First, it's crazy that Chargify is not talking about this here and responding. (Update: they are responding quickly via Twitter)
Second, when will companies understand and learn that you simply CAN NOT do this. Hell, how can any board member let a company do this?
We just started looking at Chargify for all OpenDNS enterprise users (doing many $mm/year in transactions) but we thought their pricing might not scale up for us. So we had it on hold. The distinction between free and paid customers was critical for us.
Now I know I was right not to pursue it. We'll continue with our home-built solution.
Why? Milk is more expensive than it used to be. Songs on iTunes are $1.29 now. I don't see any reason whatsoever that a company can't increase rates. Inflation and rising costs are facts of life. Even if they weren't, if a company realizes they can make more by charging more, then why shouldn't they?
They shouldn't have made such a massive price hike, and they should have given more notice, and I think that's the real issue.
Because milk won't go up from $.99 to $99 per month in one day.
Of course inflation and rising costs are a fact of life. But the economies of scale in a business like this lead to lower prices, not higher ones and the main excuse chargify seems to have for raising their prices is the fact that they are successful at the 'free' tier.
Which is something they should have factored in from day one, not come up with after a whole bunch of people have tied in their lot with them. This is a black eye for the whole third-party processing business, not just for chargify.
You don't remind your customers how much you have them by the short & curlies if you can help it, you make course changes nice and slow so you don't rock the boat. And if you mess up your planning you can either open your books and work it out in tandem or you can eat the loss and charge it to your education fund.
> You can't change your pricing upwards for existing customers, ever.
That assumption needs to be questioned. There are times when it's appropriate to raise your prices for certain goods and services. In fact, there are times when you must raise your prices if your business is to survive.
But this is not one of those times. What you do is you adjust your businessmodel so your new model takes in to account grandfathering in the old customers. Who over time will fade away so the problem will take care of itself.
We're not talking about a price hike that is caused by an increase in cost of raw materials or such. And even those usually don't radically cause your business model to shift, they will just cause an adjustment of a few percent or pennies to accommodate the underlying shift.
For instance, I have a very good deal with moniker for my domains, if they underlying price changes I pay for that. This is logical because moniker has to pay it too, so they pass the cost on 1:1. It's not like they told me 'first 50 domains are free' and then suddenly turned around and started charging me $100 / month.
Last time I looked, Spreedly's API and functionality wasn't even in the same ballpark as Chargify's. I've worked on integration projects with both, and Chargify is much better and more configurable. Spreedly may have improved, it's been a while.
On the one hand, I agree with you - Spreedly's not as feature rich as some of the competition. On the other hand, we have a lot of very happy customers, so that doesn't mean we're not a good fit for a significant set of startups.
Very true, please count me as one of your satisfied customers. In a different comment, I did say Spreedly would be a great fit for those who just want a straight forward recurring billing solution, without deep API integration and other features offered by Chargify/Recurly. I forgot to note that here.
I've been slowly integrating Chargify into my app for the last several weeks and was blown away to read about this just now. One of the big selling points for me was the fact that it was free for up to 50 customers. I thought this was brilliant on their part because neither Recurly or Spreedly offer this. It got you locked into using their service, which is huge.
That being said, I bet that 95% of their users are under the 50 users/month threshold and it must cost a bit to support them all. They must have calculated that it just wasn't worth it.
I wish they would offer a cheaper plan for up to, say, 100 users. I think that would a great middle ground for new apps.
I wrote a blog post a few weeks ago comparing the costs of Recurly, Spreedly, and Chargify and concluded Chargify was way in front . I think they're way behind now.
This seems like a big shoot-self-in-foot moment. To get to 50+ users you have to start at zero. Cut out all your <50 customers and you'll never have any >50 customers. Seems blatantly obvious to me. I guess I must be missing something.
I don't know why they don't just charge a set monthly amount for each user (up to a threshold). Say $1. So if you have 20 users you pay $20/month. That would allow them to keep their existing customers, cover their costs and provide a path for people to work up to $99/month.
Also, they shouldn't have doubled their fees for existing paying customers.
I empathize with you're sentiments, but I ran a split test for a SaaS based business and it turns out "packages" convert better, at least for their target market (law firms). It would be nice if everything was just a continuous curve, but people are more sold on "plans".
My name is David Hauser (@dh) and I am a founder at Chargify as well as the Grasshopper Group where I have spent the last 7 years serving hundreds of thousands of entrepreneurs and helping them to succeed. I want to respond directly here and invite anyone to reach out to me personally on Twitter or email to talk about this or anything else.
We made a mistake with how we implemented and communicated a massive price increase and in doing so totally ignored our loyal and amazing customers that spent the time to integrate with Chargify. After starting many companies with NO outside capital I understand the struggles of a bootstraping company or lean startup so we should have done better with this.
Listening to the feedback here and via many other channels this was very clear and we wanted to make a quick change. We have released a $39/month plan that supports 100 customers for anyone that has signed up for an account, does not matter if you never used or have not started to integrate. Some important points.
- Only active customers are ever counted in your customer count
- $39/month plan will be available for anyone that has a Chargify account now. Do not worry that you will miss signing up, it will be available for you
- Offering the type of support that we want to is not cheap, and it is how we do business
- PCI Level 1 is both expensive and valuable and we want to provide that to our customers
While we firmly believe that Chargify and many competitors provide great value to a company that wants to do recurring billing we realize the mistake that was made. We will not go back to free as it will not allow us to support our customers the way we want to. There will always be a "cheap" or cheaper competitor out there but we are not that one.
Just my 2c of course, IMHO, but a major reason you are getting so much grief is because of how difficult you have made it for people who cant now afford your services at the scale they once did, and how difficult it is for people to move from your service.
