15 ms·

Raising Prices Is Hard

353 points by soheilpro 7y ago

JMTQp8lwXL 7y ago
For all things not purchased with debt, this is true. But look at the housing market. Or, consider industries with severe information asymmetry: see the healthcare industry. Raising prices is no problem for two of the most expensive line items in a middle class household's budget. For everyone else, it's probably best to start with high prices.
- thorwasdfasdf 7y ago
  Well, it's not a matter of debt. It's more a matter of whether or not new entrants can enter the market and provide that good. In both real estate and Healthcare, it's very difficult for new players to enter the market, especially in highly regulated states. The result is a market where prices are much higher than they need to be.
tempsy 7y ago
Doesn't this just depend on the price elasticity of the good or service in question...?
- atYevP 7y ago
  Yev here -> in purely academic terms maybe, but there are a lot of factors which go in to whether or not a person will leave or stick around. I thought it'd be interesting to write about our journey (since it was super atypical) and provide some insights into how we make decisions.
  - isoprophlex 7y ago
    Your openness and engagement is highly appreciated. It's always very insightful and pleasant to read about how you're running your business!
    - atYevP 7y ago
      Thank you so much! We love sharing and hope it gets others to be more comfortable doing it as well (to our knowledge no one in SaaS really talks about churn rates if they can help it). The idea being, the more folks that talk about things the better. If you can avoid making a mistake someone else made because you read their story about it from their perspective, that's good for everyone!
  - guiriduro 7y ago
    You could probably have saved yourself a lot of heartache if you started with an aspirational higher headline price (but with easy launch discounting/coupons.) Then you just reduce or remove the discount. Same effect financially, but very different psychologically.
thorwasdfasdf 7y ago
It all depends on the cost of switching. If the cost of switching is really high then you can screw over customers all you want and raise prices considerably before they move away. However, if the cost of switching is very low, you'll find it's much harder to raise prices. In industries and products where switching costs are low, prices tend to be much much lower anyway, especially if those users are easy to reach.
- yoz-y 7y ago
  According to the article some of the difficulty is self inflicted. For example they were planning to raise the price for some time but then one of their competitor left the consumer space. It would be the best time for them to do the hike but they decided against it because it would be a nasty move.
jaytaylor 7y ago
Wow, the sensitivity, consideration, and care Backblaze consistently shows towards their customers is inspiring. I love companies like this, it's The Right Way To Be. Beautiful.
- atYevP 7y ago
  Yev from Backblaze here -> thank you Jay! Our customers were one of the reasons that we felt it would be interesting to share our process, so they could read about how we shot ourselves in the foot :D plus the story is so odd that it was just plain interesting!
  - toomuchtodo 7y ago
    Backblaze customer here. Charge me more!
    - atYevP 7y ago
      Yev here -> Hah, we have an internal joke about setting up a digital tip-jar for folks who just really want to give us more money. Maybe some day! :)
  - mywittyname 7y ago
    It makes me confident to recommend your service to people. I know that I'm going to be recommending a product that will take care of the people I care about. I won't need to worry about you guys starting to use dark patterns to milk your customers (i.e., my grandma) for more money!
    - atYevP 7y ago
      Yev here -> Yea! In the article I mention a few of our company core beliefs and one of them is "be the good guys" - we take that very seriously.
jackcodes 7y ago
I’ll possibly be going against the grain, but they have really made a fanfare about this one. I’m a subscriber and I remember the email coming though and it felt a little too over-sensitive to me. You’re putting the prices up by a dollar a month, you’ve been losing out in real terms because of inflation for years, and I already have gigabytes upon gigabytes of data stored with you. I’m not moving for an extra $12 - and even then I was too lazy to take the promotion because it’s a business expense and having to process the additional invoice didn’t feel worth the bother. But I’ll admit that one is a more of a reflection of me than Backblaze. I understand you’d be worried about a price increase but the email, promotion, two years of lead up time, and now the blog post comes across and a little too apologetic, perhaps. Just stick the prices up by a dollar and give me a quick “sorry guys, we’ve not raised them in a decade - we need to stay competitive” and I wouldn’t have even remembered it.
