
Raising Prices Is Hard - soheilpro
https://www.backblaze.com/blog/raising-prices-is-hard/
======
jackcodes
I’ll possibly be going against the grain, but they have really made a fanfare
about this one. I’m a subscriber and I remember the email coming though and it
felt a little too over-sensitive to me. You’re putting the prices up by a
dollar a month, you’ve been losing out in real terms because of inflation for
years, and I already have gigabytes upon gigabytes of data stored with you.
I’m not moving for an extra $12 - and even then I was too lazy to take the
promotion because it’s a business expense and having to process the additional
invoice didn’t feel worth the bother. But I’ll admit that one is a more of a
reflection of me than Backblaze.

I understand you’d be worried about a price increase but the email, promotion,
two years of lead up time, and now the blog post comes across and a little too
apologetic, perhaps. Just stick the prices up by a dollar and give me a quick
“sorry guys, we’ve not raised them in a decade - we need to stay competitive”
and I wouldn’t have even remembered it.

~~~
atYevP
Yev from Backblaze here -> Jack that's interesting insight, thanks! What's
funny is that I was the main driver internally for tone and the process as a
whole. We definitely had some intense conversations about the "band-aid"
approach where we'd announce and raise shortly thereafter, and the approach we
took which was a bit more measured. In the end, I think we spent a lot of time
making sure that we were taking care of the customers, but you're right, our
tone in certain communications did come off as a bit apologetic.

The truth is we'd never done it before, so we weren't really sure what the
reaction would have been - so we erred on the side of caution. Now that we
have data points, if we ever need to do this again we'd likely still take an
open, honest, but maybe more blunt approach. Tough to say though because I try
to default to default to empathy, which means my takes are usually softer.
Those conversations are some that didn't quite make it to the blog post, but
finding the right balance for us was an interesting process!

~~~
caseysoftware
Fundamentally, your customers want you to make money because when you do, you
stay in business and stay happy, healthy, and able to hire great people and
innovate.

Please don't apologize (much) or be timid about applying changes that protect
the service, customer experience, and business as a whole.

~~~
Klinky
There is a sizable contingent of customers who don't care if you make money
and want bottom barrel prices or are just around for promos. This group can
often be quite demanding without any real justification for being as such.

~~~
xmprt
I don't know about you but I'd prefer that the company that's keeping all my
data backed up stays in business and if that means paying an extra dollar a
month, then so be it.

------
jedberg
I love the detailed writeup, but it seems like they made this a lot harder
than it needs to be.

Most SaaS companies, when they raise prices, will announce that new customers
will pay the new price starting in X days, where X is usually 30 or 60. This
gives people on the fence a chance to jump on board at the lower price, and
lets current customers keep their pricing.

Then they tell their current customers that their existing price will be
grandfathered in for X months. If you make X big enough, most people don't
really notice, because when you announce it, it seems far away, and when it
happens, they probably don't even check their subscriptions that often.

The whole credit thing felt like a ploy to raise some immediate cash and
create artificial lock in, and after this post, it seems like it didn't even
really help them all that much.

~~~
dwd
I found their approach refreshing open, especially when you compare it to
cPanel's recent price hike debacle. That was a good example of how not to do
it,

------
jaytaylor
Wow, the sensitivity, consideration, and care Backblaze consistently shows
towards their customers is inspiring. I love companies like this, it's The
Right Way To Be. Beautiful.

~~~
atYevP
Yev from Backblaze here -> thank you Jay! Our customers were one of the
reasons that we felt it would be interesting to share our process, so they
could read about how we shot ourselves in the foot :D plus the story is so odd
that it was just plain interesting!

~~~
mywittyname
It makes me confident to recommend your service to people. I know that I'm
going to be recommending a product that will take care of the people I care
about. I won't need to worry about you guys starting to use dark patterns to
milk your customers (i.e., my grandma) for more money!

~~~
atYevP
Yev here -> Yea! In the article I mention a few of our company core beliefs
and one of them is "be the good guys" \- we take that very seriously.