>>There will always be a "cheap" or cheaper competitor out there but we are not that one.
Well not now you are not. You hold all of their customers details, moving from chargify to something more affordable is a nigh on impossible task. I'd expect that there are more than a few startups who will just shut up shop who just dont have the resource to enter into a process of getting all of the users to re-sign up with alternative providers. Thats pretty sad dont you think?
I suggest a massive course correction, switch back to the old plan today, inform your users, open up your books and work out a plan together with your users. I know that that may be very difficult for you at this point but you are literally killing the chargify brand with how you go about this.
Go back to where you were 24 hours ago, then make very careful moves forward in concert with your userbase. You can still do it, wait a bit longer and the window of opportunity will close. As soon as people start to throw their dreams in to the garbage and notify their end users because of changes you have made chargify might as well close up shop. Ocean liners do not turn on a dime, they'll break and sink.
If the goal of all this is to shake out the 'free' tier remember that each and every business starts at zero.
The best thing you could probably do is to find a way to put a sunset clause on the free deal in concert with your users, reasonable terms all around and then to create a limited time free offer which will automatically convert in a model that covers your costs. If they grow over that you will recoup the loss of the initial free signups.
The data you have amassed on your customers profiles will need to be brought in on figuring out what kind of model will work best for both you and your customers. My bet would be that the model that matches the chargify demographic best would be one that cuts a merchant 180 days of slack to get going, after which they enter several tiered schemes where the cost per transaction goes down as the volume goes up.
Users don't care how you want to serve them, they care that they will be served in a way that works for them, and to tack on a fixed fee where there was none before is a way that does not work for lots of your users. If you think that only the small ones will be affected you can bet that if you don't work this out in a good way that the big ones will be looking to bail as fast as they can as well.
You made a mistake, the fix compounded the mistake (I know that from your perspective it looks like meeting them more than halfway but it really doesn't, $40, at 10 sales per month works out to $4 per sale, at 20 sales it is still $2 per sale and at 40 sales you are getting in to 'reasonable' territory.
If the support costs are what is killing you then work on reducing them further, excellent guides and a team of super users to help out the newbies.
Freemium does not mean 'yesterday you were all free, today you're all premium'.
Thank you for the feedback and you are right that the pricing does not work for someone with only 4 customers. Keep in mind that starting a business has costs, even opening a bank account and collecting money is pretty core to this so we do not expect this to be a free service.
We made many mistakes with the implementation and communication with this but do not feel that the $39 plan made this worse. We always listen to our customers and have done this for 7 years at Grasshopper and have gone through both price decreases and increases. We will continue to listen to and work with our dedicated customers and passionate Hacker News followers.
I was blown away by the newsletter earlier today. It felt like I got punched in the stomach by Rocky Balboa himself.
In the beginning I considered the same billing service providers that I'm sure every other Chargify customer has considered (Spreedly, Cheddargetter, Recurly, etc). The main differentiator was your pricing model. It was the fact that I could launch my product and see if I could get to those first 50 customers before I had to pay you. You made it almost a no-brainer because of your pricing, it was perfect for people like me just starting out. It was inspiring that you were putting trust and hope in your customers. 10 months later, I'm completely integrated with Chargify, have an app in the wild with real users, and boom... All of a sudden Spreedly, Cheddargetter, Recurly, etc are looking a lot better.
Aside from the massive price increase, I (like many of your beta users) spent a year testing out your application and giving you a lot of feedback to improve your product. I have also responded to several of the "[name] is looking at Chargify, can anyone help us out?" tweets and have said nothing but great things about Chargify since day one. I have helped several of your customers via email, support forums, blogs, and twitter with integration issues, and more-or-less evangelized your product. And I'm happy to do that for great services, and I'm guessing I wasn't the only one. But this was all under the impression that what I signed up for was what I was, well, signing up for.
Receiving that newsletter made me feel like I was (we all were) being used to help establish Chargify as a viable option, only to get shit on in the end... and that sucks. It's a horrible feeling.
I understand your needs for a price increase and that you can't support freemium at a massive scale, but to be honest, even $39/month is $39 more than what I signed up for considering the first 50 customers were free. I never have needed (and probably never will need) to call you on the phone, so I'd be happy to be on a plan where 24/7 phone support isn't an option.
It seems like your early beta testers and customers, who shouted to the world how great Chargify was, should if nothing else at least be given exactly what they signed up for. Now I'm just getting started, so I don't know the ins and outs of business, but that seems like an obvious play to me.
Unfortunately, there's now a big lack of trust in Chargify... what will happen to its customers in 2 or 3 years from now when we're even more locked in? After this move, that's a little scary, and potential grounds for departure.
I still feel like it was a bait-and-switch to me, after having written an integration for one of our apps that was supposed to go live TODAY, only to find out that we had to reevaluate all the billing solutions... again. Good lesson for companies that buy these solutions - make sure your agreement does not let the vendor change their price on you whenever they want with no notice, especially when you are integrated like this. Having one more comment saying that we didn't like the pricing change probably won't change anything - but it sucked to get ready for a go-live today and then have to put on the breaks. I spent my weekend finishing up the integration and Monday find out that that time was spent integrating with a company that has basically no regard for the smaller users. This $39/month plan doesn't restore our faith in you - we're more likely to build something home-grown at this point just so nobody can do that to us in the future. After all, you make us buy authorize.net, then customer information manager... so we could build basically the same thing integrating to authorize.net's ARB (automated recurring billing) system for $10/month. I still am not getting my weekend back, or the stress from getting burned by you guys today.
Thank you for emailing us. We have been using chargify for a couple months now and we now have about 700 paying customers. Under the new scheme, it looks like we will need to pay $350 for those 700 accounts. Is my understanding correct? If so, this price change is going to put a very heavy burden on us as it will take us some time to get to 2000 accounts so that the average cost is lowered.
