We first hosted Help Scout’s @nickfrancis for an AMA back in 2020. The session was among the earliest contributions that ended up being pivotal to defining and setting our expectations for what open, candid conversations on Relay could look like. And what we could strive for.
It was a precious opportunity for us to get to know the inner workings of Nick’s and Help Scout’s operating principles, values, heart-first bets, and sound, deeply informed decision making.
So when one day we stumbled upon Nick’s LinkedIn post chronicling an audacious — for both Help Scout and the customer support category — move of dropping seat-based pricing, we got curious.
We had questions, and we were certain there was a book worth of insights behind that announcement waiting to be dug into. In classic Nick style, he went deep into the thinking behind the decision, sharing insights that can act as a sounding board to other founders grappling with the snowball of changes we sit on in 2025.
Here’s a quick index to help you navigate to the right sections easily:
- The 2022 macroeconomic crisis and the crumbling of a decade-long confidence in seat-based pricing
- Spotting early signs of the innovator’s dilemma at play and taking a day-one approach
- Leaning into the risks only they could take and making a business model shift that put millions at stake
- Short-term sacrifices for long-term growth: Managing the transition
- How usage-based pricing helped them (finally) create the best-in-class freemium plan
- Creating a culture of constant pricing and packaging iterations
The 2022 macroeconomic crisis and the crumbling of a decade-long confidence in seat-based pricing
As a company primarily serving other software companies, the 2022 SaaS downturn brought immediate consequences for Help Scout’s core business model. Customers began shrinking their teams via reorganizations, layoffs, and hiring freezes.
For the first time in Help Scout’s 14-year history, the reliable correlation between customer success and seat count had broken.
The metrics that had moved in tandem for over a decade were suddenly diverging. Another alarm went off when their Net User Retention (NRR), which had always been incredibly healthy, plummeted by more than 20%.
This wasn’t just a temporary downturn — it was an existential shake-up.
“We had always wanted our customers to add more seats, but was it actually the optimal model for them going forward?”
Nick remembers wondering. So they went into market research mode, and came back with a strong verdict:
78% of businesses planned to either maintain or reduce their customer support headcount.
This meant seats were only going to shrink, no matter how great the Help Scout product had become, and how much it had to offer.
When generative AI arrived, the trend of ever-leaner support teams gained an undeniable inevitability.
Spotting early signs of the innovator’s dilemma at play and taking a day-one approach
Many established companies in the space responded with (safer) measures — tweaking packages, adding AI as a premium feature, or doubling down on enterprise customers. Not Help Scout.
“We were living the innovator’s dilemma”
Nick could tell, referencing Clayton Christensen’s landmark theory on how successful companies fail by clinging to status-quo, lucrative-in-the-moment business models.
The question that became their North Star was simple yet radical:
“If you were founding the business today, what would you do differently?”
Because that is what disruptors do. They think from the first principles, sans any baggage and any attachments to what once was.
The answer to this reflection led to a complete transformation of their revenue model, product roadmap, and business strategy.
While competitors with deeper pockets approached AI as an add-on to preserve their per-seat cash flow, Help Scout bet its future on the idea that an AI-native customer support product demanded a very different pricing model.
Nick believes Help Scout has advantages that its larger, better-funded competitors lack: the ability to move quickly and take risks that would be unthinkable for companies beholden to venture capital metrics and growth expectations. Understandably.
Leaning into the risks only they could take and making a business model shift that put millions at stake
Embracing this risk was one that took nerves and conviction.
Nick shared that a long-running, well-kept secret of per-seat pricing is that 15-20% of paid seats typically go unused — essentially becoming free money that companies count on. Moving to a usage-based model meant voluntarily, immediately sacrificing this revenue cushion; it meant putting millions of dollars of recurring revenue at stake.
“We put millions of dollars at risk in our current customer base because we felt as though it would be even more difficult for our competitors to do that”
Nick had a hunch.
