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Our CCO Harrison Rose caught up with Founder Moritz Prätorius at Paddle Forward to find out more about their journey.
How were you selling your product before using Paddle? When did you decide to change provider?
We had been with an online marketplace called Envato for over 8 years and felt like it was time to up the game and move in a new direction.
With Envato, we could only have one license model, which was lifetime licenses. We weren’t sure about what to do next. Should we go with a subscription-only model now? or should we offer subscriptions with lifetime models? How should we structure the pricing? And then again, we thought that moving to our own shop could result in an accounting nightmare. Our accountant got us a little bit scared because they explained we’d have to take care of all the VAT transactions, the potential of credit card fraud, and managing refunds. So, we needed to find someone who could take care of all of these points for us and give us some guidance on how to move forward.
I can imagine that having worked with Envato for 8 years, the move to selling directly was quite intimidating. One thing we offer to try and support with that is our Revenue Delivery Advisory service – could you share some of your experience of that during onboarding?
Our Revenue Delivery Advisor is Paula and we had a really good connection with her right off the bat. Dirk, the other Founder, and I spoke with Paula for two hours in the first session. We were very direct, got into the nitty-gritty right away, and bombarded her with questions. She was really knowledgeable and took her time to take the fear away a little bit. With the accounting nightmare problem she said “yeah, Paddle is taking care of most of this, the whole VAT, credit cards, and chargebacks”.
She also had a bunch of great ideas that she bought into the equation. One was for us to show prices in local currencies, which is easily possible with the Paddle API. This is important because in some countries it’s not feasible to pay for everything in USD, it’s also much more user-friendly to see the amount in the currency you’re going to use to actually pay.
She also helped us with our pricing structure. We weren’t sure how the subscription should be priced so she gave hints on that and this was enough for us to move forward with confidence.
Where did you end up in terms of how you decided to price for the products?
We went with the strategy to offer more options because we saw that some of our competitors went with just three. This could be viable to not cause overwhelm with the user but we thought now that we were standing on our own two feet together with Paddle that we could do some testing and offer a bunch of different models.
We now have 3 main tiers:
You can purchase them either as a subscription or as a lifetime license and the more licenses you take, you will immediately see the amount saved. This is an added psychological benefit – which again was an idea from Paula.
It’s great to hear you're working with Paula and implementing her suggestions like displaying the discount and using localized pricing – these are things that we’ve seen are super effective in our data too.
Yeah, and it’s visible that these have paid off because we got some really good, unexpected results from that. Our marketing agency had prepared us for a big drop in sales initially when moving to sell directly. So, we wanted to start with low expectations to not be disappointed in the end. They had said maybe a 50% drop off in the beginning and then over time as the new website grows in SEO status then your sales will pick up.
But from day one we had a 20% increase in sales compared to the Envato marketplace which was just mindblowing for us. It just showed that people immediately put trust in our new website and the shop system with Paddle. This is where you guys are giving us your edge and your knowledge in structuring this checkout process which has a very high likelihood of conversion.
A key part of the move to selling directly with Paddle was the ability to experiment with pricing models and offer subscriptions for the first time. Can you talk about how the rollout of your subscription plan has been received?
Our two key takeaways from Envato were that on the one hand people thought that our license was too expensive [so they didn’t buy at all]. On the other hand, about 50% of users bought more than one license. So we wanted to bridge this gap and offer the best of both worlds.
The cheaper subscription license is more of an entry-level option for single designers and developers. Then the power users, like the agencies, have the option to buy either subscriptions or lifetime licenses in bulk and save on that in the long-run as returning customers.
The subscription license is definitely the most successful. We have about 70% of users in subscriptions right now.
The shop relaunch started in September last year so we’re really excited for this year to find out how many people will renew. Right now, we have quite a low churn rate, the drop off in subscriptions on a monthly level is surprisingly low. So, we will see what happens and have a few things planned to try to improve that in September.
One trick I saw on your website was that when you input, say, over 100 licenses for your highest tier subscription, the “buy now” button flips to “contact us” so that you can potentially sell to that customer one-on-one with some of those higher value contracts. Can you talk to us about the thinking there?
The idea was to offer a lot of flexibility and a lot of options right off the bat but we also wanted to stay open to these larger partnerships that could end up maybe in white labeling solutions or new things that we haven’t yet accounted for yet.
Now, if you’re interested in buying licenses in bulk, you can just get in touch with us and we can work out a custom quote for you. The one license subscription is the most popular and from there it trickles down. The 5 and 10 license models get less and less popular but you never know. We are just at the beginning of our journey, I believe, so we have to be prepared for every eventuality.
You mentioned that renewals are on the horizon. Talk to me about your thoughts and expectations on how that’s going to go.
Yeah, so we have a few things in mind here. One idea that Paula had was to offer upgrades so if a user already purchased a one license subscription, instead of just buying another single license they could upgrade this subscription to a higher tier, let’s say 3 licenses, and benefit from the discount with the upgrade instead of paying the full price for a single license. So we are looking to implement that.
There’s a lot of other things that we have in the pipeline that we haven’t fully fleshed out yet.
It’s really interesting that you’re thinking not only about how you can retain as many customers as possible but how you can actually expand the MRR of those existing accounts. Thanks so much for sharing that with us, is there anything else you’d like to share?
Yeah, I mean, our journey with Paddle has been beyond our expectations. We are always looking forward to the regular reports and regular calls with Paula because she always has amazing ideas and is very critical about what we are implementing as well. If we add something that might not be so well thought out, she will just tell us and we will have a discussion about it, so that’s really appreciated.
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