Would you considered a more closely geared pricing model that does not penalize us every-time we successfully grow pass one of the pricing thresholds? For example, please check out Sendgrid's pricing structure, which scales very intuitively. They provide a different type of service and so the exact numbers are not relevant. However, their structure could be a good reference for Chargify.
Even $39/mo is still prohibitive. Considering the cost of modern cloud hosts, your bottom plan is still more expensive than a web server in some cases...
As someone building a bootstrapped side project with absolutely zero customers, I wouldn't mind a stripped down $20/mo / 50 customer plan that had no phone support. But anything more than that, it really doesn't make any sense to be paying more for Chargify than the server - after all I still have to get a merchant account and go through all the BS with that on top of it.
Paypal is starting to look better and better every day, and its kind of a bummer because now if I want to support direct payments later on I need to account for Paypal, and I'd be more likely to just roll my own system
One of the problems you have is that your reason for pricing doesn't jive with how you're doing it. If it's really a question of support costs, just charge for support at the lower tier(s).
Plus let's be honest, once someone is up and humming, support costs for them (provided your service is as solid as you sell it to be) shrink very drastically.
I'm all for you making money, we want you to survive as much as you do. But given the locked-in nature of what you're selling (i.e. you've got us by the short hairs), and the extremely high cost to integrate with you, waking up one morning to a massive change like this is deeply, deeply unsettling.
To sell a product, that takes months to integrate, and change the pricing structure completely without warning is basically insane business practice. At LEAST provide a per user rate for the little guy, and change the t+c to assure customers there will be fair warning and 'not more than x% per annum increase'. A price change for a product like that should be given 6months notice and an incentive to grow into the new structure (ie grow to over 100 customers before we change the price and you'll get 10% off for another 6months.
Yeah, not to pile on... but I have to believe that pricing, at least on the lower end might be out of whack with what I still think is your target clientele - a group that likely all have some inhouse development resources. Faced with the reality that at least some integration is likely to be needed, I'm not sure Chargify would even get on my radar given the new pricing structure. To me, I always thought Chargify was "get full fledged service up and running quick, by the time we're rolling along, why mess with a good thing".
The PCI compliance bit is somewhat misleading, as at least for integrated solutions, just because Chargify is PCI compliant, doesn't let us off the hook. So if we have to be PCI compliant(integrated solution), we are basically paying for dunning management? I'm being facetious but hopefully that illustrates what others are probably thinking. My approach will now be, build out simple customer management system, tie into a payment gateway and build out related services as site/business grows.
Sucks for me... I spent a decent amount of time integrating/understanding how Chargify works and now I realize that Chargify is simply not an option(trial users were actually my biggest draw).
Anyway, you have guys have built a great service. Wish you the best.
100% agreement. Our small team has spent the better part of 2 months getting ready to rollout subscription pricing for two separate apps with Chargify's model in mind. We cannot roll them out faster and loved the option to grow slowly. Once we had 50 customers we knew there would be no hardship in paying for Chargify. It was great that these guys "got it" and really understood what bootstrappers go thru. Now it does feel like we got "punched in the gut" as another user said.
Yes, exactly. I thought the same thing. "Finally, there's someone out there who understands the needs of a bootstrapping, young business". But apparently it was a scam. If it's too good to be true, it probably is.
There's no way Chargify would have the customer base they have now having launched with these pricing plans from day one. With the several other options out there, someone starting out with nothing would NOT choose to pay $100/month right off the bat, without even considering hosting costs and merchant/gateway costs, knowing there are other options out there for $19/month. I'm happy for them that their "too good to be true" pricing sucked in some customers, but it sure does suck for us.
The attitude that "there will always be cheaper options out there, but we won't be one of them" is a far cry from how it was early on. It used to be "we understand, and offer the best pricing around". It was so relaxing to know that $50/month would get you up to 500 customers, with 49 of them being at no charge (even 10-15 at no charge would be great). Coming from that, no, $39/month for as little as 1 customer does not feel like a good deal, unfortunately. Downgraded from $100, maybe, upgraded from $0, no.
I'm truly shocked the old prices aren't going to be grandfathered in.
I think I'm going to bite the bullet and (re-)integrate with someone else. Ugh.
I am so lucky because I just started to shop around for payment system. I will have to switch to CheddarGetter which at least provide 20 free users. For those who stuck with Chargify, well, you have my sympathy.
Firstly, thanks for the change of plan. But don't think you're off the hook that easily! :P
I understand the need to ditch free users. It's a common tale that supporting free users is just not worth the effort. But realistically, dropping a bomb like this on the many customers you already have which are either "only just" paying or "about to pay" is just plain horrible. Startups who are just ticking over to the base paid plan are particularly vulnerable, not to mention the hundreds of customers who are no doubt not that far yet. The point is, that EVERY one of your customers starts off with ZERO of their own customers. That's what made your pricing so great for bootstrapped startups like us. Today, you've made it just that little bit harder for people like us.
We started using Chargify in production about 60 days ago. We were just about to write our first cheque to you, and I've even mentioned to Lance that I was actually looking forward to it. In my mind, getting to 50 paying customers was something of a milestone. But to go from budgeting for $50 a month to now budgeting $100 a month on top of the all the merchant fees for both is just about a show stopper. I guess that just means we're not in your target market.
I don't think anyone expects businesses like Chargify to offer their (awesome) product for free. But for someone who has been in business for so long, it is hard to believe you guys are so naive as to think this would go down at all well. Especially when it has happened time and time again with others only recently.
Chargify is in the unique position of having a fairly substantial "lock in" on customers. The switching costs for us is huge. For us to change to competitor would be prohibitively expensive. When you're in that position, it's unpleasant to be reminded just how much power a third party has over your own business.
