You can't change your pricing upwards for existing customers, ever.
You can change your price to anything you want for new customers.
You can decrease your prices for anybody at any point in time.
Something like chargify is the basis for the business models of other parties, if you made a deal in the past you have to honor it, so that your customers can honor the deals that they made.
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.
Saw this when skimming their tweets:
"@jamiequint We're making changes as we speak for existing merchants."
> You can decrease your prices for anybody at any point in time.
I've heard this can actually be quite tricky as it makes your existing customers feel like they've been suckered.
Not if you do it all across the board, and preferably gradually.
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.
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.
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.
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.
Here are some Chargify alternatives that we are looking at: Recurly, http://recurly.com/pricing/ at 200 transactions and 500 users $29/m - Spreedly, http://spreedly.com/info/pricing/ at $19/m + $0.20/transaction or 2% per transaction if less - CheddarGetter, https://cheddargetter.com/pricing at $39/m -> 1000 customers, $0 per transaction.
At the moment, we're probably going to switch to Spreedly, since the rates look good and they've been around for a while. Depends on what kind of dunning management they have.
Correct me if I'm wrong, but it's pretty ironic that it was part of the lean startup bundle.
Keep your interface to services like this as thin as you can get away with without compromising customer comfort, in the long run you'll be very happy you did.
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.
Also, they shouldn't have doubled their fees for existing paying customers.
The per user $x pricing would only change things for customers with less than 100/x users, which let's face it, they're not going to be making any money off now.
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.
>>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'.
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.
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.
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.
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
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.
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.
If you are not going to grandfather the old prices, at lease give a long transition period. I would suggest six months given that this is a service that requires integration and customer interaction.
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 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.
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.
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.
But this way, you could kill that love and may effect chargify future. With a tons of similar services from quite establish provider, there will be no more reason for people to use chargify.
Without those you won't be doing much in terms of migration.
Other than contacting the customer, figure you'll lose 75% or more of your business that way.
To be clear: we can leave Chargify, but Authorize has us locked in.
I write about it more here: http://peachshake.com/2010/06/15/saas-subscription-billing-o...
Up to now, I've been nothing but pleased with Chargify. This change makes me question their sanity a bit, though.
I was considering trying out Chargify, but not anymore. Unlike Spreedly, Chargify apparently wants me to pay a lot more up front for users I don't even have yet.
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.
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.
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.
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.
Let me put a big +1 in for BrainTree, then. Especially when coupled with something like their Ruby gem (http://rubygems.org/gems/braintree , written by them, not even someone else's implementation) or ActiveMerchant, it's really, really easy to integrate. Plus, since when does your card processor have articles about their git process? (http://www.braintreepaymentsolutions.com/devblog/our-git-wor...)
I have no affiliation with them other than being a happy customer.
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.
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...
You can use it with Braintree and have complete control over how the billing runs.
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?
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.
If you run a subscription-based web app and you determine that you need to increase your prices, what's the best way to do it?
Grandfathering existing customers obviously makes sense, but what if that's not an option? What if you need to charge them more to survive?
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!"
Took me a minute to realize I get nothing (except the ability to integrate... SCORE!) by signing up. Smart to drive signups this way, but I think expectations are being set incorrectly.
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.
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)
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.
I figured they did the actual processing but they just pass that on to an upstream provider of such services.
Not trying to justify, just inform.
> Do you guys do segregated merchant accounts (one merchant account per customer)?
We don't do merchant accounts at all - that's pretty much a constant across everyone in this space. Businesses plug in their own merchant accounts - Spreedly just handles all the billing logic.
That means you don't have all your eggs in that one basket.
Do you do scrubbing / anti-fraud ?
(bin checks, geo-ip checks, black list checks etc ?)
Or does your upstream service take care of those?
The merchants bring their own merchant accounts. Chargify doesn't give you a merchant account; they use the one you bring.
There are companies that will use a single merchant account across all their merchants. Essentially you pay for the privilege of not having to get your own account.
Typically these services grow like mad and then explode. Happy to hear that chargify at least is not one of those.
I expect nothing less from people who get to touch my financial transactions, but it's still a pleasure to see.
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.
Then by definition, all the old users would be grandfathered in(they are already setup).
Other issue would be changing advertising which emphasizes no setup fees...
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?
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.
I'm about to launch a pretty involved startup, and we're bootstrapping. Chargify, you just DOUBLED our monthly expenses.
Thanks a lot.
I love the idea of a subscription management services, but this is still a very young space, unfortunately.
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 are very sorry that we did not show this understanding in our announcement and pricing. No excuses.
PayPal Website Payments Standard: 2.9% + $0.30/trans
Google Subscription Payments (experimental): 2.9% + $0.30/trans
Aria SubscriptionPlus (via PayPal partnership): Free trial, then $40/mo
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.
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.
I talk a little about it here: http://peachshake.com/2010/06/15/saas-subscription-billing-o...
It was a great deal for the price, but now...not so much.
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.
Maybe I'm misunderstanding something here with the pricing, but this sounds more like you're getting hurt because you're trying to take micro payments which typically isn't a solved problem (yet).
Not sure how you got that. I'm not taking micropayments via Chargify. I don't think you understood me.
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 wonder how it will work for someone like myself, who has spent a month integrating Chargify into my app but who hasn't launched yet. Discounted plan or $99/month?
This decision worries me on so many levels.
I am so glad I went with Braintree Payment Solutions instead of Chargify. Chalk up another victory for my gut instinct paying off!
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
Shameless self-promotion, yes, but it's actually relevant. :)
Now that their business is running and they have paying customers, they have little need for keeping the free accounts and helping other businesses get off the ground.
In my opinion, a really poor move and completely opposite of the mindset and spirit of their initial offering.
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.
Seems pretty plain to me that they need to be going for the low end of the market — new startups with 0-100 customers — rather than the high end.
One-time fee for the script and you get all the power of chargify on your own host.
Also, OpenGateway doesn't store credit card information which is always good.
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?
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.
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.
Damage like this is hard to repair, it violates the trust between service provider and customer, in a b2b setting that is most unwise. B2c you might get away with it.
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.
Of course that's just my opinion.
All of these inputs are coming together in a smaller plan we're releasing for existing merchants. Details will be out soon on our blog, via Twitter, etc.
But with this pricing change, they're off the list. Sorry. So far it looks like Spreedly will be getting our money.
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.
Ning.com did this not long ago but did it in entirely responsible manner but providing many, many months of notice.
Seems like a reasonable amount to pay for removing all the pain of recurring billing.
Compare it to the $65/month I pay for a single Verizon Mifi data card, and it doesn't seem bad at all.
Maybe you can't really look at per-user costs when you only have a handful of users. Everything looks badly distorted as you head up asymptotically from zero users.
I'd much prefer a graduated system, with different overall price deltas for each subsection (Dev/Start/Grow/Max) per member.
The first customer costs you $100-$price,
The 501st customer costs you $250-$price,
The 2001st costs you $650-$price
We then modified our pricing plans again in July to reflect their feedback, and grandfathered existing users in, if they so preferred.
Dan, I wish I could work with you to change your opinion of Recurly. I'd love to talk to you about your experiences and see what we can do to make it right.
Rachel, Recurly Support
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.
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.
Regardless though, this was a bad way to handle the price increase.
When you determine pricing, you figure this out. Every business has customer acquisition costs.