6 ms·

Sorry. We Messed Up. (Zendesk responds to pricing criticism)

104 points by mattmaroon 16y ago

mattmaroon 16y ago
Reasonably well-handled. I didn't go through the effort of switching our business away from this because I thought something might happen. I do have the sneaking suspicion that if we grow a bit the business case for either switching or rolling an in-house solution ourselves will become much more compelling though, especially if I'm forced to upgrade from my current plan to a new one.
dangrossman 16y ago
This is how a startup should handle pricing changes, so long as the old pricing scheme was viable. This is the opposite of what Recurly did a month or two ago when they dramatically raised prices and the same revolt occurred. Their response was a big "F You", and their latest e-mails finally announcing even more pricing changes show they lost enough users in the process that it threatened their viability.
- Barnabas 16y ago
  I was curious about the Recurly blog post you mentioned, so I looked it up. Here's the URL for anyone else: http://blog.recurly.com/2010/03/new-pricing/ http://blog.recurly.com/2010/03/new-pricing/
- sachinag 16y ago
  I have to defend the Recurly folks here. They made a bet on flat-rate pricing over per-use pricing. Turns out that a flat-rate plan hurts you on the low end (people who won't use you at all, and where the uproar was) and on the high end (you're leaving money on the table from your potentially most profitable customers). Flat-rate pricing works for the vast, vast majority of internet companies since the day AOL won over CompuServe because they went to the $20 per month unlimited plan back in 1996. The lesson I've learned from Recurly is that developers find per-use to be less risky than flat fees, which is the opposite of normals.
  - fjabre 16y ago
    Wait so are you saying that flat rate is usually better than per-use from a biz perspective or vice-versa? EDIT: I guess it depends. Flat rate seems like an attempt to get more cash upfront to cover costs initially. The problem is you are leaving money on the table with large customers and you're potentially leaving a lot of money on the table at that. Flat rate makes sense up to a point but is anything really truly unlimited?
  - deleted 16y ago
    [deleted]
    - dangrossman 16y ago
      The reason for the uproar wasn't so much that flat-rate pricing is a problem, but that the company switched the API functions that were previously global across any pricing plan to the $199/month plan. So even if you could justify $50/month or $100/month for their service, you didn't have the option. You already implemented the API and can only keep using that implementation with the $200/month service. I don't even pay my payment gateway $200/month, and they do automated recurring billing and credit card data storage too. At the same time, the competing subscriptions-as-a-service startups already offered flat rate pricing. The per-transaction pricing Recurly offered was their main differentiator to some of these alternatives. That's the reason so many bootstrappers chose them, so switching to a $200/month fixed cost with zero notice (time to switch) and no grandfathering was a hit right to their primary customer base. Of course I can't say for sure that's who most of their users are, but the fact that they've now backpedaled again, removed their pricing page entirely and started apologizing to users seems to indicate it wasn't a good move for them.
      - detst 16y ago
        Sorry, I deleted my comment because no one had responded and I actually agree with you after I looked into it. These services are asking for too much for what they do but I think everyone is conditioned to giving away so much to services that touch their money, that they think that they can get a piece of the pie.
joevandyk 16y ago
For what it's worth, Zendesk is definitely worth it for the five customer support people we have. The amount of flexibility they give you and the api hooks are fantastic.
rjurney 16y ago
This is how you do a public apology. Nicely played.
- DenisM 16y ago
  Joel's school of apology: apologize unreservedly, it buys a lot of goodwill. My theory is that when there is an unfortunate outcome the righteous sub-person in us thinks that blame must be assigned before progress can be made. This is might be true in some cases and not in other cases, but overcoming the mental habit might be harder than playing into it.
  - kpanghmc 16y ago
    And yet, when Joel made the decision to shaft the Stack Exchange 1.0 testers, they didn't get anything close to an apology. What they got instead was a pitch about why they should be happy to give up their business model.
    - hga 16y ago
      I also don't recall ever getting an apology for his capping CityDesk without any recourse, open sourcing of the software, whatever. I suppose in both cases the distinction is that Joel decided not to apologize. The original point was about how he does that when he actually does it. And all or nothing is a legit thing to do here.
      - DenisM 16y ago
        > he original point was about how he does that when he actually does it. And all or nothing is a legit thing to do here. yes, that's what I meant.
ahoyhere 16y ago
Their customers & readers aren't going to forget the chortling, self-satisfied tone of their earlier communications.
jimboyoungblood 16y ago
When we decided to make a change to the Zendesk pricing structure for our existing customers, we tried to be as thoughtful, transparent, and straightforward as possible. Transparent? Maybe you should've given your customers a warning first..? While the letter is certainly worded very nicely (and carefully), it reeks more of damage control than sincerity. The picture with the puppy dog face puts it way over the top.
- mcantor 16y ago
  How do you get more sincere than, "We failed. We let you down. And we apologize."? I'm asking this in all honesty; I don't really understand where you see this as being insincere. Just curious.
  - epochwolf 16y ago
