7 ms·

This article really resonates with me: it puts into words how I've been feeling about handling SaaS pricing and product features. My main takeaway is: don't sq

by cuu508 8y ago

This article really resonates with me: it puts into words how I've been feeling about handling SaaS pricing and product features. My main takeaway is: don't squeeze money out of your customers by severely limiting the free plan. Focus on delivering as much value to your users as possible. Help them grow so you can grow together. You will get happy customers who will be happy to recommend you, and happy to pay for your service. Cloudflare, one of the examples mentioned in the article, is also a hero of mine, in terms of how much value they offer for free.

chdaniel 8y ago
you mentioning Cloudflare out of all the given examples is the proof that they're giving out a lot — hence why I said I love them despite never using their service "You will get happy customers who will be happy to recommend you, and happy to pay for your service." — and some of them will become friends. we're talking long-lasting friendships because you helped them get off the ground thx for the comment!
michaelt 8y ago
My main takeaway is: don't squeeze money out of your customers by severely limiting the free plan. Seems to me how well offering a free tier will work depends heavily on what your product is - and whether it provides a logical place to separate the tiers so users are motivated to pay without losing the goodwill the free tier aims to generate. For example, if you're a SaaS version control system, it's easy: Charge per-user-per-month for private repos and corporate-single-sign-on-system integration. Boom, no hassle or difficult sign-up for free tier users, practically every company with more than a handful of developers has to pay, companies with 100x as many employees pay 100x more, no need to annoy free-tier users to push them onto the paid tier, no semi-permeable paywall where users can clear cookies or open multiple accounts. But if you're a social network, or a tool for debugging regular expressions, or a chat app, or a newspaper, or a streaming music service? Much harder to draw such a tidy line.
- chdaniel 8y ago
  But wait, isn't the biggest social network the perfect example? Made it free for everyone, gathered so much attention But when you want to advertise, you'll have to compete with so many others, hence the bidding. One could argue the "you're the product when the product is free", true but the equality of opportunity is there. And the cost of entry is 0.
  - michaelt 8y ago
    There's a difference between a product with two tiers and a company with two products. I would not say that Google Search was a free tier of Google AdWords, even if every AdWords user is also a search user, as they're different products. Likewise, there's not a paid Facebook Premium tier or a paid Instagram Pro version. The closest things to social networks that have a paid tier within the social media product are the likes of Tinder, Strava and perhaps LinkedIn.
- frosted-flakes 8y ago
  Please don't use code blocks for quotations. Reading them is terrible on mobile.
darkerside 8y ago
I thinks the way this ends up working in real life is, know how much value you're creating for your users and find ways to profit that keep them in the black. For many folks, being able to build playlists containing almost any don't you can think of is enormously valuable. And the elegance of advertising in this situation is, those who use the service most end up "paying" more for it anyway through ads. When they're getting enough value out of it that the ads become annoying, switching to a paid tier quickly becomes a great bargain.
- chdaniel 8y ago
  That's one way. Another way I was thinking of while reading your comment is something along the lines of "bringing so much value for free, that eventually when they're asking for something from you, you'd feel guilty not to help". Happened to me with an older guy whom I took advice from. He helped me a shitton without asking me. I'd often tell him "how can I help, you're offering so much free stuff to me". Eventually, he asked me to become business partners in a venture — I said yes willingly but thinking about it in retrospective, there was no way I could say no What that means at scale could be after a product/online person helps you with a shitton of free resources/content, you'd feel guilty not to pay them back by donating to one of their fundraisers — see Wikipedia They’re free as fuck and you’ve seen the “please donate so that we can keep it free”. I know they’ve got: - over $80m (million dollars, yes) in donations in 2015 - assets worth around $100m in 2017 - probably even more due to anonymous donations (and if you’re donating a lot you want to be anonymous) And I still have absolutely no damn problem with them asking for money. Yes, that’s revenue on top of which there are expenses (a huge bill, given how much they’ve got to cover). They’re transparent, they don’t hide these figures I’ve just posted and that’s totally fine. Surely they must be in top 1000 value sources of the modern world. I think it’s not shame that gets people to donate to Wikipedia but, if anything, guilt. I’ve helped you so much I’ll guilt you into returning it, at least to a degree. I think this is the next wave. And then everyone will be doing that (because making someone feel guilty is a flaw, somehow), it’ll be the old-school and we’ll find something new. But hey, in the grand scheme of things, at least we all started being better by providing value
  - 8y ago
cosmie 8y ago
It's also not even completely altruistic. The free accounts on Cloudflare serve as an incredibly diverse source of first party signal intelligence, which directly impacts the quality of the offering they're able to provide to paid accounts. The fact that there's at least nominal value to Cloudflare in having me as a free customer gives me confidence and reassurance in using their product, as it lends credence to the long term availability of my free tier account and that I won't suddenly be the victim of a shift in their marketing and sales development budget. I'm not sure what the right term for that type of incentive alignment is, but it reminds of me Geico auto insurance. As a business, their goal is to provide a long term and stable source of float to Berkshire Hathaway[1], not quarterly profits. To do that, they've optimized their business to capture and retain as much market share as reasonably feasible. Their rates are truly reflective of the actuarial expectations of insuring you - there's virtually no profit margin baked in because that could prevent marketshare growth, and you won't get bitten by shady exclusions buried in the fine print that you only find out about when you try to file a claim, and you won't get hit with an unexpectedly huge rate increase at renewal time due to a slightly worse than expected quarter and the need to engineer short term profits. The "gotcha" with Geico's pricing model is that they're using my business as leverage for other purposes (premiums as float to provide leverage to BH). I do a lot of work in optimizing monetization strategies and developing/optimizing business processes, so I may be an atypical consumer. But I have far greater adoption of services when I understand the value drivers of the relationship. If you're not directly making profit off of me, I'm either a marketing expense in your acquisition process or you're using our relationship to derive profit elsewhere. If I'm a marketing expense I'll try to avoid building reliance on your product into my life because the stability of our relationship is unknown. And if you're deriving profit from our relationship and I don't understand how, I'll default to assuming an adversarial relationship where either "I'm the product" or there's a hidden catch coming in the future. Whereas if I know that you're not directly extracting profit from our relationship, and I understand how you're indirectly driving profit from our relationship, I'm far more likely to trust you and integrate your product into my life.
- chdaniel 8y ago
  You know it, you're a smart dude > If you're not directly making profit off of me, I'm either a marketing expense in your acquisition process or you're using our relationship to derive profit elsewhere. That "elsewhere" might be the word-of-mouth on steroids that I talked about in the article. Send me an email, tell me more about what you do, interested in hearing - daniel@chagency.co.uk

