5 ms·

We’ve priced the 37signals Suite aggressively. It’ll often be cheaper to purchase the whole four-app Suite than to purchase two products separately. Interestin

We’ve priced the 37signals Suite aggressively. It’ll often be cheaper to purchase the whole four-app Suite than to purchase two products separately. Interesting. I'd be interested to see the metrics that made them decide this is a good idea.

imajes 16y ago
My Guess: - reduced processing fees - reduce churn from people who see multiple 37s charges per month - better revenue from customers who are ~ 75% toward plan level and want other services (most willing to upgrade).
robryan 16y ago
A large amount of their customers must just use one app, seems like a good way to get them paying double whether they need it or not. Deals like these get people paying for things they don't need because of the perceived amount of extra value having the whole suite of products gives.
patio11 16y ago
It's a great way to increase the amount of money they're extracting from their best customers while simultaneously giving them an increased perception of value. Seriously, they're going to print money hats.
- rmc 16y ago
  Surely their best customers will already be paying separately for the products individually? How does charging them less for the same increase the amount of money they are going to get from these customers?
  - zach 16y ago
    Of course, they can, er, manage the price point of the suite in the future. It's a per-month charge, after all. To me it's clear that it's about the total lifetime customer revenue rather than adding up monthly prices. Especially since they are trying to get people to use Highrise and Campfire, which are much stickier apps. But there's also the factor that if users do bump into any of the limitations at lower levels, they upgrade the whole suite. Plus, their winning price points would seem to be $20-$50 a month (where managers and showrunners will be okay paying out of their own pocket as a productivity tool) and $150-$250 a month (which can be expensed to a company account without big hoopla if you know your people actively use it). And they want to get accounts pushed from the former category to the latter (it especially helps to be offering a good deal at this time). And finally, nobody likes to see multiple charges from 37s on their card. That's definitely a real issue. Good move for both customers and 37signals, I think.
  - swombat 16y ago
    This is actually the tactic that Microsoft used to own the Office market, I believe... they first released a "Microsoft Office" that included Word, Excel and so on, all in one, for less than two of those products sold separately. That, of course, completely wiped out single-products that couldn't be sold in a suite, e.g. WordPerfect. Once the market was clear of competitors, they then proceeded to slowly but surely increase the price of the suite (and the price of the standalone products along with it).
  - jules 16y ago
    I bet they calculated the amount they'd lose if every customer who can go cheaper by choosing the suite did so. That number must have been small enough to take this step.
- twymer 16y ago
  Will go well with their fancy new office.
cjy 16y ago
In economics this is referred to as "bundling". By selling multiple products together you can extract more surplus from customers with diversified tastes. Say, Customer 1 is willing to pay $100 per month for Basecamp and $60 per month for Highrise. And, Customer 2 is willing to pay $60 per month for Basecamp and $100 per month for Highrise. If you know this, and you charge for the products individually, the profit maximizing price is $60 for each good and total revenue is $240. However, if you charge for the products as a bundle the profit-maximizing price is $160 per bundle and the total revenue is $320. It's a smart move to charge using bundles when your marginal cost is low and there is a lot of variety in demand.

imajes 16y ago

My Guess: - reduced processing fees - reduce churn from people who see multiple 37s charges per month - better revenue from customers who are ~ 75% toward plan level and want other services (most willing to upgrade).

robryan 16y ago

A large amount of their customers must just use one app, seems like a good way to get them paying double whether they need it or not. Deals like these get people paying for things they don't need because of the perceived amount of extra value having the whole suite of products gives.

patio11 16y ago

It's a great way to increase the amount of money they're extracting from their best customers while simultaneously giving them an increased perception of value. Seriously, they're going to print money hats.

rmc 16y ago
Surely their best customers will already be paying separately for the products individually? How does charging them less for the same increase the amount of money they are going to get from these customers?
- zach 16y ago
  Of course, they can, er, manage the price point of the suite in the future. It's a per-month charge, after all. To me it's clear that it's about the total lifetime customer revenue rather than adding up monthly prices. Especially since they are trying to get people to use Highrise and Campfire, which are much stickier apps. But there's also the factor that if users do bump into any of the limitations at lower levels, they upgrade the whole suite. Plus, their winning price points would seem to be $20-$50 a month (where managers and showrunners will be okay paying out of their own pocket as a productivity tool) and $150-$250 a month (which can be expensed to a company account without big hoopla if you know your people actively use it). And they want to get accounts pushed from the former category to the latter (it especially helps to be offering a good deal at this time). And finally, nobody likes to see multiple charges from 37s on their card. That's definitely a real issue. Good move for both customers and 37signals, I think.
- swombat 16y ago
  This is actually the tactic that Microsoft used to own the Office market, I believe... they first released a "Microsoft Office" that included Word, Excel and so on, all in one, for less than two of those products sold separately. That, of course, completely wiped out single-products that couldn't be sold in a suite, e.g. WordPerfect. Once the market was clear of competitors, they then proceeded to slowly but surely increase the price of the suite (and the price of the standalone products along with it).
- jules 16y ago
  I bet they calculated the amount they'd lose if every customer who can go cheaper by choosing the suite did so. That number must have been small enough to take this step.
twymer 16y ago
Will go well with their fancy new office.

cjy 16y ago

In economics this is referred to as "bundling". By selling multiple products together you can extract more surplus from customers with diversified tastes. Say, Customer 1 is willing to pay $100 per month for Basecamp and $60 per month for Highrise. And, Customer 2 is willing to pay $60 per month for Basecamp and $100 per month for Highrise. If you know this, and you charge for the products individually, the profit maximizing price is $60 for each good and total revenue is $240. However, if you charge for the products as a bundle the profit-maximizing price is $160 per bundle and the total revenue is $320. It's a smart move to charge using bundles when your marginal cost is low and there is a lot of variety in demand.