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Raising and Setting Prices
Colleen Schnettler
Hey Software Social listeners! Colleen here. For their first time ever, MicroConf is putting on a SaaS podcast awards. Michele and I would be so honored if you would nominate us at saaspodcastawards.com! And here's today's show.
Michele Hansen 0:02
So I think I already know what the title of this week's episode is going to be.
Colleen Schnettler 0:08
Oh, that's funny, because I don't know, please tell me.
Michele Hansen 0:12
See, normally we don't decide on the title until I've loaded everything into Transistor and cleaned up the transcript and everything else. But I think today is going to be the pricing episode.
Colleen Schnettler 0:24
Ooh, that sounds fun.
Michele Hansen 0:27
Because you were saying last week, do you want to talk about pricing today? Right.
Colleen Schnettler 0:30
I did say that. But I don't know if I'm quite ready yet.
Michele Hansen 0:34
Well, it's been on my mind a lot this week.
So there's actually can't it kind of came out of a conversation I was having on Twitter yesterday. And just talking about specifically talking about what to do when you raise prices, and and how to treat customers who would win with you for a long time versus business needs to change pricing models or, or increased prices. And then, of course, something that happened recently, which is a company that many of us use, raising their prices on us. And so all of this got me thinking about ways of dealing with prices, and how pricing model itself can be an advantage over competitors, especially entrenched competitors. And then also how there's a lot of advice about pricing. And I think all of that needs to be couched in the specifics of your own business and your own understanding of your customers. So the context here is that stripe is raising prices on their subscriptions product. So basically, you can use, you know, stripe to create your payments. And if you have products set up as subscriptions now, previously, their subscriptions API was free. And when it was announced, I think in 2018, or so the announcement they sent out was basically that it was going to be free forever, and just included in the product. And then this morning, um, this just showed up on Hacker News. I mean, maybe it was yesterday that the post actually went up. And I just saw today that they're now going to be charging a point 5% fee on any subscription, which doesn't sound like a lot. But if you extrapolate that out to making, you know, 1000 hundred thousand a million a year like that, that adds up very quickly. And I think something that's really rubbing people the wrong way is first of all, they told people at the get go that this was going to be included and that they weren't going to charge for it. And second of all, that we never even got an email about it. And we're just finding out about it on Hacker News. Yeah. And so this actually ties into a conversation I was having with Simon Bennett of snap shooter on Twitter yesterday about this sort of idea of quote, unquote, grandfathering pricing.
And I say, quote, unquote, grandfathering, by the way, so I know this is the term that people generally use. But we stopped using that term this summer. Because the concept of grandfathering, that the term comes from, after the Civil War states instituting voting policies that said you could only vote if your grandfather could vote. So which basically disqualified former slaves and their descendants from voting, and I always thought this was just like, one, like, one way the term had been used and wasn't like the origin of it. And so like, you know, once we found that out, we we change the term, how we talk about it to be loyalty discount, which I also think really more communicates what you're giving the customer and makes them feel good about themselves, rather than thinking about relatives and stuff like that.
Um, so anyway, so So Simon was talking about this, because he's saying, you know, I've left so much money on the table by by giving these loyalty discounts by by not raising prices on on old customers, and we're sort of, you know, talking about, but you can get value out of that and other ways like, like as a SaaS company, it's so valuable to have long term, customers who will reliably renew like that, you know, they're already on boarded with your product, the support volume is much, much lower. They like you, they're presumably happy with your product. You know, those are the customers we reach out to when new customers are looking for our customer reference, which especially happens with bigger companies. So, so I want to bring like two different resources that kind of helps us think about this, but then also how we think about them differently. So one of those is an article by Amy hoy, which I feel like I referenced her so much on this podcast that like we have to have her on.
Colleen Schnettler 5:09
Aren't you guys friends?
Michele Hansen 5:11
Like Twitter friends? Yeah, I think we like met at MicroConf. Um, yeah, through the twitterverse. So this article, such a great title, One Weird Trick to Raising your Monthly Price Without a Customer Revolt, which is basically what Stripe is looking at right now. And you know, Hacker News is full of people saying, you know, should we migrate off of stripe like up like, all this kind of stuff. So in this article basically goes through, like, you know, you see a company raised prices, there is a revolt, it scares you away from raising prices. The problem with that is that companies may need to raise prices, especially the situation you're in right now, where you may pray something right now. And then it turns out as you learn more about your customers, and what their cadence of needs are, and, and how you know how their behavior needs to be matched with a pricing model, you may need to change things in six months, or a year from now or two years from now, whether that's the actual pricing model itself, or the price levels. And so how do you do that in a way without making people revolt. And so one of the key points she makes, you know, here is that it is possible to raise prices without a revolt, like you don't have to be afraid of that. And there's a good way to do this, I think the way stripe has done it is not a good way, which is raising the prices on something people are already using for free, and then not telling them about it, those are two strikes against you.
One of the most popular ways of doing this, which I think Bugsnag is doing. I think I think we're just talked about this a couple weeks ago, and we I mean, Mathias and I, is that you basically get locked out of new features, so you can keep your price for forever. And I think Basecamp does this as well. But you don't get new features, you don't get new functionality. And so you know, eventually, you know, the percentage of their actual product that you're using is lower and lower and lower. But if you're only doing simple things with a product, and you're happy with the price you're paying, and you don't need more, that can be a really good thing. Another thing is, you know, like designing new plan levels, so you change those those different levels. And, but I think the really important thing to hear, to think about here, you know, your job as a founder, whether that's one who is just starting out or, or like me, or someone wh...