by cuu508 8y ago

chdaniel 8y ago

you mentioning Cloudflare out of all the given examples is the proof that they're giving out a lot — hence why I said I love them despite never using their service "You will get happy customers who will be happy to recommend you, and happy to pay for your service." — and some of them will become friends. we're talking long-lasting friendships because you helped them get off the ground thx for the comment!

michaelt 8y ago

My main takeaway is: don't squeeze money out of your customers by severely limiting the free plan. Seems to me how well offering a free tier will work depends heavily on what your product is - and whether it provides a logical place to separate the tiers so users are motivated to pay without losing the goodwill the free tier aims to generate. For example, if you're a SaaS version control system, it's easy: Charge per-user-per-month for private repos and corporate-single-sign-on-system integration. Boom, no hassle or difficult sign-up for free tier users, practically every company with more than a handful of developers has to pay, companies with 100x as many employees pay 100x more, no need to annoy free-tier users to push them onto the paid tier, no semi-permeable paywall where users can clear cookies or open multiple accounts. But if you're a social network, or a tool for debugging regular expressions, or a chat app, or a newspaper, or a streaming music service? Much harder to draw such a tidy line.

chdaniel 8y ago
But wait, isn't the biggest social network the perfect example? Made it free for everyone, gathered so much attention But when you want to advertise, you'll have to compete with so many others, hence the bidding. One could argue the "you're the product when the product is free", true but the equality of opportunity is there. And the cost of entry is 0.
- michaelt 8y ago
  There's a difference between a product with two tiers and a company with two products. I would not say that Google Search was a free tier of Google AdWords, even if every AdWords user is also a search user, as they're different products. Likewise, there's not a paid Facebook Premium tier or a paid Instagram Pro version. The closest things to social networks that have a paid tier within the social media product are the likes of Tinder, Strava and perhaps LinkedIn.
frosted-flakes 8y ago
Please don't use code blocks for quotations. Reading them is terrible on mobile.

