Spreedly doubles pricing.
henrydillon.comLast year here on HN, Nathaniel said this:
"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." (http://news.ycombinator.com/item?id=1781104)
It's one thing to trash your competitor publically. It's another to then do the exact same thing you were complaining about one year later.
This isn't about the numbers - $30 is jack squat. This is about principles. With this decision, Spreedly shows that they can say one thing and then do the exact opposite. And that's troubling.
One learns a lot in a year. I said some things then that I wish I'd had more experience to back up; if I had, I probably would have tempered them more. That said, I also said this:
"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."
We're doing that, with a unilateral offer to grandfather customers for 90 days.
In general, I still think grandfathering is best when possible, but when you realize your business isn't growable (and barely sustainable) at current prices then something's gotta give. We've put this price raise off too long, hoping to soften it with new features, etc., but it's a chicken and egg problem. We can't do what needs to be done without the resources to do it. So prices have gone up, and it's the next day and we're in a better spot to help all our (remaining) customers rock.
To be fair, grandfathering doesn't mean putting off a price raise for a limited amount of time, it means not changing the terms/policies/pricing for the duration of the account because they signed up with those and should keep them. You're simply giving them 90 days notice.
My monthly Spreedly bill went up by approximately the amount I spent on AdWords between 9 AM and 3 PM on Friday.
I know pricing discussions generate a lot of heat, but honestly, $30 is not a lot of money. Nor does it magically become a lot of money after you have 500 customers, at which point you have very high-class problems.
Here, let me extend that graph with one extra line:
http://images1.bingocardcreator.com/blog-images/hn/spreedly-...
This subject seems tailor-made to solicit opinions from pathological customers who are not likely to be either good customers for Spreedly or successful at selling many accounts, totally regardless of whether Spreedly costs $5, $50, or $500 a month.
You are right. This is true for businesses with substantial number of customers.
It is a significant difference for those starting up with small customer base (10 or 20) to pay from $23 earlier to $53.
I realize that there's many HN Members who may be trying to start a company in 3rd world countries where $30 is a significant chunk of change, and this may sound harsh. But if your business, at any point, can't absorb a $30 a month increase in fees for something as important as your subscription billing system then something is wrong.
I am not really sure it's the price change that is most offensive. It's the fact they were willing to do it without regard for their current customers. I don't want to deal with a company that is happy to change their price whenever they feel like it and I get the short end of the stick.
Trust me, we weren't happy about having to raise the price. It was a painful, hard-fought decision to change it internally, and to not permanently grandfather existing customers. But in the end it's about having a sustainable business - the worst possible outcome for customers is for the service they were powering their billing with to disappear altogether.
Sure it can absorb a $30/month increase in fees. But if multiple service providers hit me with a $30/month increase then it kind of adds up. In other words, a price increase like this is ok as long as it's the only one.
Again, it's not the fixed cost. It's your per transaction pricing that has doubled so over the lifetime of your business and as you grow you'll pay 40c instead of 20c every month for every customer.
$2.40 per customer per year? If you can even see this difference, raise prices.
Once you hit sufficient transactions/month your per transaction fee will drop back to 20¢/transaction.
Yes, what you just said.
I don't use Spreedly, but it is a similar case with the AppEngine pricing: I want providers to charge a fair price and keep providing services. Also, same as AWS: I have customers who grumble some on their monthly bills, but providers need to charge a fair market price.
small businesses are notorious penny pinchers, even $20/mo is a big decision for them. So doubling prices is a big problem for a lot of them...even if the actual cost is nothing compared to their other expenses.
I think those suggesting that this is an insignificant rise are missing the point.
These subscription billing services have close to the most powerful lock-in imaginable on your business. When you commit to one, you are trusting them with a vital part of your operations. At best, switching later is going to be disruptive to your business and potentially damaging to your customer relations.
This is the third of the most well-known recurring billing services to sharply increase prices in the not-so-distant past, after Recurly and then Chargify. In each case, that suggests they have either screwed up their projections so much that they had to grab extra money or deliberately screwed their customers over by dramatically increasing costs when they have an all-but-captive audience.
Either way, that is a serious black mark against an organisation that's asking you to trust them with something as important as your payment processing, particularly when those organisations are already relatively tiny compared to most payment-related services and therefore inherently risky to build on anyway.
BTW, blog posts from these services about how they are just trying to find a sustainable business model and hope their customers will understand aren't exactly reassuring. If they could get things so badly wrong before, why should we trust that they are doing any better now and won't see another rise next year?
This isn't newsworthy because of the amounts involved. It's newsworthy because it reflects on the competence of these payment services and illustrates a dangerous trend.
That's certainly one perspective; prescience is something I wish we were better at. Another perspective is that a startup is a search for a viable business model, and each of the subscription services in turn has realized that their entry price in to the market was decidedly unviable. We were able to sustain ours for longer than most because we (a) never offered a free plan, and (b) have kept our overhead ridiculously low. But (b) has kept us from improving the service like we need to, which in turn hampers growth, which is a nasty feedback cycle.