------
Lich
Backblaze, here's a story. My dad used to run a mailing service, kind of like
a UPS store, but non-franchise. We also had private mailbox rentals (PMB) for
customers. My dad ran the business for about 12 years. About year 7-8, my dad
was like, I have to raise the prices of the PMBs. You know what his longtime
customers said?

They weren't mad, but they were surprised. They said, "Damn, it's about time.
I've been wondering for a long time when it was going to up. Good for you."

~~~
atYevP
Yev here -> that's similar to what we saw too! It's one of those things where
because we'd not done it, there was a bit of dread (not because we thought
we'd be skewered, but because we really don't want to let folks down).
However, once we saw the early responses rolling in, there was a collective
sigh of relief.

------
rootusrootus
I am totally okay with them charging however much money they need to in order
to be reliable. I switched recently from Crashplan over to Backblaze because
Crashplan just couldn't reliably get a complete backup of my workstation.
Backblaze does not seem to have any problem with that at all. This is what I
want from a backup -- after all, as they say, backups are worth nothing but
restores are priceless. Another dollar a month is _nothing_.

~~~
atYevP
Yev here -> Thanks! Staying reliable and in-business are two things that we
care deeply about!

~~~
microcolonel
Your desktop application for Windows (which I do not use personally, but have
set up for a couple other people) is pretty great as far as backup provider
applications go.

The one thing that wasn't spectacular was the signup flow. I found it a bit
confusing: IIRC if you subscribe to Backblaze from the prompt in the
application, it doesn't automatically configure when that subscription is
purchased, so you have to download the custom installer or whatever the normal
process is (I don't exactly remember, except that it was a bit less smooth
than I wanted).

Nonetheless, once that was out of the way, my brother's two-seat setup works
great, and it has given me considerable peace of mind that he will not simply
lose all of his audio production files, and be crushed.

B2 is great value and I use it wherever I can.

------
ademup
This article makes me truly appreciative that my product/service is not
essientially a "commodity". Absolutely no disrespect intended for BackBlaze,
as they have obviously gone the distance in adding value to their core "we
store data" product.

That said, I generally find it easy to raise prices. Indeed, price discovery
is "fun" in my tiny tiny niche. Basically, I just increase the price every
time a new customer signs up. I honestly think this is completely fair to both
past and new customers. Sign up early and you reap the benefits of lower cost.
Sign up for a longer term and you keep those benefits.

It's a struggle with inflation, and I strongly appreciate the argument in
accounting for it. It is so obviously real, yet customers seem to have an
extremely hard time wrapping their heads around it.

~~~
gowld
If you sell a scarce popular product, soak the people first in line. If you
build your business on the word-of-mouth advertised of the loyal customers who
took a big risk on you, share the wealth they helped you accumulate.

------
jve
My subscription got renewed this month. However I feel the pain of having to
connect external hard drive every month (because at home, I don't use computer
that much, but backups are must have). And actually my ext hdd broke down and
there were no backups @ backlbaze, because I was too late :(

Luckily, was able to restore data by buying identical external drive,
resoldering bios and voila - turns out it was just the controller issue.

May I ask (because Babklazers hang around here) why this limiation? Can it be
increased? Can it be turned off? I don't have that much data and I feel I'm
really overpaying for my gigabytes and better buy some home NAS or whatever.
Probably wouldn't feel that way if I would be storing TB's @ Backblaze :)

~~~
atYevP
Yev here -> glad you were able to restore your data! The limitation exists
because the longer we keep data the more it costs us, the 30-Day Version
History we have allows us to eventually reclaim space. That said, we're
looking at ways to make it easier!

------
teach
Goodness, I wish Backblaze had a Linux client. I pay for Backblaze for my
wife's Windows workstation _and_ a second license for her Windows laptop, yet
I'm stuck with CrashPlan for Small Business to back up my Linux workstation.

And before I get comments about B2 and Duplicity, my Linux workstation is also
our NAS, so I'd be backing up roughly 4-5TB. I greatly prefer Backblaze, but
not enough to pay an extra $200 a year.