- kalleboo 7y ago
  You and I feel that way, but there are a LOT of people who are extremely price sensitive, especially in a world accustomed to race-to-the-bottom app pricing. When we adjust our app price, or have a sale, we can really notice it in reactions in our support in-box.
  - jackcodes 7y ago
    You likely have more experience in that regard than I do so I’ll take that on board, but to frame my point in a more semi-positive light; I feel enough goodwill to backblaze that embarking on a 6 month project with some of your most senior engineers to deliver a credits system just to soften the blow of a price increase, in a market without a clear competitor feels like overkill. You don’t need to do all this for my dollar a month! I do actually trust them enough to not screw me over, their price increase history alone showed me that. Sometimes the quick and forgettable slap to the face is more pleasant than the long drawn out apology - although as you mentioned from your experience, maybe I’m in the minority.
    - timcederman 7y ago
no_wizard 7y ago
I have to say well done BackBlaze. This to me is an integrity move!
eclipxe 7y ago
Nice article. I just signed up as I've been having a heck of a time with my time machine backups just failing. Great timing!
- atYevP 7y ago
  Yev here -> Welcome aboard!
rootusrootus 7y ago
I am totally okay with them charging however much money they need to in order to be reliable. I switched recently from Crashplan over to Backblaze because Crashplan just couldn't reliably get a complete backup of my workstation. Backblaze does not seem to have any problem with that at all. This is what I want from a backup -- after all, as they say, backups are worth nothing but restores are priceless. Another dollar a month is nothing.
- atYevP 7y ago
  Yev here -> Thanks! Staying reliable and in-business are two things that we care deeply about!
  - microcolonel 7y ago
    Your desktop application for Windows (which I do not use personally, but have set up for a couple other people) is pretty great as far as backup provider applications go. The one thing that wasn't spectacular was the signup flow. I found it a bit confusing: IIRC if you subscribe to Backblaze from the prompt in the application, it doesn't automatically configure when that subscription is purchased, so you have to download the custom installer or whatever the normal process is (I don't exactly remember, except that it was a bit less smooth than I wanted). Nonetheless, once that was out of the way, my brother's two-seat setup works great, and it has given me considerable peace of mind that he will not simply lose all of his audio production files, and be crushed. B2 is great value and I use it wherever I can.
  - jve 7y ago
    Yep, for years there has been 0 issues with Windows backup application itself.
- Faark 7y ago
  Crashplan is kinda reliable to me... but sloooow. Recently had a drive die on me. Restore was buggy at first. Support seemed competent (hope that weren't just common text blocks) and gave me a more recent installer with my primary gripe fixed. That was about 10 days ago and I'm at 11% down of 3TB :( Yeah, I can understand that not fitting someones use-case. Backblaze on the other hand didn't offer client side encryption when I last checked, so I'll have to stick with the slow one.
teach 7y ago
Goodness, I wish Backblaze had a Linux client. I pay for Backblaze for my wife's Windows workstation _and_ a second license for her Windows laptop, yet I'm stuck with CrashPlan for Small Business to back up my Linux workstation. And before I get comments about B2 and Duplicity, my Linux workstation is also our NAS, so I'd be backing up roughly 4-5TB. I greatly prefer Backblaze, but not enough to pay an extra $200 a year.
- pcurve 7y ago
  5tb?! They may not want your business ;)
  - gmanley 7y ago
    I backed up 11TB. As long as we are outliers I don't think it's an issue. I can't imagine what would happen if everyone started downloading all the media they watch, though. Hopefully streaming continues to be realistic in the near future.
    - brianwski 7y ago
      Disclaimer: I work at Backblaze. > I backed up 11TB. As long as we are outliers I don't think it's an issue. I work on the backup client, and I like larger customers for the reason that if the client works for the larger customers today, then it will work really really well for average size customers for several years to come. Larger customers help stretch and test the datastructures for me. :-) We politely ask the larger customers to recommend Backblaze to their friends and family with less data. We live on the averages, so as long as that works out, we're happy to free customers from worrying about exactly how much they store.