    > How do you get more sincere than, "We failed. We let you down. And we apologize."? I've noticed with hacker news there is always a few people (different people, not the same ones) that are not satisfied with the apology of the day. I'm not sure why this is. My initial theory is that the apology didn't address a highly specific issue in the exact manner that person wanted. Apologies like this are (necessarily) non-specific because they address everyone. Then again, if I want to be cynical, it's possible that that person (not specific to jimboyoungblood) just won't except any apology as adequate.
    - jimboyoungblood 16y ago
      For the record, I'm not and have never been a customer of ZenDesk, nor any of their competitors- so there's nothing I could have "wanted" out of their apology. So perhaps I am one of those people that wouldn't be okay with any apology.
      - epochwolf 16y ago
        > so there's nothing I could have "wanted" out of their apology That you are consciously aware of. :) (I bring it up because there have been some apologies I wasn't okay with when I didn't have a clear reason not to be.)
bradgessler 16y ago
Did Zendesk bother to grandfather the pricing on their existing customers and instead charge more for new customers?
- mikeryan 16y ago
  no originally existing customers would only be grandfathered in for a year and they had to pay up front.
  - bradgessler 16y ago
    Wow, yeah, that's a huge mistake. We always grandfather our customers anytime we change our prices; however, in our ToS we do reserve the right to change our prices for existing customers as long as we notify them first. For other web startups out there who want to change prices, I highly recommend that you grandfather existing customers so you don't piss them off and because you don't have to communicate anything about pricing changes to them.
    - uptown 16y ago
      "We always grandfather our customers anytime we change our prices; however, in our ToS we do reserve the right to change our prices for existing customers as long as we notify them first." What? You grandfather your customers, but reserve the right to increase your prices for them as long as you let them know? That doesn't make sense.
      - jdeeny 16y ago
        I think he means they have reserved the right to change prices for existing customers, but choose not to do so as a general rule. If they ever are in a situation where they need to change pricing for existing customers, the TOS would allow them to do so.
Mark_B 16y ago
Interesting to see the "too little too late" comments on their comments. Proof that 1) no matter how hard you try to apologize and make things right, you can't please everybody and 2) unfortunately, these people are the most vocal.
- gizmo 16y ago
  Well, they didn't try very hard to make things right. Users revolted, so they caved. That's all there is to it. The "unfortunately these people are most vocal" misses the mark completely -- had they been NOT vocal they would've faced enormous bills or they would have to spend 50 hours trying to migrate to a new system. That's if the data can be exported and imported freely, which is rarely the case. So the customers spent hours comparing the offers of the competition, all the time being frustrated because this jumped on them from nowhere. And then, 2 days later, they hear "Whoops, my bad!". That just doesn't fix the damage, now does it? If a thousand customers each spend 3 hours worrying about what to do, and these numbers are conservative, then you've created 3000 hours of unnecessary frustration. So the damage will exceed $300.000. Just with one ill considered move! Whoops, sorry!
  - Mark_B 16y ago
    Before, back when they complained in the first place - that was completely awesome. But to gripe about having wasted time evaluating other solutions? This is something everybody should do. No matter how happy you are using any product, be it software, hardware, utilities, daily transportation, you consider evaluating costs/benefits of a "Plan B".
    - awa 16y ago
      Well, most users would trust the service/company less after such an incidence. Also, not everybody does a evaluation on every service every day. I guess most do a analysis when signing up and would either forget about it until they hear of something cheaper from somebody or do a reevaluation after a fixed period of time like say every 3-6 months. This sudden price change made everybody stop what they were doing and look for an alternative now. And people spent time doing research, brainstorming alternate ideas and some made the switch already and now they say Oops!. This is why they are griping.
bcardarella 16y ago
Glad to see they changed course. I was a developer at ZD for a few months when they were in Boston and I can tell you that they're a great group of people. Listening to their customers and changing course is evidence of that. Most other companies would just barrel ahead despite the outcries.
danielnicollet 16y ago
I get a sort of "spin doctor: feel from this move, with the big glaring eyes looking at me as I make my way to the message on the zendesk blog post... Maybe not so well handled since one could think Zendesk is trying to turn a difficult situation into a PR blitz: why are you posting here, rather than just emailing your customers?
- dangrossman 16y ago
  The same thing was e-mailed to customers before it was posted on the blog.
- verdant 16y ago
  They got some bad press for the pricing move. I don't blame them for trying to generate some good press out of it.
comcastdeals90 16y ago
too late now
bosch 16y ago
"It’s always easier to apologize for something you’ve already done than to get approval for it in advance." - Grace Murray Hopper, quoted in Computerworld, September 10, 1984.
jacquesm 16y ago
The damage is done though, and zendesks competitors are the ones that gained the most from this, even those that didn't switch are now more than aware of who they are and what their offering is. The last thing you want to do when you have a good thing going is to get your customers to invest a bunch of time in to researching your competition.

