 2015
- "Pledge 1%", Building a Movement of Corporate Philanthropy, May 21, 2015