I mentioned in another post here that UsabilityHub has just shy of 10,000 users. 90% of those were migrated from our previous system (paypal) which wasn't subscription based. At the time I made the decision to keep those users out of Chargify rather than paying $40 a month to maintain them. I felt dishonest for doing so, but now that I'd be getting charged $1000 a month for those "free" users, it was possibly the best decision I ever made. We got out relatively unscathed, but that is how close we come to being forced to shut down our product because of pricing decision made by a third party. Let that be a lesson to all.
The moral of the story here, however, is that you guys have spent nearly a year building up some pretty awesome goodwill amongst the startup community. Today you've turned around and told all of us that we don't matter to you. You guys have spent so long telling us how the banking sector is "doing it wrong", is too expensive and has too many fees, and then you turn around and join them.
To underline all of this, Chargify is now the most expensive part of the billing chain for startups. Congratulations.
EDIT: I'm currently in the process of implementing "one time" purchases using Chargify. This is our most requested feature. Given that all these users will be counted as "active users" in Chargify, we'll be getting billed for every one of our 10,000 users that decide to make a "one time" purchase even though they're not actually subscribers.
So I guess I need to explain to our customers why we won't be doing that any more.... this just keeps getting worse.
I've met David and he is a great guy that really cares about entrepreneurs, so I'm surprised about how they went about this pricing change.
The pricing change itself makes total sense (startups who never get any traction/paying customers end up costing a ton and never pay anything) - but changing to a pricing structure that can hurt so many entrepreneurs (like in toast76's case) seems the wrong way to go.
Is the cost to grandfather in all the existing customers really worth all the brand damage this created? Not to mention the startups that are now cash-flow negative since they are being suddenly charged for all their free users (and apparently one-time payment users).
The icing on the cake is that their branding is focused around being the service provider to entrepreneurs.
That's the bit that upsets me. I've dealt with Lance in particular quite a bit. These guys are fanatical about helping out. I WAN'T to give these guys money. I love their stuff, I love their spirit. If this was Paypal I wouldn't be posting here... I'd just be closing my account.
Very thoughtful response and love the passion. We are in a very limited segment of Chargify customers that actually have many freeium customers and we would love to work with you to make sure pricing works for you.
There is much talk about freemium but over 12 months of data show that companies actually doing this that are using are system are under 2% of our customers. Feel free to email me, send me a twitter message, anything you want and we will figure out something that will work for you.
Chargify can charge what it wants, but the pricing change was abrupt and BIG. Apps on the ground floor went from FREE to $1200/year. No grandfathering, 30 days to accept. For a service that needs to be integrated, that's a terrible move that shows no respect for startups.
What's worse is that if you're already using them, you basically have no choice in the matter since the alternative is trying to get all of your customers to sign up again, which is basically a non-starter. Note that they also doubled prices for their first tier of paid customers from $600 to $1200.
This is the evil next business model: Free "bait and switch". Get businesses to sign up with a service that is free but requires integration. Then start charging. Integration makes it very difficult to switch.
Well, technically you have all the customer data in your gateway's info manager (like Authorize.net's CIM), but it would still be a real bitch to take that and do anything useful with it. Plus, the clock is ticking on your 30 days to get it migrated to your new setup.
Honestly, I haven't looked closely at the raw A.net API. I heard about Chargify, pricing looked good, and it fit my model. Basically, I wanted someone else to deal with dunning, expired cards, running the periodic charges, etc, etc.
This spooks me a bit. I'm a big fan of Chargify, but for their prices to jump like this and totally remove the free plan is scary. That will make it much less attractive to brand new web apps that don't have a proven business model.
With the new pricing scheme your setup cost for accepting credit cards are merchant account, gateway (ie. Authorize.net), and $99/mo for Chargify. For most brand new web apps that's going to be significantly more than you pay for server/hosting costs. That's a bitter pill to swallow when you're not even sure if anyone will actually pay for your service.
this is disappointing. we were looking forward to starting to use chargify because of the free tier. Now I would be reluctant to even sign up until I was sure I had at least a few paying customers. I don't remember exactly but the free tier seemed pretty generous, maybe cutting that down to under 5-10 customers is free? To at least get people hooked on it without such a big barrier to entry.
Even giving me 5 customers free would encourage me to try them, but they can forget that now -- because I'm not going to commit to anything close to $99 a month unless I actually have hundreds of paying customers. Just my personal point of view, but it feels like they have so much business now that they no longer care about getting any new customers.
UsabilityHub has just shy of 10,000 users. The VAST majority of those are free users, and a fair percentage of those are inactive. My Chargify bill would've just gone from $50p/month to $999p/month! And pretty soon I'd be looking at having to NEGOTIATE my pricing. What the fuck chargify?
Fortunately for us, we saw the potential for asshole acts from Chargify and never registered our free users with them. If we had...well...we'd be royally screwed. $50 to $1000 with one newsletter.
I feel like a moron the number of times I pointed to Chargify as a great way to do business. They were startup friendly, they helped you grow your business to the point where you'd be happy when you start paying them. I know we were! Most of all, Chargify were the beacon of freemium pricing. Not only were THEY freemium, they were very freemium friendly.
In one swoop they've gone from the cheapest part of setting up your billing to being BY FAR the most expensive part. What a bunch of suckers all your customers are...us included.
Chargify, you will NEVER under the hate you've just brought on yourselves.
Just a note that Recurly did this exact same thing several months ago, though they've since changed their prices again. We were literally 1 day away from launching on Recurly when they changed prices. Spooked by the sudden price hike, we spent a good deal of time re-writing our ecommerce on Chargify. And now this. Maybe it's time to just bite the bullet and roll our own solution.
