Chargify New Pricing

I don't know why they don't just charge a set monthly amount for each user (up to a threshold). Say $1. So if you have 20 users you pay $20/month. That would allow them to keep their existing customers, cover their costs and provide a path for people to work up to $99/month.

Also, they shouldn't have doubled their fees for existing paying customers.

> Update: they are responding quickly via Twitter

Saw this when skimming their tweets:

"@jamiequint We're making changes as we speak for existing merchants."

http://twitter.com/Chargify/status/27063975080

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

Here's the feedback I just submitted to Chargify:

While I entirely understand the need to charge and make money, I find the sudden and significant change in pricing jarring. Many people just went from 0 to $1200 per year.

I'm guessing the cost of supporting the formerly free (0-50 customers) tier is close to zero from a technical/infrastructure perspective, but relatively high from a support/feedback perpective.

People in the free tier will either grow or go out of business. For those that grow, your cost is the same - you'll have the same questions whether you charge them day 1 or day 100.

So the real issue is the cost of support for those who signup for the free tier and either flake out or go out of business.

In my opinion, the rate of customer growth you'll get from having a free tier is worth the extra support cost. With no barrier in place, people will try Chargify, see that it's a high quality product, and if they have a viable business, will use it. That was our experience.

With a barrier in place ($100/month from day 1), they'll do a lot of research and probably try the cheaper options before trying Chargify.

For our particular case, I'm quite happy with Chargify as a product, but quite unhappy about the way the pricing was handled. With the former pricing tier we had the luxury of growing in cost as we grew in revenue. With the new pricing structure we have an immediate unexpected cost.

Now we have to go and investigate the other recurring payment options, which bums me out entirely, since I was hoping we were well past that.

You should, at the very least, grandfather the old users into the old plan. In my opinion you should keep the free tier around, but find ways to reduce your support costs. For my business, we treat support questions as the leading indicator for where we need to make the product more intuitive. We invest in improving the product, thereby also reducing costs.

Of course that's just my opinion.

Full disclosure: I run Spreedly, an earlier to market but much less funded competitor to Chargify.

Here's the dirty little secret that Spreedly discovered about 18 months ago, and that I'm sure Chargify - like Recurly before them - has now found out for themselves: there 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 leaves businesses in this space two options: either focus on successful startups and actively filter out the "losers" (by charging a minimum of $99/month, for instance), or minimize costs for "low probability" businesses - and they're all low probability early on! - and use "cheap to try things out" as a star search for the few businesses that will end up getting big.

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. This pairing is not coincidence - I'm pretty confident that the pricing change is very firmly tied internally to these two new "features". PCI Level 1 compliance is a hefty upfront cost plus a large ongoing price tag. Good 24/7 phone support is crazy expensive to provide, and means that free customers would eat their lunch since so much of the support needs for one of these businesses is on the front end.

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. When Spreedly made our last pricing change - from percent of transaction fee to flat per transaction fee - it was a price drop for most of our customers. But not all: anyone with super low prices would've ended up paying us more, so we explicitly made it the minimum of $0.20 or 2% of the transaction. There's just no excuse for ticking off existing customers - it makes you look like a cell phone company. 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.

So, that's my $0.02 - hope it helps folks understand why I think this is happening. Questions, feedback, etc., welcome.

P.S. I think in some areas Chargify's definitely ahead of Spreedly Subscriptions in terms of functionality - all of that extra capital definitely shows in the end product. But that's because we've been focused on "what's next" after you figure out the naive business model doesn't work in this space. I said above that there are two options. That's a lie - we're working on a third option. If there are any angels reading this that would like to invest in a team that's been thinking deeply about this space since before Chargify and Recurly were a twinkle in their founder's eye, drop me a line.