      - teach 7y ago
        So if you need a beta tester for a Linux client, you know who to ask! And I just double-checked and it looks like I'm only backing up a little less than 2TB in Crashplan after all.
pcurve 7y ago
I used to manually back things up on premise but then it became just too painful and without proper raid I never knew quite when my number would come up. With BB I never worry about. Hopefully I won't ever have to use their retreival service. So far so good.
- cortesoft 7y ago
  I have had to use their retrieval process.... and it has been SUPER easy. Just selected the drive that failed, they sent me the new one..... copied the data off, sent it back..... no cost to me! I have had to do it twice so far (my system has 6 drives in it... all included in the standard plan!) Been super happy with the service.
  - atYevP 7y ago
    Yev here -> Glad you enjoyed it and that it was so easy!
noncoml 7y ago
Backblaze, don't worry about the prices. You are good. Two things you can improve are (1) more official sdks (2) see if you can simplify your REST APIs. Other than that, thank you! You are awesome
- atYevP 7y ago
  Yev here -> Noted!
js2 7y ago
FWIW, I switched from the Backblaze client to Arq + B2 in the past year or so. At this point Backblaze is little more than commodity storage to me and I stick with it because it provides the best combination of pricing and speed. I switched to Arq once I had multiple computers to backup and paying by the GB for me is cheaper than paying per computer. From a client-side perspective, Arq and Backblaze each have their own pros and cons.
- snotrockets 7y ago
  Arq also sells a service* (rather than software) which stores on Wasabi. Slightly cheaper for my own needs (<1TB) and much less of a headache. * https://www.arqbackup.com/arqcloudbackup/ https://www.arqbackup.com/arqcloudbackup/
- stu_k 7y ago
  Thanks for mentioning Arq, that looks really useful. What are the cons you've found?
aidenn0 7y ago
I'm guessing the negative churn rate on their churn rate graph is due to using inappropriate smoothing, rather than anything real?
davidw 7y ago
Would be curious to read "raise prices" patio11's opinion on this one.
eruci 7y ago
I had a 100EUR per month subscription deal on geocode.xyz and someone was dubious as to "why it was so cheap". Doubled it to 200EUR per month and everybody is happy now.
jedberg 7y ago
I love the detailed writeup, but it seems like they made this a lot harder than it needs to be. Most SaaS companies, when they raise prices, will announce that new customers will pay the new price starting in X days, where X is usually 30 or 60. This gives people on the fence a chance to jump on board at the lower price, and lets current customers keep their pricing. Then they tell their current customers that their existing price will be grandfathered in for X months. If you make X big enough, most people don't really notice, because when you announce it, it seems far away, and when it happens, they probably don't even check their subscriptions that often. The whole credit thing felt like a ploy to raise some immediate cash and create artificial lock in, and after this post, it seems like it didn't even really help them all that much.
- ultrasaurus 7y ago
  Agree 100%: - Announce price increase for new users to existing customers. Allow them to expand or sign longer term contracts to lock in the current price for X days. - Apply new pricing to new customers & expansions. - Migrate existing customers closer to new pricing on a timeline. I'm a sucker for heirloom pricing for your oldest customers :) Understand where you are in the growth curve though; if you're growing 200% YoY and your early customers are thought leaders, then focus on new customer pricing and don't worry about raising prices. Oh, and whenever possible sell differentiated, mission critical products to businesses whenever possible.
- dwd 7y ago
  I found their approach refreshing open, especially when you compare it to cPanel's recent price hike debacle. That was a good example of how not to do it,
hinkley 7y ago
Wouldn't it have been simpler for them to raise prices for new customers a year ago and leave the existing base grandfathered in? It seems like I have this discussion at work from time to time. The faster we grow our customer base the harder it is to monetize our improvements, because we have a smaller and smaller pool of new users. Getting big before you get your feature set and cost structure down means you have to go ask forgiveness from old users. If instead you launch a big ad campaign after improving functionality and increasing the prices...