Spreedly doesn't provide the same functionality, but it's great if you just need a basic recurring payment solution without the frills or deep API integration.
I haven't worked with CheddarGetter or BrainTree directly.
If you can at all afford it get your own merchant account and work with an IPSP directly, keep control of your own data as much as is allowed and make a deal that if they go belly up that you will get access to your accounts for a one-time migration to another IPSP. Otherwise you're just setting yourself up for big trouble down the road.
Middlemen in the payment business have a habit of going down when you need them most (when your business is successful and you are growing like mad, have a bunch of employees and suddenly your income evaporates).
iBill, DMR, now Jettis in trouble and many others besides.
All it takes is one big VISA fine for not following procedures and these operations will fold like a house of cards.
The recurring payments capabilities of gateways, such as Braintree, Auth.net, etc. typically are not as robust as the recurring payments capabilities of the companies that specifically focused on that capability such as Chargify, Recurly, Zuora, etc.
If you just need to charge the same customers exactly the same amount on exactly the same timeframe, then the capabilities of gateways such as Braintree may be ok for you.
But typically SaaS companies and others with multiple plans, additions, features, extra one time payments, etc. need an additional layer of logic on top of those capabilities. You can either buy that logic or pay Chargify, et al for it.
I just wanted to clarify that Braintree does has additional recurring billing features that are not mentioned here. You have the ability to set up multiple plans, modify individual subscriptions, created add-ons and discounts, create one time charges and more. For a more complete list of features you can check out our website: http://www.braintreepaymentsolutions.com/services/recurring-....
Basically, braintree has a 'vault' feature where I just add a 'vault_id' attribute to my user model, then call 'response = GATEWAY.store(credit_card, :email => current_user.email)' to send their info off to braintree. Later, that lets me send a charge with their vault_id, and it charges their card.
It's probably just slightly lower-level than Chargify's...
I was piloting Chargify with about dozen customers to see if I wanted to make it the default platform for all of my customers. Now, definitely not. This bait and switch shows a complete lack of respect for everyone who has invested in the platform.
Chargify, I'm sure you'll be laughing all the way to the bank, but not with my money.
Does anyone sell an installable non-SaaS replacement for Chargify that integrates with Authorize.net CIM?
I spent the last two days porting our code from paypal web payments pro over to chargify... and then they just jacked up their prices for starter level from 0 to $1,200 a year, and you still have to subscribe to authorize and the customer information manager - so they're just providing the gateway for $100/month. Ruined my afternoon, and probably tomorrow as I look at the other options like recurly.com , spreedly.com , cheddargetter.com , etc.
It also strikes me as a dangerous strategic move. The reason I originally selected Chargify over competitors like Spreedly and CheddarGetter is because they had the lowest entry cost. I can experiment and find product market fit. By that point, I don't care so much about the monthly cost (and I'm locked in to a product that I like, which helped me reach my goals). The new pricing model is extreme enough to make me revisit the decision. I'm sure I'm not alone.
I find their product and support to be great, and I'd like to see them keep a similar model. Maybe they should lower the thresholds (free up to 10 paying customers, for example). I'm sure there are other models that will work for them and their customers.
Make the old customers part of a 'legacy' tier which allows them to continue to pay the same and receive the same, but don't allow new customers to join that. Put new customers in the 'fancy shmancy' tier and allow old customers to migrate there (with price increase) for whatever new features you are adding.
It's still going to be a bitter pill for the old customers, but it IS better than saying "Sorry, you gotsa pay more now! Suckers!"
Full disclosure: I run Spreedly, an earlier to market but much less funded competitor to Chargify.
Here's the dirty little secret that Spreedly discovered about 18 months ago, and that I'm sure Chargify - like Recurly before them - has now found out for themselves: there are plenty of people who want to start subscription businesses, and out of those, the vast majority will not succeed and will actually end up costing more than they ever bring in. That leaves businesses in this space two options: either focus on successful startups and actively filter out the "losers" (by charging a minimum of $99/month, for instance), or minimize costs for "low probability" businesses - and they're all low probability early on! - and use "cheap to try things out" as a star search for the few businesses that will end up getting big.
Note that Chargify paired this price increase announcement with two other significant announcements that have largely been overshadowed by the hullabaloo: PCI Level 1 compliance, and 24/7 phone support. This pairing is not coincidence - I'm pretty confident that the pricing change is very firmly tied internally to these two new "features". PCI Level 1 compliance is a hefty upfront cost plus a large ongoing price tag. Good 24/7 phone support is crazy expensive to provide, and means that free customers would eat their lunch since so much of the support needs for one of these businesses is on the front end.
The ridiculously huge mistake I think Chargify made here was something I thought was just a given these days: they should've unilaterally grandfathered all of their existing clients, and quietly given the grandfathered plan to anyone who was already integrating but not yet launched as well. When Spreedly made our last pricing change - from percent of transaction fee to flat per transaction fee - it was a price drop for most of our customers. But not all: anyone with super low prices would've ended up paying us more, so we explicitly made it the minimum of $0.20 or 2% of the transaction. There's just no excuse for ticking off existing customers - it makes you look like a cell phone company. Even if you absolutely have to raise prices across the board, I think three months of warning is the absolute minimum amount of time to give a customer base before you hit them with the increase.
So, that's my $0.02 - hope it helps folks understand why I think this is happening. Questions, feedback, etc., welcome.
P.S. I think in some areas Chargify's definitely ahead of Spreedly Subscriptions in terms of functionality - all of that extra capital definitely shows in the end product. But that's because we've been focused on "what's next" after you figure out the naive business model doesn't work in this space. I said above that there are two options. That's a lie - we're working on a third option. If there are any angels reading this that would like to invest in a team that's been thinking deeply about this space since before Chargify and Recurly were a twinkle in their founder's eye, drop me a line.