So it was time, and it was painful, but now we get to focus in on the fun stuff: making the service more awesome, and growing.
> Another perspective is that a startup is a search for a viable business model
Sure, and I personally have nothing against you trying to do that. It's a tough market to get into, no doubt, and any new business is going to have its share of stumbles in the early days.
On the other hand, that doesn't change the fact that it would be dangerous/irresponsible for the executives at most organisations to rely on your service for something as fundamental as accepting payments until you've got over those stumbles and you are clearly a viable partner for the long term. Nor does it change the fact that one way or another, you're clearly still stumbling at this point, even if you're stumbling with style! :-)
As the saying goes, it's not personal, it's just business. To me (as someone who runs businesses himself and would love to outsource all the payment hassles for just about all of them) I can't see the case for relying on a start-up at this stage of development for this sort of service. If your prospective client is already well-established, they can afford to do anything your start-up can do in-house to keep the costs down and get exactly the solution they want, so the reward for outsourcing isn't high. If your prospective customer is running a start-up themselves and looking to outsource, they could be betting their entire business on the abilities of other people outside their control (i.e., your team), which is a tough call to make without at least obvious financial backing and a proven track record behind you, so the risk for them is high.
I wish you luck in your quest to find that viable model. Perhaps you can bring enough similarly entrepreneurial folks along with you for now to reach the point where you do offer higher rewards with lower risks, at which point I'm guessing you've made it.
Or it could be that all three of these subscription billing companies got shafted by their correspondent banks...
None of these guys pay the banks. Their customers are already paying a for payment gateway for that service, they sit on top providing recurring billing and subscription management.
Not likely for spreedly, as you have to provide your own payment gateway i.e. paypal.
I'm very surprised they haven't chosen to "grandfather" existing customers, so that they can remain on the previous pricing model.
True. They have proposed to "grandfather" the current plans only upto 90 days so customers to migrate elsewhere, if they opt to.
And this probably means that they did the numbers and whatever they are going to loose with those who leaves will be offset be increased fees paid by those who sticks around.
If it is so sticky, why don't people sign up for multiyear contracts for recurring billing services with some sort of price guarantee?
Think businesses would bite? Month-to-month, no minimum, cancel any time is so much in vogue, it's hard to imagine there would be much traction around a multi-year contract, but maybe I'm wrong.
I would sign up, if that's any consolation :)
More generally, it's one of those things that you don't want to change if it works well. Maybe the best model is an short term contract (e.g. 3 or 6 months) which can roll into a multiyear contract.
AFAIK, none of the providers offer such a thing. A nice, idea, though.
It is surprising to see this coming from Spreedly, especially in the context of their previous discussion on the same topic in HN (when Chargify increased price).
When you price a subscription product, one should factor in long term sustainability at that price, for a long time.
Any price increase due to additional features / facilities you provide - say 24*7 on-call support, must not be burdened on your existing users.
Provide a way for existing users to "opt" for those at a higher price, but leave them at the current price as they stand.
"It is surprising to see this coming from Spreedly"
Really? A relative newcomer to e online payments space, undercutting the status quo pricing of the incumbents, suddenly finding they've underestimated the costs of running their service? Doesn't surprise me at all...
If I were building a new business based on any of the new online payment services, especially if they're significantly less expensive than traditional merchant accounts or PayPal, I'd be treating it as a short term windfall until they discover the hidden costs they're not charging you for. If they're _very_ lucky, maybe they've got some brand new fraud prevention technology that means the genuinely have lower running costs than PayPal or Visa, but I wouldn't bet _my_ business on it.
This makes me chuckle - the funny thing is that we were actually the first "small business" subscription service - Chargify, Recurly, etc., all launched well after us. That said, it also meant we didn't have any point of reference when we initially set pricing. I think we actually did surprisingly well four (4!) years ago, given the lack of information we were working with.
This is a great point - their choice may very well have been between raising prices and shutting down.
Sure, users can export and migrate, but that costs time and money to do. Code must be updated to work with the new provider and other projects would be put on hold.
Exactly. If your engineering costs swamp $30 -- and they do -- this announcement is a total non-event for you.
Sure $30 may not be a big deal but what's going to happen next time? And the time after that?
What a terrible situation to be in. I sign up for a product, in part based on their pricing, and they bump up the cost knowing it'll be too expensive for me to move.
If this happened to me, it might be too expensive for me to move an existing product away from them but it'll definitely keep me from putting another project on the platform.
For the record, I'm using Recurly, so I'm talking directly from the point of view of an existing and paying customer.
I know the Spreedly guys personally (and have been using them for years). Honestly, they underpriced their services and need to make more money if they are going to add features and build a better product.
Doubling their prices certainly seems like a reasonable idea, I wonder what other models they looked at.
It's not so much the rise in monthly fixed costs that's the problem.
It's the doubling of per transaction pricing (that will just sting month after month) and the lack of features compared to now cheaper competition. Recurly at 10c vs. Spreedly at 40c.
<plug> Run your own Spreedly and stop adding service fees to your payment processing fees! http://www.opengateway.net/ </plug>