- atYevP 7y ago
  Yev here -> Maybe! That was one avenue we were considering - do the announcement, then make the increase only effective for new users instead of existing. I think one of the reasons we shied away from that was it would create different user "classes" and we'd need to keep that tracked somewhere, so it would still have been some engineering effort to make sure that all the billing code worked correctly. Eventually we decided on the extension program because it also moved up some revenue, even though it was deferred.
juliansimioni 7y ago
I'm glad the people at Blackblaze really look like (from this writing and others) good people who want to run a successful business while doing right by their customers. But... Jeez, clearly they did not hire patio11 While they technically did _raise_ prices, I'm quite certain they had a lot of leeway to have raised them a lot more
- mherdeg 7y ago
  Yeah he had some thoughts on how tarsnap should price itself at https://www.kalzumeus.com/2014/04/03/fantasy-tarsnap/ https://www.kalzumeus.com/2014/04/03/fantasy-tarsnap/ which I think suggests that he would consider Backblaze underpriced.
  - csytan 7y ago
    It's funny running into this article for the first time. I've been using Tarsnap for a couple years now for our SAAS. After receiving the first month's email receipt for $0.25, I replied: saying something along the lines of "damn this is cheap! you could charge a lot more!". No reply of course. He's probably heard it a million times already. Having gained a bit more experience with pricing our own product this past year, I think it might not be as simple as "he sucks at business". Here's some potential (and highly speculative) reasons: - He may not need the money. He's got a respectable day job that pays well. - Higher prices mean less value for your users. Less value means less geek cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably wouldn't if it started at $100/mo. - Higher prices mean you sell to a different audience with more responsibility. High touch sales, support email threads with 10+ folks all demanding different things, handling exotic types of billing, etc. Many devs don't like dealing with this kind of stuff. - What if he's doing this as a lead gen for his consulting services?
    - cperciva 7y ago
      I replied: saying something along the lines of "damn this is cheap! you could charge a lot more!". No reply of course. He's probably heard it a million times already. I do hear that quite a bit, but I also hear a lot of people saying that Tarsnap is too expensive. I figure that as long as I have complaints coming from both directions I'm probably somewhere close to the right price. ;-) Sorry about not replying -- I usually do reply even to emails like that, but it's possible that I was overwhelmed with email at the time. - Higher prices mean less value for your users. Less value means less geek cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably wouldn't if it started at $100/mo. This is part of it -- Tarsnap wouldn't get nearly as much free advertising if its prices were higher. - What if he's doing this as a lead gen for his consulting services? No, I'm not doing that. In fact I do very little consulting these days.
sanbor 7y ago
I gave a try to Backblaze but stopped using it when I noticed you have to send to their servers you private key to restore your files. For me it's not acceptable.
encoderer 7y ago
* For consumer products. B2B products often have annual price increases built into contract.
NKosmatos 7y ago
One of my favorite companies! I plan to become a customer when we finally get proper VDSL/fiber connections here in Greece, currently 900kbps upload :-( They’ve just opened an EU datacenter(DC4) in Netherlands. It would be nice to see a future blog about distribution of customers.
iagooar 7y ago
> The year following Crashplan’s announcement we saw a huge increase in customers, which is simultaneously good and bad No, this is GREAT, but you have to do it right! You should have increased dramatically the pricing for new customers to keep the growth at acceptable levels (in terms of absolute numbers). This way you would have had a lot better margins from new customers and could have scaled your business in a more controlled way. > raising prices on the day when the industry started having fewer options would have been the right financial decision, but not the right Backblaze decision. It would have been the right Backblaze decision, because you would have secured a decent margin to provide the best service you can to your customers. > We’ve all been subjected to price increases that were clandestine, then abruptly announced and put into effect the same day, or were not well explained. Not sure if I use radically different services, but this never happened to me! Usually, you get months of time in advance to get adjusted to the new pricing.