> here are plenty of people who want to start subscription businesses, and out of those, the vast majority will not succeed and will actually end up costing more than they ever bring in.
That's not exactly news, that's why you try to get a good grip on the life-cycle of a cross section of your potential customers before you set a pricing scheme.
A free customer should work out at any level of scale and any life cycle that that customer can go through, the fact that there are 'many of them' or that the distribution is not what you expected points to a lack of research of your prospective customers.
Bait-and-switch by accident or by design makes no difference to your customers.
> Note that Chargify paired this price increase announcement with two other significant announcements that have largely been overshadowed by the hullabaloo: PCI Level 1 compliance, and 24/7 phone support.
Wait until they start getting in to more and riskier transaction volumes, they'll have to add up to 30 cts per transaction worth of fees for various services to help with scrubbing the bad stuff from the good stuff to keep the chargeback rates in check.
Otherwise they'll be spending a lot of money on airline tickets to warm and sunny places trying to get merchant accounts from banks that mere mortals would rather not deal with just to stay in business.
> they should've unilaterally grandfathered all of their existing clients, and quietly given the grandfathered plan to anyone who was already integrating but not yet launched as well.
100% agreed on that one, I really can't fathom with they decided to shoot themselves in to both feet at once like that.
Do you guys do segregated merchant accounts (one merchant account per customer)? If not how will you deal with a merchant account issue once your volume is larger and you start to attract 'bad apples'? (like everybody else that ever did multiplexed merchant accounts)
> Wait until they start getting in to more and riskier transaction volumes, they'll have to add up to 30 cts per transaction worth of fees for various services to help with scrubbing the bad stuff from the good stuff to keep the chargeback rates in check.
Selling a billing logic service to businesses isn't exactly high risk. Their customers' users' payments do not go through Spreedly/Chargify... they just talk to the API of the customers' payment gateways using their customers' credentials. Any end-user chargebacks related to the subscriptions are on the customers, not Spreedly/Chargify.
> Do you guys do segregated merchant accounts (one merchant account per customer)? If not how will you deal with a merchant account issue once your volume is larger and you start to attract 'bad apples'? (like everybody else that ever did multiplexed merchant accounts)
You misunderstand what these services are. They do not provide payment processing in any way. They are only selling business logic the app developer would normally have to write.
So, are you saying that firms like Spreedly which don't have as high costs are not offering PCI Level 1 compliance and poorer support? What are the liabilities for Spreedly and its customers for non-compliance?
Spreedly is PCI Level 2 compliant, which while not cheap, is significantly lower cost than Level 1 compliance. There's not additional liability involved by us being Level 2 vs Level 1 - while Level 1 is certainly a nice marketing strategy, the truth is that it's not required until transaction volume reaches a pretty significant level. Once Spreedly reaches that level we'll get it, but by that time we'll also be able to afford it.
In terms of support, what we're doing at Spreedly is focusing on providing excellent email support, and occasionally supplementing that with IM/phone support for critical issues. It's a trade-off that seems to be working well for us and our customers at this point.
At Spreedly we rarely do any phone pre-sales or support, and that's a very intentional choice. As noted above, good phone support is expensive to provide, and one of the ways we've decided to keep costs down (at least for now) is by sticking to email. For those who want phone pre-sales and support, Chargify's offering looks like it could be a good option.
Totally understand the reasons not to offer this, but we feel it is pretty important the ability to call your billing provider 24/7 and talk to someone as well as a NOC that is staffed 24/7 monitoring all systems. Collecting money is what makes a business work, sending an email that someone might get to the next day just is not good enough for us.
I just joined Chargify Oct. 7th after the AppSumo bundle offered a $200 credit. 4 days later, they've raised their prices. I'm going to scrap the work I've done and go out of my way to use other services. The money isn't an issue. $99/month is fine, but I wouldn't pay it to get started.
I feel like I'm missing something, because going by these pricing charts -- http://chargify.com/pricing-and-signup -- it seems like if you're a Chargify customer, "freemium" is no longer possible.
We (http://mocksup.com) happily use Spreedly and only send customers to them when they're upgrading to a paid account. Can you not do this with Chargify? And if you can, what do they count as a "free" user?
At UsabilityHub we (fortunately) circumvented their "free" user count by never sending them to Chargify in the first place. If we did, we'd be now getting billed $1000 a month. We did this because when we switch to chargify a couple of months ago we had over 8000 users and didn't want to migrate them all to Chargify.
We'd be shutting up shop right now if we had.
I'm doubly lucky as I was about to start migrating users to do "one off" billing using Chargify. Given that every one of those would now count towards our monthly fee we'll be using a different service for "one off" purchases.
This was very disappointing to read. If their product were rock solid I wouldn't have minded as much but it's far from being a complete solution. Unfortunately, a lot of chargify needs a lot of work. I'm especially unhappy with the metered components as they enforce integer cent prices for the components and only allow integer usages on those components. It's impossible to charge fractional usages. I guess it's time to start writing my own billing system.
We just launched globalfolders.com using Chargify (on a very slim budget), thinking we could justify their costs once we graduated to a larger plan. This change erases that idea.
It hurts more than just Chargify and their customers, it hurts anyone running such a service as people will be more likely to avoid services that they can't trust to keep their pricing stable (or at least give plenty of advance notice, 6 months to a year).
These kind of changes definitely make me think much harder about outsourcing a service. How can we trust the current pricing? Do we have to change our pricing every time they change theirs? How many customers do we lose based on their bad business decisions?
Chargify knows that people have spent time integrating with their service. They hope that this will give them a percentage of paying customers, knowing full well that they will lose a lot of customers. This is definitely a bad move for Chargify and a good decision for their competitors.
