Chargify New Pricing

Agreed on pricing upwards for existing customers. Why would you ever punish your earliest customers for taking a risk on you?

> 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.

Agreed.

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.

> 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.

agreed. it raises uncertainty...if they raise the prices now...what's stopping them from raising them again in the future.

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.

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.

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 agree completely - paying $1,200 a year to get started is a bit steep when it comes without notice and after i've been building the integration too.

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?

Respect your desire and need to price accordingly. I also believe you need to respect the need for current clients that had certain expectations (a bootstrappable billing service that starts at $0).

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.

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.

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

Hey David,

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'.

good luck!

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.

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.

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.

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.

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.

I am surprised with so many concern towards new pricing, and they do let you know and they try hard to let you know. I believe this means people are loving your service.

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.

David,

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.

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.

Thanks, I've never heard of them!

I agree, I'm working on a SaaS that is hopefully going to be deployed in a month where I was planning to use Chargify, but the $99/month seems hard to justify when I can just use paypal.

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.

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 want to waste a bit more time, it would be great if you would take notes and submit a blog post to HN with what you find.

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!"

> 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)

Appreciate the thoughtful response and great to see a competitor growing in the space, brings everyone up.

Not a fan of their phone support

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?

It seems that a better solution to the dilemma of high up-front costs would be exactly what Chargify does not have: setup fee (+monthly costs, probably lower than existing)

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...

Just an FYI they have a free plan as well as a $39 plan.

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.

Agreed on the metered components. Chargify's metered billing system is not ready for primetime.

I love the idea of a subscription management services, but this is still a very young space, unfortunately.

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.

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.

Chargify isn't really a revenue driver, much love, the people that spent freaking hours integrating with chargify to have a bait and switch pulled.

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.

Chargify handles a lot of the recurring aspect, dealing with expired cards, notifying you if someone doesn't pay, etc, etc

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.

You should get out NOW so you can settle on a different company's services -- one that treats its customers better.

Really? Almost half your revenue is $99 off 35 customers? You charge your customers marginally more than $2.80 a month?

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).

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.

Yes, self-hosted Rails solution here: http://railskits.com/saas

Shameless self-promotion, yes, but it's actually relevant. :)

Am not well versed in this, but wouldn't the onus be on you to be PCI compliant then?

This looks too good to be true. Where's the catch?

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.

And the way to get rid of the free tier is to switch it off for new customers, not to scare the crap out of all your existing customers.

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.

Stupid question: Didn't you see this response coming?

It's only $0.20/month/customer if you have 500 customers. If you have one customer, then it's $99/month/customer.

At Recurly, we did roll out new pricing in May of this year, and immediately received a lot of feedback from our users.

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

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.

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.