Chargify, the company who makes a clean and powerful API to help companies with their billing, has just upped their prices - a lot. Gone is the free plan, and in its place a $99/month option. (Also available to small existing customers is a $39/month plan).
When we built TrackJumper, we looked at Chargify. We even implemented it into an early version of the product. In the end, we decided not to use it because Braintree's API got us the basics for free. Not going with Chargify slowed us down, and limits our ability to rapidly change our billing system. But that's a trade-off we were comfortable with, and it's been working for us.
The reactions to the price increase on Hacker News, for example, are pretty much universally negative. Some going as far as to accuse Chargify's leadership of strong arming their customers or just generally not doing "the right thing".
But lets look at this in what I think is a more reasonable light:
Chargify was underpriced.
Chargify has a great product. The intricacies of billing schemes are not trivial to implement and I don't think it's unreasonable to say that using Chargify can save companies thousands of dollars in development cost at a point where cash is likely to be in short supply.
Chargify offers great service.
Customer service is not free - and you want good customer service for your billing system. Chargify was/is offering outstanding customer service. I know this because I had some questions about their Braintree integration. I opened a ticket and the next thing I knew, I received a phone call from their CEO, Lance Walley. We couldn't fix the problem (that Chargify doesn't yet support Braintree's V2 API), but he sure as heck tried to find a solution.
Chargify has been very transparent.
Lance routinely tweets about how many customers Chargify has and what their business is up to. He's all over the customer support tickets. As I said before, he will call you and tell you all about what they're doing if you make the slightest effort to contact them. This leads to the crux of my argument:
You must do your own due diligence.
Spending even a little time investigating Chargify would have told you that they are not making tons of money yet. That their product is free for almost all of their users. That they haven't raised significant amounts of money (at least not publicly). Is it surprising that a new CEO would come in and increase prices in this situation? Of course not. And if you'd checked, it think it's pretty likely that they'd have told you as much. I know I was told exactly that.
If this price increase was a surprise, you weren't paying attention. If your business depends on Chargify, and you can't afford a price increase, shame on you for not doing your homework.
On the other hand...
I'm not going to let them off scott free. Going from zero to $99 per month is a pretty drastic step - especially for businesses who aren't yet profitable. They could probably have done a better job at actively communicating their plans (rather than just telling those those who asked). This transition will cause a lot of cost and problems for their existing customers. Chargify owes it to them to help smooth that transition.
And the list of benefits they touted as they announced the price increase was weak -very, very weak. I'd have preferred that they said, "Hey, we're undercharging for our fantastic product, and we need to focus on our core business, so we're raising prices".
Bottom line - don't overlook Chargify because of a poorly handled transition. There is a bigger picture - look at all of it.
Subscribe to:
Post Comments (Atom)
I agree! We need to get back to a model of charging people for our products - crazy, right? I'm not a mac fanatic, but I do appreciate that apple has led the way in setting customer expectations - pay for what you use.
ReplyDeleteI do wish there was a cheaper option, something like 50 customers for $20/month. I think they'd make a lot of money by keeping a much larger percentage of their previous free customers.
Let's face it, if I'm a one-man team with a product and a dream, I'm willing to keep that dream alive much longer if I can fund it myself for under $50/month total - hosting, billing, etc. $100/month just for the billing portion of my app means I might shut down early if I can't ramp up quickly.
To be clear, I'm not talking about Chargify doing "the right thing" for the little guy. Little guys need to plan, prepare, and spend just like any other business. I'm just suggesting that Chargify itself might make more money with a cheaper intro plan.
jaime,
ReplyDeleteThat pretty well sums up my take - Chargify seems to have missed out on keeping some of their customers who are willing to pay a little, perhaps for a limited set of the features. Perhaps they'll work out a way in the future.
Hey, we definitely hear the feedback. We added a $39 plan yesterday for up to 100 customers for existing merchants in Chargify. That seemed to help a lot. Other interesting ideas have been proposed to us for making it easier for new merchants, too.
ReplyDelete--- Lance Walley, CEO
--- Chargify
You're being fair, and I get that. But here's the thing: the premise of your whole argument is that we, the customers, should have known that Chargify couldn't survive at those prices because we should have done research? That's ridiculous at best.
ReplyDeleteDavid H. seems like a great guy, and so does Lance. But it is *their* job (or someone else involved in the company) to do *their* research to know that they couldn't survive at their initial prices. How on Earth does it make sense for Chargify's customers to know this if Chargify itself doesn't know this? Not shame on us, shame on them.
If I had a service and charged everyone $1/month for an entire year, waited until I got 2500 or so customers tightly integrated with my service, and then said "I realized I can't keep paying for my server at $1/month, so I'm raising it to $101/month... I hope you don't mind". I would expect EVERY single customer to be extremely pissed off and cancel their accounts, and not to mention spread the word that I scammed them. "Oh, but you can call us on the phone now" - who cares?! I won't use that, so by all means give me the cheaper pricing and take away the ability to call.