We appreciate the feedback from all of our loyal Chargify customers and we will have an update shortly to show we understand this support. A plan only available to those that already have accounts that will be much less and have a smaller number of customers.
We are very sorry that we did not show this understanding in our announcement and pricing. No excuses.
It's not so much as the money that's upsetting, as much as the broken trust when prices are adjusted upwards so dramatically. For example, our monthly prices will go from 0 to $99/month. You can say that may be a good thing, forcing us to focus on customer acquisition. But the point is that a service we budgeted X dollars for suddenly, dramatically increased. Of course $1200/yr is not life threatening. However, the trust is gone (or, at least it's dissolving quickly). As I wrote in my email to Chargify, if they're experiencing increasing costs, let us (their customers) know and be sincere - we are their fans! I WANT to pay them, because they have a quality product. But right now, it looks like a money grab after locking in developers. That part is upsetting.
Pretty sure you're dead wrong here. I am in the target market, and I'll still make money using Chargify, but it took me two years to get where I am. Starting from zero today, Chargify would make absolutely no sense to even consider.
If bootstrapped young startups aren't in Chargify's target market, then I'd argue that "the target market" was poorly chosen.
Why might the low-budget territory (with costs from $0-$30/month) be useful for Chargify to cover? Not because you'll make much money from that territory. In fact, you might, on balance, lose money on the people who remain in that group. However, everyone who starts there won't stay there, because some will ultimately become your multi-thousand-subscription core users a year from now. In other words, it might act as a "loss leader." This pricing structure, given the pricing structure of the competition, risks diminishing the wellspring of new users for Chargify.
Restated, my (testable) hypothesis is that (a) if you have similar competitors, and (b) you make yourself unpalatable to your low-tier users, then you will see reduced growth in your high-tier users. It looks like Chargify is willing to test that hypothesis.
Gotta remember that pricing is the hardest part of running a SAAS business. More often than not, you're going to get it wrong the first time, and maybe even the second time.
As much as Chargify's new prices are a turnoff, I understand their reasoning. I also understand the outrage. Any uptick in pricing is going to result in unhappy chatter on the Internets.
As someone working on a SAAS project, I'm doubly interested in this news.
1 - for keeping an eye on the competitive landscape for companies like Chargify and Spreedly.
2 - for looking at the side effects of pricing changes and the negative marketing impact
I have this feeling that when I finally release my product, I should price it slightly higher than my gut tells me to ensure that I reduce the risk of any price hike negativity resulting from unforeseen operating costs.
It's clear that none of these services have quite figured out how to best price their service but it seems that CheddarGetter is the only reasonably priced option.
Why is it that they seem to be perceived as also-rans? With Chargify, you'd have to bring in $60,000/yr before they would begin to be reasonably priced. Completely unreasonable for a bootstrapper seeing if they have something that will stick.
We appreciate the feedback and will make something available to anyone that built their business around this. It will not be free but we will give a large discount for a smaller plan. More information to come shortly.
I think the real moral of the story is that it's not okay to offer a free plan and then suddenly remove it and jack everybody's prices up. Your customers will feel betrayed, and it'll be a PR disaster. I'm not sure if people will ever trust Chargify again.
Wow thats a real bummer, I was about to integrate it into an app, but I certainly don't want to blow $99/mo on something that may or may not earn me a small fraction of that
Has anyone used Spreedly or CheddarGetter etc? Thoughts?
Are there any robust open source self-hosted solutions? (For Django, Rails, PHP?) Considering its just a subscription management wrapper for Authorize.net, shouldn't be too hard to cut out the middleman
We appreciate the feedback and will make something available to anyone that built their business around this. It will not be free but we will give a large discount for a smaller plan. More information to come shortly.
Bummer. I just integrated this into a client's app... Wouldn't have done so with this pricing.
Also, the price increase is possibly a sign of a problematical revenue model at Chargify. Probably not, but there's a chance that they really need to improve revenue and that gives me other doubts about whether to integrate with them.
This is going to turn into a marketing/PR disaster for Chargify. They even sent out another e-mail to try and make up for their initial "mistake".
Customers are very sensitive to pricing changes. The minute you decide to change pricing you should be thinking about it long and hard. While you are doing it you should be communicating to customers that you are thinking about a pricing change and solicit feedback. You need to be gently breaking the news to them.
I signed up for Chargify to check out their pricing. I liked the fact that you could have 0-50 without paying anything. Considering development for a specific platform is not free this sudden pricing change has forced me to consider alternatives.
As a customer who was just considering using them I feel kind of violated.
That's a pretty huge price increase. With all the competition in this space (Recurly, CheddarGetter, Spreedly, many others), I would assume the prices would be going down, not skyrocketing up.
They obviously are banking on the fact that their customers are already tied up with their API, so it would be difficult to switch. This is pretty sketchy, and it's going to make me very suspicious of these guys in the future. Also.. no grandfathering clause for existing paid clients?
I don't think you can expect these services to lower pricing any time soon. Why? It's clear now that Chargify and Recurly, who have both tried a very friendly freemium model, vastly underestimated the costs and problems associated with the businesses they are building. In both cases, it's a good bet that they needed to either raise prices or go out of business.
Pricing only goes down once the business model is clearly established across multiple competitors. This space simply isn't clearly defined yet.
As someone who will be looking for this type of service in the near future, I agree with Michah that the pricing for a start up, especially one that's bootstrapping is not attractive at all. At this pricing it makes more sense to build my billing system and use Authorize.net.
As a Chargify customer from very early on & having been in a paying position since early March (we launched in mid-January & it took a month & a half to hit a paying level) would we have used Chargify from the get-go if we had to pay for it? I can't say for certain but it's quite likely as it still would've been cheaper than moving development cycles into building a billing system (as it is we're still backlogged in that dept).
