Why Layered Complexity Gave Us a 40% Jump in Customer Lifetime Value

Forrest wrote this on May 04, 2012 in . It has 11 reactions

Aaron Levie, Box CEO and co-founder, shared some great insights at his March Soapbox talk. He shared his belief that people would shift away from Microsoft and seek out the best possible solution by mixing and matching products and services.

Simple is in. And Aaron is making the case for it once again. He references an important trend sweeping not just across Silicon Valley, but across the nation — the radical simplification of everything.

Aaron believes if a company makes a customer do any unnecessary work to achieve a desired outcome, the company is 'primed for disruption.' And, to an extent, he's right — often times, people opt for a simple option over a complex solution that adds unnecessary stress (and subsequent problems) to our lives.

Simplicity Isn't An End-All-Be-All

While simplicity is a trend that seems to be a hot topic for discussion, simplicity isn't an end-all-be-all when it comes to customer understanding and user behavior. Instead, we view effective layered complexity as a standard for all businesses to pursue.

To observe how layered complexity differs from simplicity, we have to approach it from a user standpoint. Customers have varying levels of understanding about various subjects, and because of this, they have different needs. For example, a product designer's design literacy differs significantly from a startup CEO trying to determine how product design fits into their business.

Effectively communicating a product or service to a customer is an important component of building a successful business. Lacking the ability to do this often has significant consequences.

When it comes to simplicity, however, Levie says solutions shouldn't accomplish less:

Now, this isn't an excuse for solutions to accomplish less. The irony of simplicity is that it invariably lets you do more. Simplicity isn't about giving up any value — it's a movement around designing technology or products thoughtfully to make them substantially more useful and attainable.

However, there are times when more complex features or service components are needed to scale a business. If simplicity is the ultimate end-goal for all, inevitably, some users or customers will be disgruntled over missed offerings. Companies should structure their products and services understanding that while simplicity is important, selective layered complexity is even moreso for including the right solutions and, in the long term, building effective, profitable businesses.

A 40% Jump, Thanks to Layered Complexity

On Wednesday, we discussed pricing for features not per user. Our pricing tiers for Notable are a perfect example of layering complexity. Last March, we launched a new feature-based pricing model for Notable. Capturing images is the same no matter how much a customer pays. Instead of striving for simplicity, we layer in complexity with tiered features.

Just one month after we launched the new Notable pricing model, we experienced a 22% increase in our customer lifetime value. Even more convincing: Notable customer lifetime value was up 41% one year following the change.

While minor tweaks were made to pricing, layered complexity had a tremendous impact on increasing our customer lifetime value. Which goes to show that even though customers and businesses may want to simplify, there are times when it's necessary and, even profitable, to instead layer complexity as their businesses grow.

How do you believe layered complexity fits into your company's business plan?


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