There’s been a lot of discussion lately about Chargify changing their pricing to force customers on their free plan to start paying $99/mo or leave the service. Ouch!
We’ve seen a lot of this behavior from SaaS companies lately and frankly it’s downright puzzling:
- Feb 2010 : GetSatisfaction removed core features from Free to drive people to a new $19/mo plan. Public backlash lead to them grandfathering in all existing customers 8 days later.
- May 2010 : ZenDesk raised prices for their existing customers. Some by as much as 300%. Public backlash lead to them grandfathering in existing pricing for some accounts if they agreed to pay annually.
- March 2010 : Recurly, a Chargify competitor, changed their pricing which lowered the cost for the top end of customers but also raised the pricing floor for smaller customers. Ironically enough the backlash lead to a number of customers looking to Chargify as an alternative.
All of these companies violated one of the golden rules of SaaS:
Thou shall not raise thy price nor lower thy features for existing customers.
I know it’s tempting. I know you’ve probably added tons of awesome new features and made the service way more valuable since those existing customers signed up.
I know it’s tempting because we’ve been tempted ourselves. Before UserVoice had paid plans we had 6000 people on “Beta” accounts. They now get the same features as our $19/mo Tin plan for absolutely nothing.
But therein lies the trap. It’s not the customer’s fault for committing to your service at a price point that’s not viable for you. It’s your fault for not setting a price point that allows you to pay the bills. Don’t take out your failings on your early adopter customers by changing the rules in the middle of the game.
Our takeaway from our 6000+ beta customers was that we should have launched paid pricing plans sooner – not that we should try to force them to atone for us not doing that.
Nothing prevents you from changing pricing and feature sets for new customers. In fact doing so has the nice side effect of rewarding those early customers for taking a chance on your product, giving you valuable feedback and telling all their friends about you:
“SEOMoz is probably the best source of SEO advice/tools on the internet. They used to be free, but have gradually introduced monthly/annual memberships. The current cost is $799/year, but when I joined in 2006, it was $299/year. What’s cool is that they still honor the $299/year fee. At that price, I’ll never go away — and, I continue to rave about them to my friends! Great job, SEOMoz, for thanking those who helped you get where you are today.” -TechCrunch
Iterate early and often on pricing as well as product but remember to leave those existing customers alone.
Have an example of a company that's handled pricing changes the right way? Post it in the comments!
Photo courtesy of spanaut.