Over the past year, we discovered that the customer that never paid had the highest support load. Once we made the announcement about the price change, the same applied to complaining about Chargify across multiple public channels. Those customers that were working on a hobby business, or just something they were not investing in significantly, seemed to have the time to tweet all day long, post multiple negative comments on every possible channel available, and shout the loudest.
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.
I think you're really pre-judging your customers in a bad way here.
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.
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.
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.
" 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"
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.
I think chargify could get a long way with a $5-10/mo 10 customers max plan. Just enough for developers to get their feet wet, with a nice paywall to keep out the non-serious.
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.
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.
Isn't it a little arrogant to presume that another company should be able to find ways to effectively employ random people who don't want to pay money for their services? There really aren't big stacks of dishes in the back you can wash if you can't pay your tab.
Good point. I would happily trade a free lifetime account for my bug tracking app ( http://trackjumper.com ) to any graphic/ui designer who will help me improve and/or clean up the main page of the app.
Oh hell yes. I ran Despammed.com for years (free spam filtering) and never charged anything for it, not having figured out the ???-profit part. The majority of people were very supportive, and even provided donations that paid my mortgage more than once - but there were enough that were psychos demanding that I take them off my spam mailing list (???) or they'd never pay me again. Seriously. There are a lot of really stupid/weird people out in the world.
Unlike many other services, Chargify is involved in a financial transaction where there's always a third and fourth party involved (customer's customer and credit card processor).
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.
Are you a Chargify customer? You have a lot of thoughts to share about how the service should work. For instance: why should Chargify not need that much support to begin with? Are you sure their business model isn't "get people to pay a premium for support"?
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.
You're missing my point. It is not an iron law that every payment service needs to build the lowest-cost, most efficient Wal-Mart of payment processors. I'm asking, how do you know that the entire point of their business isn't to find out if lots of people will pay extra for superior support?
I don't follow your logic. Finding out that you need to raise your prices to capture value is a basic fundamental fact of life in entrepreneurship. You keep talking like Chargify broke a sacred promise to their users. This rankles me: in business, we have a word for "sacred promise": it's called "a contract". Chargify serves businesses, exclusively; you'd think its users would understand this fact.
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.
I switched away from Freemium for my company yesterday. Should have done it a while back.
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.
Correct - the only customers I have had to "sack" have been a couple on a "special low price" deal - they always made greater demands than the regular paying customers and their (non financial) contributions to the process were always inadequate and late.
I think this is essentially true, we made this decision early when we came out of beta to not offer a free plan for exactly this reason. Non-paying customers end up taking up the lions share of your companies resources.
Pathological customers are, by definition, bad. I'm not using the term to mean "a synonym of non-paying customers, poor people, or people enthusiastic about the software."
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.
OK, my experience is much different. I would far far rather provide a free ad supported service than charge.
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.
Don't ask customers to pay "a tiny amount". Ask them to pay according to the business value you believe your service provides, scaled to your business objectives (ie: eating, hot showers, customer acquisition).
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.
Not to be difficult, but I don't understand this reasoning. At the end of the day, you're charging someone, just not the end user. Why is charging advertisers preferable to charging users?
My maxim for this is : you want to find customers who value their time over their money.
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.
This is a complaint, not a business insight: "Those customers that were working on a hobby business, or just something they were not investing in significantly, seemed to have the time to tweet all day long, post multiple negative comments on every possible channel available, and shout the loudest." Same with the TechCrunch section.
If you choose to make an apology, you might as well make it sound as sincere as possible.
If you read all the comments on this thread, you'll see that virtually all of the negative reactions to Chargify's move appeal to some form of "you need free customers to market your business". Sorry, I can see why you wouldn't enjoy reading this stuff, but insight about Chargify's business is exactly what this is.
No, I enjoyed reading it, and most of it was fine. But if the point of his post is to say "I'm sorry" and do damage control, he shoots himself in the foot by whining about people complaining. If 99% of your users are on the free plan, and they're the ones complaining loudest, bashing them in your apology is possibly not the best plan to get you out of the mess.
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.