Even their pricing consultants advised that they take a more cautious, phased (hybrid; seat-based +) approach toward this necessary transition.
But Nick could tell that any model still incorporating per-seat pricing would become unnecessarily complex. And for a company determined to win in the SMB segment, simplicity was non-negotiable.
Finding the right kind of “usage-based” component and doubling down on it aggressively, with conviction
While it was clear that Help Scout needed and wanted to find the perfect metric that correlated their growth with their users’ success, it wasn’t a simple search by any means.
Tickets as a metric were too vague. Pricing for AI resolutions was too subjective. After many months of research, Help Scout found something refreshingly straightforward: contacts.
“What matters with every business is the person, the customer, the contact,” Nick notes.
The elegance of this approach is that it doesn’t force Help Scout to become the arbiter of what constitutes a “resolution” — a metric some competitors use that can potentially invite gaming and confusion.
With the contacts model, a customer can have multiple interactions — both AI-powered and human-led — but they only count once in a billing cycle. It’s a usage metric that aligns with actual business value.
Their market research also revealed a market preference that had made seat-based so popular in the first place: people liked predictability. This was a key element to keep intact even when moving to usage-based pricing.
This informed Help Scout’s “three-month rule” — calculating billing based on trailing three-month averages to smooth out seasonal spikes. The result was that, overall, this approach turned out to be 34% less variable than per-seat pricing.
While it still has elements of unpredictability based on usage, users could expect more consistency in their bills.
Short-term sacrifices for long-term growth: Managing the transition
The transition is truly radial and audacious.
Some customers stand to receive discounts as high as 90% under the new model — a staggering revenue hit. It’s a multi-year process, with some customers remaining on legacy pricing until they opt into the new system. One could wonder why go with it?
“We’re willing to accept short-term pain in exchange for long-term gain and ultimately do what we feel is best for customers”
Nick states with remarkable conviction, derived both from a customer-first way of operating as well as a deep understanding of the innovator’s dilemma.
How usage-based pricing helped them (finally) create the best-in-class freemium plan
One of the most intriguing consequences of Help Scout’s pricing model shift is how it has enabled a truly competitive (and user-first) freemium offering — something Nick and team have wanted to implement for years but couldn’t make work under the seat-based model.
Their previous free plan was deliberately limited to encourage upgrades, as seat-based freemiums go: three seats, limited features, upgrade for more. The new model flipped this logic on its head.
With the new correlation that has been unlocked thanks to contact-based pricing, and Help Scout “hitching the wagon to the growth of a business”, free users get unlimited seats and all features. As companies grow their customer base, they naturally move into paid tiers based on contacts, the need to limit and create restrictions to force upgrades has eased away.
This is also a strategic advantage for Help Scout, further establishing its position as the frictionless entry point for startups and small businesses.
Interestingly, Help Scout already wins over 60% of its business from first-time customer support platform adopters. And Nick has a feeling that this new, best-in-class freemium plan will make it even more of a no-second-thought choice.
Creating a culture of constant pricing and packaging iterations
While a lot of companies treat monetization as a one-off, high-stakes event to be approached with anxiety-ridden caution, Help Scout has embraced it as core competency and area of rapid iteration.
“We launch new plans and pricing at least twice a year,” Nick shares. The contact-based pricing model is already on its third public iteration, with two more versions being tested behind the scenes.
This iterative approach is enabled by a cross-functional pricing committee that meets twice weekly, drawing insights from sales, marketing, product, and engineering.
Nick himself leads this function — a testament to its strategic importance.
“It’s the biggest lever in the company,” he says, explaining why the CEO must maintain personal ownership of pricing strategy.
As you could tell by now, for Help Scout, pricing isn’t just about revenue extraction — it’s about finding deep alignment with customers in a time of (often dizzying) change.
Their willingness to sacrifice millions in existing revenue to get ahead of industry-wide disruption may prove to be either a cautionary tale or a case study in visionary leadership.
Either way, it’s a bet most established competitors simply can’t match, and that’s precisely the point.