I'm no business mastermind by any means, but Chargify had nothing but positive talk surrounding it prior to this, and grandfathering the old prices for the existing people who have trusted in Chargify would have only enhanced that positive talk. It was a marketing cost that they should have invested in. I mean, David H paid ~$20k for some 2 minute video that said "entrepreneur" a bunch of times, and claimed that he would have paid more! And investing in his current users would have taken him a lot further than some video, I assure you.
Yes, the $39/month plan helps, but that's not what made me (and I'm guessing a lot of other customers) choose to go with Chargify early on. We chose to go with them because of their original pricing. Based on this new pricing, I'm not aware of a competitor that's even close to this expensive... think all 2500 customers would have *still* chosen Chargify a year ago? Absolutely not! It was a bad move to not grandfather the prices for the existing customers. Even if I continue to use them under the $39/month plan, there's no way I would recommend them to anyone, nor would I give praise to them at the level I would have before.
If they're just trying to target an entirely different market, so be it, because that's exactly what's happening. It's a shame, too, because I think Chargify could have become the de facto standard for billing for businesses of all sizes.
Unfortunately, I guess it's time to look into the Spreedly API.
Ryan, I get what you're saying - it's not the business owner's job to know everything about their vendors. But it is their job to make sure they don't get caught in a bad position because of the actions of their vendors.
ReplyDeleteBilling software is pretty important. Either Chargify is critical to your business or it isn't. If it isn't, this price increase isn't a big deal. If it is, the information was out there in spades, and people should do what they can to understand their own business risks. I don't think it's unreasonable to say "Hey - I'm really depending on this company. Who are they? Are they going to be around tomorrow? How are they making money? What will I do if they disappear for one reason or another?"
I've gotten those questions and much more from bigcos when trying to sell them enterprise software (that wasn't even core to their business). Small business needs to act the same way - ask questions when it's important.
Don't get me wrong - they could have handled this a lot better, but the venom being directed towards Chargify across the net the past day or so has been a bit undeserved in my estimation.
I can totally see how offering their great service for free is ridiculous. That definitely does invite some companies who aren't serious to give it a go. However, you still have to pay for a server, pay for a merchant account, pay for a gateway, etc. So it's not as bad as offering some random photo service for free, you still need to have XYZ aligned for Chargify to make sense, which I would think would filter out some of the goofballs in itself.
ReplyDeleteDon't get me wrong, I'm more than willing to pay for quality service, which is what they offer, but it sucks to get blindsided by this so harshly. One minute Chargify is the cheapest part of my setup, the next minute it's without question the most expensive! That sucks when it's completely out of the blue.
Now who's to say in 2 years they won't realize that "$100/month can't pay for our great customer service, so it's now going to be $300/month". There's now an unfortunate lack of trust.
Again, their price increase is I'm sure a wise move on their part for their new customers from here on out. But to the people who helped them through the beta, promoted their product, helped other customers with integration, spread the word, etc, they should take a little more care of them in my opinion. I don't care if I get 50 customers free, even half of that (or a third) would be great. It's what we expected when we signed up, over a year ago.
I do understand your point about knowing the risks, etc, but it's hard to anticipate a $0 to $100 price increase out of the blue. When 501 customers signed up for the free plan in my app under the old plan, it was $0/month. Now it's $349/month. That's an absurd increase.
Plus, they had the "first 50 customers free" thing to only recently add "1000 customers on a non-paying (free) plan for each tier". All that did was reinforce the fact that they were supporting the bootstrappers. And that was only like 2 months ago - in fact, when they added that, it was the very reason I added a free plan to my app! Double shady.
Chargify: here's what I would be okay with, for your existing customers: $25/month for the first 100 (active) customers, with the first 10 at no charge (and feel free to take away my phone call privileges).
$39/month is still a big jump, some people add themselves as a customer to their own service to make sure the billing works properly. It would suck to pay $39/month just for yourself!
Good thoughts, Ryan. Hopefully, this conversation will help Chargify figure out a way to smooth this transition for it's customers.
ReplyDeleteWell, I am glad I skipped the AppSumo deal. I wasnt sure if I will use Chargify for my new site that will be launching shortly. I think Spreedly is looking much better now.
ReplyDeleteMark -
ReplyDeleteChargify is probably the highest quality service you will find in this billing space, they're the real deal.
Yes, they made some (big) mistakes with the way they handled their pricing adjustments, but I can't say that their service sucks, because it's actually quite the opposite. Despite all of this, I decided to stick with them.
If you can swing their new pricing, I would have to recommend them for their service alone.
Chargify imho is far from perfect (to say least). New API is poorly documented, API libraris they offered not really useful - lack of examples and limited functionality. I.e. only one of the PHP libraries they mentioned provide support for migrations and its not working anyways ;-)
ReplyDeleteIMHO not worth to recommend this service.