~~~
ac29
Backblaze has explicitly said more or less the exact reason they don't have a
Linux client for their one-price-fits-all backup service is that they don't
want people backing up multi-TB NAS devices. The folks over r/DataHoarder/
would absolutely destroy them if they offered unlimited backups for NAS
devices for $6/month - many of them have hundreds of TB on their personal
NAS'.

Its absolutely the correct business decision, and as you note, you are more
than welcome to use B2 and pay per GB for as much storage as you want.

~~~
bproven
you can still (probably) do that now using b2 cloud with duplicity or restic
you just don't have an official Linux client.

Although I do use restic on my laptop (backing up to b2) I wish they had a
nice official Linux client for desktops

(unless you are talking about non-b2 :) )

~~~
metafunctor
Then you pay a fair price for the space you actually use, not a flat monthly
fee.

------
js2
FWIW, I switched from the Backblaze client to Arq + B2 in the past year or so.
At this point Backblaze is little more than commodity storage to me and I
stick with it because it provides the best combination of pricing and speed.

I switched to Arq once I had multiple computers to backup and paying by the GB
for me is cheaper than paying per computer.

From a client-side perspective, Arq and Backblaze each have their own pros and
cons.

~~~
snotrockets
Arq also sells a service* (rather than software) which stores on Wasabi.
Slightly cheaper for my own needs (<1TB) and much less of a headache.

* [https://www.arqbackup.com/arqcloudbackup/](https://www.arqbackup.com/arqcloudbackup/)

------
JMTQp8lwXL
For all things not purchased with debt, this is true. But look at the housing
market. Or, consider industries with severe information asymmetry: see the
healthcare industry. Raising prices is no problem for two of the most
expensive line items in a middle class household's budget.

For everyone else, it's probably best to start with high prices.

~~~
thorwasdfasdf
Well, it's not a matter of debt. It's more a matter of whether or not new
entrants can enter the market and provide that good. In both real estate and
Healthcare, it's very difficult for new players to enter the market,
especially in highly regulated states. The result is a market where prices are
much higher than they need to be.

------
juliansimioni
I'm glad the people at Blackblaze really look like (from this writing and
others) good people who want to run a successful business while doing right by
their customers. But...

Jeez, clearly they did not hire patio11

While they technically did _raise_ prices, I'm quite certain they had a lot of
leeway to have raised them a lot more

~~~
mherdeg
Yeah he had some thoughts on how tarsnap should price itself at
[https://www.kalzumeus.com/2014/04/03/fantasy-
tarsnap/](https://www.kalzumeus.com/2014/04/03/fantasy-tarsnap/) which I think
suggests that he would consider Backblaze underpriced.

~~~
csytan
It's funny running into this article for the first time.

I've been using Tarsnap for a couple years now for our SAAS. After receiving
the first month's email receipt for $0.25, I replied: saying something along
the lines of "damn this is cheap! you could charge a lot more!". No reply of
course. He's probably heard it a million times already.

Having gained a bit more experience with pricing our own product this past
year, I think it might not be as simple as "he sucks at business".

Here's some potential (and highly speculative) reasons:

\- He may not need the money. He's got a respectable day job that pays well.

\- Higher prices mean less value for your users. Less value means less geek
cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably
wouldn't if it started at $100/mo.

\- Higher prices mean you sell to a different audience with more
responsibility. High touch sales, support email threads with 10+ folks all
demanding different things, handling exotic types of billing, etc. Many devs
don't like dealing with this kind of stuff.