darkerside 8y ago

I thinks the way this ends up working in real life is, know how much value you're creating for your users and find ways to profit that keep them in the black. For many folks, being able to build playlists containing almost any don't you can think of is enormously valuable. And the elegance of advertising in this situation is, those who use the service most end up "paying" more for it anyway through ads. When they're getting enough value out of it that the ads become annoying, switching to a paid tier quickly becomes a great bargain.

chdaniel 8y ago
That's one way. Another way I was thinking of while reading your comment is something along the lines of "bringing so much value for free, that eventually when they're asking for something from you, you'd feel guilty not to help". Happened to me with an older guy whom I took advice from. He helped me a shitton without asking me. I'd often tell him "how can I help, you're offering so much free stuff to me". Eventually, he asked me to become business partners in a venture — I said yes willingly but thinking about it in retrospective, there was no way I could say no What that means at scale could be after a product/online person helps you with a shitton of free resources/content, you'd feel guilty not to pay them back by donating to one of their fundraisers — see Wikipedia They’re free as fuck and you’ve seen the “please donate so that we can keep it free”. I know they’ve got: - over $80m (million dollars, yes) in donations in 2015 - assets worth around $100m in 2017 - probably even more due to anonymous donations (and if you’re donating a lot you want to be anonymous) And I still have absolutely no damn problem with them asking for money. Yes, that’s revenue on top of which there are expenses (a huge bill, given how much they’ve got to cover). They’re transparent, they don’t hide these figures I’ve just posted and that’s totally fine. Surely they must be in top 1000 value sources of the modern world. I think it’s not shame that gets people to donate to Wikipedia but, if anything, guilt. I’ve helped you so much I’ll guilt you into returning it, at least to a degree. I think this is the next wave. And then everyone will be doing that (because making someone feel guilty is a flaw, somehow), it’ll be the old-school and we’ll find something new. But hey, in the grand scheme of things, at least we all started being better by providing value
- 8y ago

cosmie 8y ago

It's also not even completely altruistic. The free accounts on Cloudflare serve as an incredibly diverse source of first party signal intelligence, which directly impacts the quality of the offering they're able to provide to paid accounts. The fact that there's at least nominal value to Cloudflare in having me as a free customer gives me confidence and reassurance in using their product, as it lends credence to the long term availability of my free tier account and that I won't suddenly be the victim of a shift in their marketing and sales development budget. I'm not sure what the right term for that type of incentive alignment is, but it reminds of me Geico auto insurance. As a business, their goal is to provide a long term and stable source of float to Berkshire Hathaway[1], not quarterly profits. To do that, they've optimized their business to capture and retain as much market share as reasonably feasible. Their rates are truly reflective of the actuarial expectations of insuring you - there's virtually no profit margin baked in because that could prevent marketshare growth, and you won't get bitten by shady exclusions buried in the fine print that you only find out about when you try to file a claim, and you won't get hit with an unexpectedly huge rate increase at renewal time due to a slightly worse than expected quarter and the need to engineer short term profits. The "gotcha" with Geico's pricing model is that they're using my business as leverage for other purposes (premiums as float to provide leverage to BH). I do a lot of work in optimizing monetization strategies and developing/optimizing business processes, so I may be an atypical consumer. But I have far greater adoption of services when I understand the value drivers of the relationship. If you're not directly making profit off of me, I'm either a marketing expense in your acquisition process or you're using our relationship to derive profit elsewhere. If I'm a marketing expense I'll try to avoid building reliance on your product into my life because the stability of our relationship is unknown. And if you're deriving profit from our relationship and I don't understand how, I'll default to assuming an adversarial relationship where either "I'm the product" or there's a hidden catch coming in the future. Whereas if I know that you're not directly extracting profit from our relationship, and I understand how you're indirectly driving profit from our relationship, I'm far more likely to trust you and integrate your product into my life.

chdaniel 8y ago
You know it, you're a smart dude > If you're not directly making profit off of me, I'm either a marketing expense in your acquisition process or you're using our relationship to derive profit elsewhere. That "elsewhere" might be the word-of-mouth on steroids that I talked about in the article. Send me an email, tell me more about what you do, interested in hearing - daniel@chagency.co.uk