104 points by mattmaroon 16y ago

Reasonably well-handled. I didn't go through the effort of switching our business away from this because I thought something might happen. I do have the sneaking suspicion that if we grow a bit the business case for either switching or rolling an in-house solution ourselves will become much more compelling though, especially if I'm forced to upgrade from my current plan to a new one.

dangrossman 16y ago

This is how a startup should handle pricing changes, so long as the old pricing scheme was viable. This is the opposite of what Recurly did a month or two ago when they dramatically raised prices and the same revolt occurred. Their response was a big "F You", and their latest e-mails finally announcing even more pricing changes show they lost enough users in the process that it threatened their viability.

Barnabas 16y ago
I was curious about the Recurly blog post you mentioned, so I looked it up. Here's the URL for anyone else: http://blog.recurly.com/2010/03/new-pricing/ http://blog.recurly.com/2010/03/new-pricing/
sachinag 16y ago
I have to defend the Recurly folks here. They made a bet on flat-rate pricing over per-use pricing. Turns out that a flat-rate plan hurts you on the low end (people who won't use you at all, and where the uproar was) and on the high end (you're leaving money on the table from your potentially most profitable customers). Flat-rate pricing works for the vast, vast majority of internet companies since the day AOL won over CompuServe because they went to the $20 per month unlimited plan back in 1996. The lesson I've learned from Recurly is that developers find per-use to be less risky than flat fees, which is the opposite of normals.
- fjabre 16y ago
  Wait so are you saying that flat rate is usually better than per-use from a biz perspective or vice-versa? EDIT: I guess it depends. Flat rate seems like an attempt to get more cash upfront to cover costs initially. The problem is you are leaving money on the table with large customers and you're potentially leaving a lot of money on the table at that. Flat rate makes sense up to a point but is anything really truly unlimited?
- deleted 16y ago
  [deleted]
  - dangrossman 16y ago
    The reason for the uproar wasn't so much that flat-rate pricing is a problem, but that the company switched the API functions that were previously global across any pricing plan to the $199/month plan. So even if you could justify $50/month or $100/month for their service, you didn't have the option. You already implemented the API and can only keep using that implementation with the $200/month service. I don't even pay my payment gateway $200/month, and they do automated recurring billing and credit card data storage too. At the same time, the competing subscriptions-as-a-service startups already offered flat rate pricing. The per-transaction pricing Recurly offered was their main differentiator to some of these alternatives. That's the reason so many bootstrappers chose them, so switching to a $200/month fixed cost with zero notice (time to switch) and no grandfathering was a hit right to their primary customer base. Of course I can't say for sure that's who most of their users are, but the fact that they've now backpedaled again, removed their pricing page entirely and started apologizing to users seems to indicate it wasn't a good move for them.
    - detst 16y ago
      Sorry, I deleted my comment because no one had responded and I actually agree with you after I looked into it. These services are asking for too much for what they do but I think everyone is conditioned to giving away so much to services that touch their money, that they think that they can get a piece of the pie.