\- What if he's doing this as a lead gen for his consulting services?

~~~
cperciva
_I replied: saying something along the lines of "damn this is cheap! you could
charge a lot more!". No reply of course. He's probably heard it a million
times already._

I do hear that quite a bit, but I also hear a lot of people saying that
Tarsnap is too expensive. I figure that as long as I have complaints coming
from both directions I'm probably somewhere close to the right price. ;-)

Sorry about not replying -- I usually do reply even to emails like that, but
it's possible that I was overwhelmed with email at the time.

 _\- Higher prices mean less value for your users. Less value means less geek
cred /love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I
probably wouldn't if it started at $100/mo._

This is part of it -- Tarsnap wouldn't get nearly as much free advertising if
its prices were higher.

 _\- What if he 's doing this as a lead gen for his consulting services?_

No, I'm not doing that. In fact I do very little consulting these days.

------
Osiris
> This became a full-time job for a handful of our most senior engineers, and
> resulted in a six month project before we were ready to put it through our
> QA testing.

So let's say that you pay your senior engineers $150k, 6 months is $75k per
engineer, say 3-5 engineers, that's $225-375k. Plus QA time, etc.

It might have cost the company $500k just to implement a program that would
reduce their revenue by letting people by in at a lower price.

I'm not saying this is the case here, but I often see companies I've worked
for not do this kind of math, the opportunity cost of implementing a feature
or product.

~~~
atYevP
Yev here -> while the numbers aren't entirely correct in our case the equation
is correct. We do account for engineering time and opportunity cost of other
projects that aren't getting worked on (though we tend to stack projects so
while one team works on, billing, another will work on UI, when billing team
is done they'll move on to the next project, etc..). One of the side-benefits
for us in this case was building out the Extensions program meant we had to
build a more robust crediting system, which is code we might be able to re-use
later!

------
noncoml
Backblaze, don't worry about the prices. You are good.

Two things you can improve are (1) more official sdks (2) see if you can
simplify your REST APIs.

Other than that, thank you! You are awesome

~~~
atYevP
Yev here -> Noted!

------
anonymoushn
I hope Backblaze lets me pay them to back up everything including
/Applications, my home directory, and /Library one day.

------
no_wizard
I have to say well done BackBlaze. This to me is an integrity move!

------
magicalhippo
I considered them when Crashplan threw me away. I've really liked what I see
of Backblaze as a company, but sadly their services come up short for me.

Personal is cheap but too basic (keeps file versions for 30 days only, no
backup on external drive/NAS). B2 is seems to be too expensive for my 1TB of
data.

They also lacked a data center in EU, learned my lesson with Crashplan on that
one, though I hear that is about to change.

Currently I've settled for Acronis True Image. Not exactly the same, but more
options, faster to get things running again after a proper HD crash (tried
that a few times already) and they're cheaper than B2.

But yeah, had I been a customer, the price hike would have been totally fine.

~~~
atYevP
Yev here -> things have changed! For 1TB of data on B2 the cost of the service
is actually LESS expensive for B2 than the computer backup ($6/month
unlimited). B2 is priced at $5/TB/Mo - so that price has stayed the same. We
also just opened a data center in Amsterdam - so you can create an account in
the EU and your data will be stored there! Not sure if that helps, but figured
I'd let you know!

~~~
magicalhippo
Thanks for the reply, it does indeed make it a lot more attractive.

The main issue I have with B2 is that I'll be using some client where the API
transaction costs are a complete unknown, at least to me. I have no idea how
many API calls of the various sorts the different clients will use, and how
they scale with my data.

I have a almost two million files, if a client uses one or two B or C API
calls per file when processing the backup set, then that's 5-10 bucks right
there.

~~~
atYevP
Yev here -> very true, but for a backup those should only occur once and
there's a free amount per day. The nice thing about our integration partners
like Cloudberry is that they go through qualification and we help them develop
so if their apps start to go haywire it's usually caught quickly and fixed
rapidly. It's been pretty rare for the transaction calls to go haywire.

Another thing you can do to protect yourself if that's a big worry is by
placing a Cap or an Alert for a transaction type. That way with an alert we'll
notify you when you're nearing that cap so you'll have forewarning instead of
just being charged (or if you set the cap, we'll stop until it's been lifted
or reset).

