SaaStr - AI Features: Should They Be Core or Add-On?
The discussion focuses on the strategic decision of whether to include AI features in a core package or offer them as an add-on. If over 60-70% of the existing user base adopts the AI feature, it should be included in the core package, potentially allowing for an increase in the package price. Conversely, if only 20% of users are interested, it should remain an add-on. This approach is exemplified by companies like Notion, which offers AI as an add-on, and Intercom, which includes it in the core package. The broader strategy emphasizes that pricing and packaging should align with overall company strategy, focusing on customer needs and predictability in costs and success. The importance of aligning these decisions with product workflows and customer preferences is highlighted.
Key Points:
- Include AI in core package if 60-70% of users adopt it.
- Offer AI as an add-on if only 20% of users are interested.
- Pricing and packaging should align with company strategy.
- Consider customer needs for predictable costs and success.
- Align decisions with product workflows and customer preferences.
Details:
1. 📦 Core vs Add-On: Strategic AI Feature Packaging
- If over 60-70% of your existing users adopt your AI features, it should be included in your core package.
- The adoption rate of AI features among existing users is a critical factor in deciding their inclusion in core or add-on packages.
- Examples of AI features that could be core include those with universal appeal, such as AI-driven search functionality, while niche features like advanced analytics might be add-ons.
- Additional factors influencing the decision include competitive analysis and long-term strategic goals, such as market differentiation and revenue maximization.
- Consider user feedback and industry trends to guide the packaging strategy, ensuring alignment with customer needs and expectations.
- Regularly review and adjust the packaging strategy based on changing user adoption patterns and technological advancements.
2. 📝 Real-World Insights: Notion and Intercom's AI Integration
- Notion has opted to offer AI as an add-on feature since only 20% of its users have shown interest, illustrating a targeted approach to cater to specific user needs without overcommitting resources.
- In contrast, Intercom has embedded AI into its core package, reflecting a higher adoption rate and a strategic decision to enhance overall user experience through AI capabilities.
- The approaches highlight different market strategies: Notion's selective integration versus Intercom's comprehensive incorporation, each aligning with their respective user base's demand and engagement levels.
- This suggests that Notion is prioritizing resource allocation efficiency by focusing on users who are willing to pay for AI, while Intercom is leveraging AI to improve product value universally.
3. 💡 Holistic Pricing Strategy for Business Growth
- Pricing and packaging should be approached as an overarching company strategy rather than isolated decisions about price points.
- Hybrid pricing models, such as subscription-based plus usage fees, are effective in meeting diverse customer needs.
- Consider customer preferences for predictable costs and integrate these into pricing strategies for enhanced customer satisfaction.
- Align pricing strategies with product workflows to reflect how customers use products, ensuring that pricing feels natural and justified.