- atYevP 7y ago
  Yev here -> Interesting takeaways! It was difficult to map how many customers we'd gain after Crashplan left the business and how many we'd have gained if we had raised prices by a lot more. It was made more complicated by the fact that they partnered with our 2nd largest competitor, so we also had to do a quick "sanity-check" about whether or not we wanted to raise prices to near their level, or stay the same until things calmed down. Thanks for the insights!
magicalhippo 7y ago
I considered them when Crashplan threw me away. I've really liked what I see of Backblaze as a company, but sadly their services come up short for me. Personal is cheap but too basic (keeps file versions for 30 days only, no backup on external drive/NAS). B2 is seems to be too expensive for my 1TB of data. They also lacked a data center in EU, learned my lesson with Crashplan on that one, though I hear that is about to change. Currently I've settled for Acronis True Image. Not exactly the same, but more options, faster to get things running again after a proper HD crash (tried that a few times already) and they're cheaper than B2. But yeah, had I been a customer, the price hike would have been totally fine.
- atYevP 7y ago
  Yev here -> things have changed! For 1TB of data on B2 the cost of the service is actually LESS expensive for B2 than the computer backup ($6/month unlimited). B2 is priced at $5/TB/Mo - so that price has stayed the same. We also just opened a data center in Amsterdam - so you can create an account in the EU and your data will be stored there! Not sure if that helps, but figured I'd let you know!
  - magicalhippo 7y ago
    Thanks for the reply, it does indeed make it a lot more attractive. The main issue I have with B2 is that I'll be using some client where the API transaction costs are a complete unknown, at least to me. I have no idea how many API calls of the various sorts the different clients will use, and how they scale with my data. I have a almost two million files, if a client uses one or two B or C API calls per file when processing the backup set, then that's 5-10 bucks right there.
    - atYevP 7y ago
      Yev here -> very true, but for a backup those should only occur once and there's a free amount per day. The nice thing about our integration partners like Cloudberry is that they go through qualification and we help them develop so if their apps start to go haywire it's usually caught quickly and fixed rapidly. It's been pretty rare for the transaction calls to go haywire. Another thing you can do to protect yourself if that's a big worry is by placing a Cap or an Alert for a transaction type. That way with an alert we'll notify you when you're nearing that cap so you'll have forewarning instead of just being charged (or if you set the cap, we'll stop until it's been lifted or reset).
thorwasdfasdf 7y ago
Based on the price comparison tool they have, their prices are 4 times Lower than Amazon, Microsoft or Google Cloud!! I would think that people would flock to this platform. I'm bookmarking it, that's for sure.
- zhte415 7y ago
  Likewise. I've known the name for a while, just never looked into it much. The prices seem very good!
- deleted 7y ago
  [deleted]
ademup 7y ago
This article makes me truly appreciative that my product/service is not essientially a "commodity". Absolutely no disrespect intended for BackBlaze, as they have obviously gone the distance in adding value to their core "we store data" product. That said, I generally find it easy to raise prices. Indeed, price discovery is "fun" in my tiny tiny niche. Basically, I just increase the price every time a new customer signs up. I honestly think this is completely fair to both past and new customers. Sign up early and you reap the benefits of lower cost. Sign up for a longer term and you keep those benefits. It's a struggle with inflation, and I strongly appreciate the argument in accounting for it. It is so obviously real, yet customers seem to have an extremely hard time wrapping their heads around it.
- gowld 7y ago
  If you sell a scarce popular product, soak the people first in line. If you build your business on the word-of-mouth advertised of the loyal customers who took a big risk on you, share the wealth they helped you accumulate.
anonymoushn 7y ago
I hope Backblaze lets me pay them to back up everything including /Applications, my home directory, and /Library one day.
idonotknowwhy 7y ago
I agree with some of the other comments here, this sounds too apologetic. I'm signing up this weekend for a personal account to backup around 100GB of family photos and videos. I've been using the HDD reliability data to choose my drives for many years and this looks much cheaper than S3. I was also impressed by being greeted as a linux user and sent to this page when I hit sign up: https://help.backblaze.com/hc/en-us/articles/115001518354-How-to-configure-Backblaze-B2-with-Duplicity-on-Linux https://help.backblaze.com/hc/en-us/articles/115001518354-Ho...