------
idonotknowwhy
I agree with some of the other comments here, this sounds too apologetic.

I'm signing up this weekend for a personal account to backup around 100GB of
family photos and videos.

I've been using the HDD reliability data to choose my drives for many years
and this looks much cheaper than S3. I was also impressed by being greeted as
a linux user and sent to this page when I hit sign up:
[https://help.backblaze.com/hc/en-
us/articles/115001518354-Ho...](https://help.backblaze.com/hc/en-
us/articles/115001518354-How-to-configure-Backblaze-B2-with-Duplicity-on-
Linux)

~~~
microcolonel
That was my experience too. B2 is great value and a heck of a lot easier to
configure through their web portal than S3.

------
thorwasdfasdf
Based on the price comparison tool they have, their prices are 4 times Lower
than Amazon, Microsoft or Google Cloud!! I would think that people would flock
to this platform.

I'm bookmarking it, that's for sure.

~~~
zhte415
Likewise. I've known the name for a while, just never looked into it much. The
prices seem very good!

------
hinkley
Wouldn't it have been simpler for them to raise prices for new customers a
year ago and leave the existing base grandfathered in?

It seems like I have this discussion at work from time to time. The faster we
grow our customer base the harder it is to monetize our improvements, because
we have a smaller and smaller pool of new users.

Getting big before you get your feature set and cost structure down means you
have to go ask forgiveness from old users.

If instead you launch a big ad campaign after improving functionality and
increasing the prices...

~~~
atYevP
Yev here -> Maybe! That was one avenue we were considering - do the
announcement, then make the increase only effective for new users instead of
existing. I think one of the reasons we shied away from that was it would
create different user "classes" and we'd need to keep that tracked somewhere,
so it would still have been some engineering effort to make sure that all the
billing code worked correctly. Eventually we decided on the extension program
because it also moved up some revenue, even though it was deferred.

------
eruci
I had a 100EUR per month subscription deal on geocode.xyz and someone was
dubious as to "why it was so cheap". Doubled it to 200EUR per month and
everybody is happy now.

------
thorwasdfasdf
It all depends on the cost of switching. If the cost of switching is really
high then you can screw over customers all you want and raise prices
considerably before they move away.

However, if the cost of switching is very low, you'll find it's much harder to
raise prices. In industries and products where switching costs are low, prices
tend to be much much lower anyway, especially if those users are easy to
reach.

~~~
yoz-y
According to the article some of the difficulty is self inflicted. For example
they were planning to raise the price for some time but then one of their
competitor left the consumer space. It would be the best time for them to do
the hike but they decided against it because it would be a nasty move.

------
eemil
Maybe it's just me, but it always seems like a cash grab whenever a company
updates its prices and allows customers to prepay x amount for the old price.
Why not offer a discount, or coupon code instead? Not saying that I disagree
with the price increase, just that specific method of rewarding existing
customers.

~~~
atYevP
Yev here -> it does absolutely move money "up" \- but as a company (at least
if you're disciplined) it doesn't mean you get to use it. You're basically
deferring revenue (the amount lost from not increasing prices on existing
customers for X amount of time) and the money you bring up is for a service
you still have to provide, so for accounting purposes it's more or less
"locked down". So you're absolutely right, it does bring money forward, but
there's costs involved as well!

------
leosarev
I loved Basecamp history of raising prices. Thay just made x2 increase
overnight, but just for new customers.

------
NKosmatos
One of my favorite companies! I plan to become a customer when we finally get
proper VDSL/fiber connections here in Greece, currently 900kbps upload :-(
They’ve just opened an EU datacenter(DC4) in Netherlands. It would be nice to
see a future blog about distribution of customers.

------
iagooar
> The year following Crashplan’s announcement we saw a huge increase in
> customers, which is simultaneously good and bad

No, this is GREAT, but you have to do it right! You should have increased
dramatically the pricing for new customers to keep the growth at acceptable
levels (in terms of absolute numbers). This way you would have had a lot
better margins from new customers and could have scaled your business in a
more controlled way.

> raising prices on the day when the industry started having fewer options
> would have been the right financial decision, but not the right Backblaze
> decision.

It would have been the right Backblaze decision, because you would have
secured a decent margin to provide the best service you can to your customers.

> We’ve all been subjected to price increases that were clandestine, then
> abruptly announced and put into effect the same day, or were not well
> explained.

Not sure if I use radically different services, but this never happened to me!
Usually, you get months of time in advance to get adjusted to the new pricing.

