This is exactly what I mean when I talk about pathological customers. You will get to deal with them, too, if you try to be the cheap option in your market.
This is exactly what I mean when I talk about pathological customers. You will get to deal with them, too, if you try to be the cheap option in your market.
You don't have pathological customers, what you have is a large number of people who instead of paying hard currency for a service will trade time as their currency.
What this means is that a good number of those who stay on the free side of the freemium model are in fact willing to pay. Just not with cash. What they're willing to do is to spend time to learn your service, to participate in your forums, and in any way that is required to get their free service.
When you only expect, want, and cater for the customers who have hard currency you will of course piss off the time-as-a-currency crowd if you've already grabbed them.
Then it should come as no surprise when those pissed off people use their time against you.
I'm not saying that's a reasonable response. But it's certainly to be expected. The best thing to do is to work out how to use the time-as-a-currency crowd to your advantage. Instead of ditching them in a price-hike, ask them to do something for you. Maybe they have to participate in support forums to help others getting on board in return for the service? Maybe they have to just promote your service on their site?
My point is simply that it's naive to ignore this very large set of customers, and even more naive to act in ways that will piss them off if you've already constructed a freemium model that attracted them.
Look, I'm sure they're very nice people, but their extra time is not going to pay for your ramen. They cost more money and pay less money so they cost you money. You may decide that you would like to optimize for lower revenue, but most people would probably disagree.
Suggestions: remove spam from the discussions forums, help the newbies, write tutorials, etc, etc.
This is the exact opposite of my experience. Pathological customers use the service less, spend less time reading the words on the screen, spend less time exploring or reading the documentation and more time asking me questions (in, often, the rudest possible fashions), ask me questions like (I kid you not) "It says that every card will be different. Does that mean every card will be the same? Cuz that would suck.", etc etc.
Patrick, I'm sure you get lots of awful customers. You're targeting not-very-technical people, and when you do lots of SEO/AdWords to get as many people in the door as possible, you'll bring in a lot of good customers and a lot of bad customers.
But I don't think Chargify has that many. Of course they had a few, but for the most part, I doubt that those free customers suck; they just aren't making money yet.
But a lot of companies that don't know if they'll ever make $49/month when they start writing their payment code turn into valuable customers.
You need to look no farther than Bingo Card Creator. Would you have been comfortable locking yourself in to paying $49/month so that you could save time writing payment logic when you first started? I doubt it. But today, a billing system that enticed you with a free plan would be extremely happy that that got you to sign up.
The real issue I see for Chargify is that I don't know what their target market is now. They basically have to get new apps, since existing apps will already have something that works. But now they're limiting themselves to new apps with owners that are confident in their success. You're not going to pay $50/month for billing on something that you're just hoping will bring you a few hundred dollars a month, even though some of those apps turn into many thousands a month.
I agree fully. And the first plan is actually $99 month, not $50. $99 as the cheapest option is really pushing it in my opinion.
They are offering existing customers are $39 plan, which I think is fair enough for a starting business for the support you need when you're getting setup. I don't understand why they don't just offer this plan to the public as well though.
If you can turn a non-paying fan into an advocate, they are much more valuable than a paying customer (well, most customers anyways.)
I always thought it is rather common to have free users limited to FAQs and articles/tutorials rather than access to 24/7 phone (and other) support.
(please excuse my ignorance here, but I haven't seen this mentioned)
On top of that your service should not need that much support to begin with.
Are you sure you're not just piling on here?
Are you ?
I didn't see a sign at the door that said that only chargify customers can speak.
> For instance: why should Chargify not need that much support to begin with?
Because every other payments service that I've ever used (and that's quite a few of them) didn't need that either.
Download integration guide, spend a day figuring things out, test, fire & forget.
> Are you sure their business model isn't "get people to pay a premium for support"?
It could be.
> Are you sure you're not just piling on here?
Yes, I'm quite sure. For the record, I built 'webpay', one of the very first web payment services so I have a bit of knowledge in what goes in to a payment service and a bunch of people I know run an IPSP. When this whole thing blew I put up a bunch of things that were not too hot about how this was/is handled and that was before anybody else wrote as much as two lines about it. If you want to accuse me of 'piling on' then I'm sure you could find a better example to make your case.
Nobody incurs this sort of brand damage for research purposes.
It is not reasonable to take offense at a business getting their initial pricing wrong. Everybody gets their initial pricing wrong.
I seriously think Chargify might be making a bigger communications error now than they did by pulling the bandaid off on their new prices. They're creating uncertainty about whether they'll revert to old pricing, or create some "wash the dishes for your meal" freemium model. If they need to be charging this new rate to make the business make sense, it's their business, and it is fundamentally and totally and categorically their call to make.
Self-help timetables are unlikely to be acceptable to the third and fourth parties.Any technical or implementation issue is likely to be high priority for the customer. People tend not to have small payment issues even for nominal amounts.
Free users are harder to support, more vocal and less likely to upgrade. Even a token amount of money initially is probably enough to discourage the "pathological" customers and the sunk costs mindset might encourage spending more money with your service.
I suppose I could try selling user data or use advertising. Either require massive number of users and a lot of upfront time to get going.
You get fanatical customers everywhere, and they can be good and bad. They've mainly been good in my experience though.
I have heard from many other software developers, and seen in my own life, that charging more money disproportionately chases them away. I had a major decrease in the number I dealt with just when I went from $25 to $30, while sales went up. It is amazing: charge $5 more, see people suddenly have less hard drive failures, virus infestations, and "bad days". (I called you a dishonest SOB thieving from poor defenseless women when I mistyped my password... because I'm having a bad day, you see.) And it wasn't 20% less, it was closer to 80% less.
If you give it away free as ad supported, users tend to be extremely grateful. Once they start paying, even a tiny amount, they start to be more resentful and demand far more.
What Patrick is saying over and over and over and over again is that you have to be willing to let the pathological customers go. One function of your pricing is to chase out the people who aren't driving your business, so you can concentrate on serving the people who derive the maximum value from your work.
Asking for small change is just about the worst thing you can do; pathological customers can afford it, and will immediately feel entitlement.
As soon as you run across a person who values their money more than their time, they'll use up your time and give you no money. And, while they might be nice folks, if you're running a business you have to politely find a way of letting them know you can't do business with them.
If you choose to make an apology, you might as well make it sound as sincere as possible.
Pvg says it much better than me below.