joevandyk 16y ago

For what it's worth, Zendesk is definitely worth it for the five customer support people we have. The amount of flexibility they give you and the api hooks are fantastic.

rjurney 16y ago

This is how you do a public apology. Nicely played.

DenisM 16y ago
Joel's school of apology: apologize unreservedly, it buys a lot of goodwill. My theory is that when there is an unfortunate outcome the righteous sub-person in us thinks that blame must be assigned before progress can be made. This is might be true in some cases and not in other cases, but overcoming the mental habit might be harder than playing into it.
- kpanghmc 16y ago
  And yet, when Joel made the decision to shaft the Stack Exchange 1.0 testers, they didn't get anything close to an apology. What they got instead was a pitch about why they should be happy to give up their business model.
  - hga 16y ago
    I also don't recall ever getting an apology for his capping CityDesk without any recourse, open sourcing of the software, whatever. I suppose in both cases the distinction is that Joel decided not to apologize. The original point was about how he does that when he actually does it. And all or nothing is a legit thing to do here.
    - DenisM 16y ago
      > he original point was about how he does that when he actually does it. And all or nothing is a legit thing to do here. yes, that's what I meant.

ahoyhere 16y ago

Their customers & readers aren't going to forget the chortling, self-satisfied tone of their earlier communications.

jimboyoungblood 16y ago

When we decided to make a change to the Zendesk pricing structure for our existing customers, we tried to be as thoughtful, transparent, and straightforward as possible. Transparent? Maybe you should've given your customers a warning first..? While the letter is certainly worded very nicely (and carefully), it reeks more of damage control than sincerity. The picture with the puppy dog face puts it way over the top.

mcantor 16y ago
How do you get more sincere than, "We failed. We let you down. And we apologize."? I'm asking this in all honesty; I don't really understand where you see this as being insincere. Just curious.
- epochwolf 16y ago
  > How do you get more sincere than, "We failed. We let you down. And we apologize."? I've noticed with hacker news there is always a few people (different people, not the same ones) that are not satisfied with the apology of the day. I'm not sure why this is. My initial theory is that the apology didn't address a highly specific issue in the exact manner that person wanted. Apologies like this are (necessarily) non-specific because they address everyone. Then again, if I want to be cynical, it's possible that that person (not specific to jimboyoungblood) just won't except any apology as adequate.
  - jimboyoungblood 16y ago
    For the record, I'm not and have never been a customer of ZenDesk, nor any of their competitors- so there's nothing I could have "wanted" out of their apology. So perhaps I am one of those people that wouldn't be okay with any apology.
    - epochwolf 16y ago
      > so there's nothing I could have "wanted" out of their apology That you are consciously aware of. :) (I bring it up because there have been some apologies I wasn't okay with when I didn't have a clear reason not to be.)