If I was running a business that relied on a lot of freemium customers I might think twice, but then unless you're asking for credit cards up-front just don't put them into Chargify until they upgrade and give you their CC details. We handle gift subscriptions this way, unless they convert to a 'real' subscription when their gift is up they never go through Chargify.
For what it's worth, it's safe to say after using Chargify for almost a year and having an active site using it for 9-10 months, the level of service and support we've received has been more than worth what we're paying — our development backlog is already a pain-point, I can't imagine what it'd be like if we were rolling our own billing system.
Their justification on Twitter seems to be that they needed to get rid of their free tier. That makes some sense, but that doesn't really explain why they double the price for their lowest tier and increased the pricing on their other tiers as well. It's unfortunate that they're increasing their price without adding any extra value to the product.
While I entirely understand the need to charge and make money, I find the sudden and significant change in pricing jarring. Many people just went from 0 to $1200 per year.
I'm guessing the cost of supporting the formerly free (0-50 customers) tier is close to zero from a technical/infrastructure perspective, but relatively high from a support/feedback perpective.
People in the free tier will either grow or go out of business. For those that grow, your cost is the same - you'll have the same questions whether you charge them day 1 or day 100.
So the real issue is the cost of support for those who signup for the free tier and either flake out or go out of business.
In my opinion, the rate of customer growth you'll get from having a free tier is worth the extra support cost. With no barrier in place, people will try Chargify, see that it's a high quality product, and if they have a viable business, will use it. That was our experience.
With a barrier in place ($100/month from day 1), they'll do a lot of research and probably try the cheaper options before trying Chargify.
For our particular case, I'm quite happy with Chargify as a product, but quite unhappy about the way the pricing was handled. With the former pricing tier we had the luxury of growing in cost as we grew in revenue. With the new pricing structure we have an immediate unexpected cost.
Now we have to go and investigate the other recurring payment options, which bums me out entirely, since I was hoping we were well past that.
You should, at the very least, grandfather the old users into the old plan. In my opinion you should keep the free tier around, but find ways to reduce your support costs. For my business, we treat support questions as the leading indicator for where we need to make the product more intuitive. We invest in improving the product, thereby also reducing costs.
Ironically, we just wrote a blog post (http://blog.quplo.com/2010/10/the-payment-provider-shortlist...) about Chargify as it was in our "shortlist" of 3 remaining (subscription) payment providers that don't give European businesses a hard time. Chargify got a pretty good end of the stick, short of a couple of weird things like charging for free users.
But with this pricing change, they're off the list. Sorry. So far it looks like Spreedly will be getting our money.
I found out about the change of pricing friday and I was really bummed about it. 50 free users were the perfect amount of user to guarantee some steady income before tackling the expense. It's also true that with a $25/mo you would need 7 clients to at least cover the billing costs (chargify/gateway/merchant acc.). Maybe instead they could have just change the free plan to 10 customers + no support.
I looked at Spreedly, I loved their simplicity, but at the same time I feel they are missing some important features like discount and coupons management.
This is a truly despicable and irresponsible business decision. Not only did Chargify pull a bait-and-switch but they completely pulled the rug out from under both developers and merchants by providing virtually no warning on this price change. Unfortunately, we launched with Chargify just a few months ago. Big mistake!
Ning.com did this not long ago but did it in entirely responsible manner but providing many, many months of notice.
With Patrick, I guess I understand the screams of pain on the unlooked-for price hike, but, even at the lowest non-developer level, you're only paying $0.20/month per customer. Assuming you're charging your customers at least $5/month, that's only $.04/customer/month, or less than 1%.
Seems like a reasonable amount to pay for removing all the pain of recurring billing.
Yes, I think you're right about not looking at per-user costs while you're in the very-few-user stage. And if one doesn't grow to the point that these services are worthwhile at $100/month, then it's probably the case that one didn't get to a sustainable place, anyways. The $40/month offer that they added for existing customers is also a more accessible price point for those bootstrappers just getting started.
As a side note, rolling your own subscription code using Authorize.net's CIM service (where they hold on to the CC numbers for you) is cheap and not really that hard, and it gives you the ability to do whatever custom stuff you want at lower cost. The API is a bit annoying, but I don't think I spent more than a day integrating it.
Deja vu. This is exactly what Recurly did to its users a few months ago. It was a bad move, with negative effects for their company that were serious and lasting enough that they had to backpedal with new pricing a few months later.
Until today they offered a plan that let you use their service for free until you reached 50 customers.
Now there's no free plan that you can use after you've launched your site. And for existing apps that use Chargify and have less than 50 customers, they're going to have to start paying $99/month to keep using the service.
Edit: I understand your question now. Yes, the current free plan lets you integrate it into your site, but you can't actually start charging customers until you upgrade to the $99/mo plan.
Did they learn nothing from the Recurly debacle a few months back?
I don't think their pricing is bad but they need a starter plan that's less than $99/month.
Also, why are both Chargify and Recurly doing "bucket" plans with such high starting price points? Why not charge based on actual usage? If you have 500 paying customers you can justify $99/month no problem, but most people are going to take a while to build up to that size of customer base. These people can't start off with a $99/month plan. At least give maybe the first 10 customers for free, or charge on actual usage, e.g. $X per 10 customers or something like that.
One thing's clear at least, if I ever go into the recurring payment business, Chargify and Recurly are both very good examples of what NOT to do to win customer loyalty.
The problem with charging for actual usage is that most of Chargify's support costs are probably incurred while their customers are setting things up. And that is when they don't have any users. Once you get chargify set up you don't have to touch it too much.
Regardless though, this was a bad way to handle the price increase.