~~~
atYevP
Yev here -> Interesting takeaways! It was difficult to map how many customers
we'd gain after Crashplan left the business and how many we'd have gained if
we had raised prices by a lot more. It was made more complicated by the fact
that they partnered with our 2nd largest competitor, so we also had to do a
quick "sanity-check" about whether or not we wanted to raise prices to near
their level, or stay the same until things calmed down. Thanks for the
insights!

------
pcurve
I used to manually back things up on premise but then it became just too
painful and without proper raid I never knew quite when my number would come
up. With BB I never worry about. Hopefully I won't ever have to use their
retreival service. So far so good.

~~~
cortesoft
I have had to use their retrieval process.... and it has been SUPER easy. Just
selected the drive that failed, they sent me the new one..... copied the data
off, sent it back..... no cost to me!

I have had to do it twice so far (my system has 6 drives in it... all included
in the standard plan!)

Been super happy with the service.

~~~
atYevP
Yev here -> Glad you enjoyed it and that it was so easy!

------
tempsy
Doesn't this just depend on the price elasticity of the good or service in
question...?

~~~
atYevP
Yev here -> in purely academic terms maybe, but there are a lot of factors
which go in to whether or not a person will leave or stick around. I thought
it'd be interesting to write about our journey (since it was super atypical)
and provide some insights into how we make decisions.

~~~
isoprophlex
Your openness and engagement is highly appreciated. It's always very
insightful and pleasant to read about how you're running your business!

~~~
atYevP
Thank you so much! We love sharing and hope it gets others to be more
comfortable doing it as well (to our knowledge no one in SaaS really talks
about churn rates if they can help it). The idea being, the more folks that
talk about things the better. If you can avoid making a mistake someone else
made because you read their story about it from their perspective, that's good
for everyone!

------
davidw
Would be curious to read "raise prices" patio11's opinion on this one.

------
jwhite_nc
I honestly didn't realize the price had gone up until I read this post.
Checked my billing history and saw it's been $6 the last few months. Shrug.
Underpriced service that I'll keep paying for.

------
numbers
I didn't need to read an explanation to why they're raising prices, this is
something I really value and I'm happy paying a dollar more to know I can rely
on Backblaze.

------
sanbor
I gave a try to Backblaze but stopped using it when I noticed you have to send
to their servers you private key to restore your files. For me it's not
acceptable.

------
aidenn0
I'm guessing the negative churn rate on their churn rate graph is due to using
inappropriate smoothing, rather than anything real?

------
Causality1
The whole online backup thing would be great if I wasn't already bumping up
against my ISP's 1TB monthly transfer limit.

~~~
imhoguy
You generate >1TB of fresh new data to backup every month? That is not like
average user usage.

Large initial backup is a problem indeed but you can split your initial
dataset for months.

~~~
Causality1
No, I just already use almost a terabyte with no backup activity at all, and
how much I download is something I have to be conscious of. Having to balance
that along with upload usage would be a significant hassle for me.

------
eclipxe
Nice article. I just signed up as I've been having a heck of a time with my
time machine backups just failing. Great timing!

~~~
atYevP
Yev here -> Welcome aboard!

------
formercoder
In reality by keeping their price flat for a decade they’ve lowered their
price every year in real terms.

------
encoderer
* For consumer products.

B2B products often have annual price increases built into contract.