bradgessler 16y ago

Did Zendesk bother to grandfather the pricing on their existing customers and instead charge more for new customers?

mikeryan 16y ago
no originally existing customers would only be grandfathered in for a year and they had to pay up front.
- bradgessler 16y ago
  Wow, yeah, that's a huge mistake. We always grandfather our customers anytime we change our prices; however, in our ToS we do reserve the right to change our prices for existing customers as long as we notify them first. For other web startups out there who want to change prices, I highly recommend that you grandfather existing customers so you don't piss them off and because you don't have to communicate anything about pricing changes to them.
  - uptown 16y ago
    "We always grandfather our customers anytime we change our prices; however, in our ToS we do reserve the right to change our prices for existing customers as long as we notify them first." What? You grandfather your customers, but reserve the right to increase your prices for them as long as you let them know? That doesn't make sense.
    - jdeeny 16y ago
      I think he means they have reserved the right to change prices for existing customers, but choose not to do so as a general rule. If they ever are in a situation where they need to change pricing for existing customers, the TOS would allow them to do so.

Mark_B 16y ago

Interesting to see the "too little too late" comments on their comments. Proof that 1) no matter how hard you try to apologize and make things right, you can't please everybody and 2) unfortunately, these people are the most vocal.

gizmo 16y ago
Well, they didn't try very hard to make things right. Users revolted, so they caved. That's all there is to it. The "unfortunately these people are most vocal" misses the mark completely -- had they been NOT vocal they would've faced enormous bills or they would have to spend 50 hours trying to migrate to a new system. That's if the data can be exported and imported freely, which is rarely the case. So the customers spent hours comparing the offers of the competition, all the time being frustrated because this jumped on them from nowhere. And then, 2 days later, they hear "Whoops, my bad!". That just doesn't fix the damage, now does it? If a thousand customers each spend 3 hours worrying about what to do, and these numbers are conservative, then you've created 3000 hours of unnecessary frustration. So the damage will exceed $300.000. Just with one ill considered move! Whoops, sorry!
- Mark_B 16y ago
  Before, back when they complained in the first place - that was completely awesome. But to gripe about having wasted time evaluating other solutions? This is something everybody should do. No matter how happy you are using any product, be it software, hardware, utilities, daily transportation, you consider evaluating costs/benefits of a "Plan B".
  - awa 16y ago
    Well, most users would trust the service/company less after such an incidence. Also, not everybody does a evaluation on every service every day. I guess most do a analysis when signing up and would either forget about it until they hear of something cheaper from somebody or do a reevaluation after a fixed period of time like say every 3-6 months. This sudden price change made everybody stop what they were doing and look for an alternative now. And people spent time doing research, brainstorming alternate ideas and some made the switch already and now they say Oops!. This is why they are griping.

bcardarella 16y ago

Glad to see they changed course. I was a developer at ZD for a few months when they were in Boston and I can tell you that they're a great group of people. Listening to their customers and changing course is evidence of that. Most other companies would just barrel ahead despite the outcries.

danielnicollet 16y ago

I get a sort of "spin doctor: feel from this move, with the big glaring eyes looking at me as I make my way to the message on the zendesk blog post... Maybe not so well handled since one could think Zendesk is trying to turn a difficult situation into a PR blitz: why are you posting here, rather than just emailing your customers?

dangrossman 16y ago
The same thing was e-mailed to customers before it was posted on the blog.
verdant 16y ago
They got some bad press for the pricing move. I don't blame them for trying to generate some good press out of it.

comcastdeals90 16y ago

too late now

bosch 16y ago

"It’s always easier to apologize for something you’ve already done than to get approval for it in advance." - Grace Murray Hopper, quoted in Computerworld, September 10, 1984.

jacquesm 16y ago

The damage is done though, and zendesks competitors are the ones that gained the most from this, even those that didn't switch are now more than aware of who they are and what their offering is. The last thing you want to do when you have a good thing going is to get your customers to invest a bunch of time in to researching your competition.