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By Michele Hansen & Colleen Schnettler
4.8
2828 ratings
Colleen Schnettler
Hey Software Social listeners! Colleen here. For their first time ever, MicroConf is putting on a SaaS podcast awards. Michele and I would be so honored if you would nominate us at saaspodcastawards.com! And here's today's show.
Michele Hansen 0:02
So I think I already know what the title of this week's episode is going to be.
Colleen Schnettler 0:08
Oh, that's funny, because I don't know, please tell me.
Michele Hansen 0:12
See, normally we don't decide on the title until I've loaded everything into Transistor and cleaned up the transcript and everything else. But I think today is going to be the pricing episode.
Colleen Schnettler 0:24
Ooh, that sounds fun.
Michele Hansen 0:27
Because you were saying last week, do you want to talk about pricing today? Right.
Colleen Schnettler 0:30
I did say that. But I don't know if I'm quite ready yet.
Michele Hansen 0:34
Well, it's been on my mind a lot this week.
So there's actually can't it kind of came out of a conversation I was having on Twitter yesterday. And just talking about specifically talking about what to do when you raise prices, and and how to treat customers who would win with you for a long time versus business needs to change pricing models or, or increased prices. And then, of course, something that happened recently, which is a company that many of us use, raising their prices on us. And so all of this got me thinking about ways of dealing with prices, and how pricing model itself can be an advantage over competitors, especially entrenched competitors. And then also how there's a lot of advice about pricing. And I think all of that needs to be couched in the specifics of your own business and your own understanding of your customers. So the context here is that stripe is raising prices on their subscriptions product. So basically, you can use, you know, stripe to create your payments. And if you have products set up as subscriptions now, previously, their subscriptions API was free. And when it was announced, I think in 2018, or so the announcement they sent out was basically that it was going to be free forever, and just included in the product. And then this morning, um, this just showed up on Hacker News. I mean, maybe it was yesterday that the post actually went up. And I just saw today that they're now going to be charging a point 5% fee on any subscription, which doesn't sound like a lot. But if you extrapolate that out to making, you know, 1000 hundred thousand a million a year like that, that adds up very quickly. And I think something that's really rubbing people the wrong way is first of all, they told people at the get go that this was going to be included and that they weren't going to charge for it. And second of all, that we never even got an email about it. And we're just finding out about it on Hacker News. Yeah. And so this actually ties into a conversation I was having with Simon Bennett of snap shooter on Twitter yesterday about this sort of idea of quote, unquote, grandfathering pricing.
And I say, quote, unquote, grandfathering, by the way, so I know this is the term that people generally use. But we stopped using that term this summer. Because the concept of grandfathering, that the term comes from, after the Civil War states instituting voting policies that said you could only vote if your grandfather could vote. So which basically disqualified former slaves and their descendants from voting, and I always thought this was just like, one, like, one way the term had been used and wasn't like the origin of it. And so like, you know, once we found that out, we we change the term, how we talk about it to be loyalty discount, which I also think really more communicates what you're giving the customer and makes them feel good about themselves, rather than thinking about relatives and stuff like that.
Um, so anyway, so So Simon was talking about this, because he's saying, you know, I've left so much money on the table by by giving these loyalty discounts by by not raising prices on on old customers, and we're sort of, you know, talking about, but you can get value out of that and other ways like, like as a SaaS company, it's so valuable to have long term, customers who will reliably renew like that, you know, they're already on boarded with your product, the support volume is much, much lower. They like you, they're presumably happy with your product. You know, those are the customers we reach out to when new customers are looking for our customer reference, which especially happens with bigger companies. So, so I want to bring like two different resources that kind of helps us think about this, but then also how we think about them differently. So one of those is an article by Amy hoy, which I feel like I referenced her so much on this podcast that like we have to have her on.
Colleen Schnettler 5:09
Aren't you guys friends?
Michele Hansen 5:11
Like Twitter friends? Yeah, I think we like met at MicroConf. Um, yeah, through the twitterverse. So this article, such a great title, One Weird Trick to Raising your Monthly Price Without a Customer Revolt, which is basically what Stripe is looking at right now. And you know, Hacker News is full of people saying, you know, should we migrate off of stripe like up like, all this kind of stuff. So in this article basically goes through, like, you know, you see a company raised prices, there is a revolt, it scares you away from raising prices. The problem with that is that companies may need to raise prices, especially the situation you're in right now, where you may pray something right now. And then it turns out as you learn more about your customers, and what their cadence of needs are, and, and how you know how their behavior needs to be matched with a pricing model, you may need to change things in six months, or a year from now or two years from now, whether that's the actual pricing model itself, or the price levels. And so how do you do that in a way without making people revolt. And so one of the key points she makes, you know, here is that it is possible to raise prices without a revolt, like you don't have to be afraid of that. And there's a good way to do this, I think the way stripe has done it is not a good way, which is raising the prices on something people are already using for free, and then not telling them about it, those are two strikes against you.
One of the most popular ways of doing this, which I think Bugsnag is doing. I think I think we're just talked about this a couple weeks ago, and we I mean, Mathias and I, is that you basically get locked out of new features, so you can keep your price for forever. And I think Basecamp does this as well. But you don't get new features, you don't get new functionality. And so you know, eventually, you know, the percentage of their actual product that you're using is lower and lower and lower. But if you're only doing simple things with a product, and you're happy with the price you're paying, and you don't need more, that can be a really good thing. Another thing is, you know, like designing new plan levels, so you change those those different levels. And, but I think the really important thing to hear, to think about here, you know, your job as a founder, whether that's one who is just starting out or, or like me, or someone wh...