- microcolonel 7y ago
  That was my experience too. B2 is great value and a heck of a lot easier to configure through their web portal than S3.
Causality1 7y ago
The whole online backup thing would be great if I wasn't already bumping up against my ISP's 1TB monthly transfer limit.
- imhoguy 7y ago
  You generate >1TB of fresh new data to backup every month? That is not like average user usage. Large initial backup is a problem indeed but you can split your initial dataset for months.
  - Causality1 7y ago
    No, I just already use almost a terabyte with no backup activity at all, and how much I download is something I have to be conscious of. Having to balance that along with upload usage would be a significant hassle for me.
Lich 7y ago
Backblaze, here's a story. My dad used to run a mailing service, kind of like a UPS store, but non-franchise. We also had private mailbox rentals (PMB) for customers. My dad ran the business for about 12 years. About year 7-8, my dad was like, I have to raise the prices of the PMBs. You know what his longtime customers said? They weren't mad, but they were surprised. They said, "Damn, it's about time. I've been wondering for a long time when it was going to up. Good for you."
- atYevP 7y ago
  Yev here -> that's similar to what we saw too! It's one of those things where because we'd not done it, there was a bit of dread (not because we thought we'd be skewered, but because we really don't want to let folks down). However, once we saw the early responses rolling in, there was a collective sigh of relief.
Osiris 7y ago
> This became a full-time job for a handful of our most senior engineers, and resulted in a six month project before we were ready to put it through our QA testing. So let's say that you pay your senior engineers $150k, 6 months is $75k per engineer, say 3-5 engineers, that's $225-375k. Plus QA time, etc. It might have cost the company $500k just to implement a program that would reduce their revenue by letting people by in at a lower price. I'm not saying this is the case here, but I often see companies I've worked for not do this kind of math, the opportunity cost of implementing a feature or product.
- atYevP 7y ago
  Yev here -> while the numbers aren't entirely correct in our case the equation is correct. We do account for engineering time and opportunity cost of other projects that aren't getting worked on (though we tend to stack projects so while one team works on, billing, another will work on UI, when billing team is done they'll move on to the next project, etc..). One of the side-benefits for us in this case was building out the Extensions program meant we had to build a more robust crediting system, which is code we might be able to re-use later!
jwhite_nc 7y ago
I honestly didn't realize the price had gone up until I read this post. Checked my billing history and saw it's been $6 the last few months. Shrug. Underpriced service that I'll keep paying for.
jve 7y ago
My subscription got renewed this month. However I feel the pain of having to connect external hard drive every month (because at home, I don't use computer that much, but backups are must have). And actually my ext hdd broke down and there were no backups @ backlbaze, because I was too late :( Luckily, was able to restore data by buying identical external drive, resoldering bios and voila - turns out it was just the controller issue. May I ask (because Babklazers hang around here) why this limiation? Can it be increased? Can it be turned off? I don't have that much data and I feel I'm really overpaying for my gigabytes and better buy some home NAS or whatever. Probably wouldn't feel that way if I would be storing TB's @ Backblaze :)
- atYevP 7y ago
  Yev here -> glad you were able to restore your data! The limitation exists because the longer we keep data the more it costs us, the 30-Day Version History we have allows us to eventually reclaim space. That said, we're looking at ways to make it easier!
leosarev 7y ago
I loved Basecamp history of raising prices. Thay just made x2 increase overnight, but just for new customers.
eemil 7y ago
Maybe it's just me, but it always seems like a cash grab whenever a company updates its prices and allows customers to prepay x amount for the old price. Why not offer a discount, or coupon code instead? Not saying that I disagree with the price increase, just that specific method of rewarding existing customers.
- atYevP 7y ago
  Yev here -> it does absolutely move money "up" - but as a company (at least if you're disciplined) it doesn't mean you get to use it. You're basically deferring revenue (the amount lost from not increasing prices on existing customers for X amount of time) and the money you bring up is for a service you still have to provide, so for accounting purposes it's more or less "locked down". So you're absolutely right, it does bring money forward, but there's costs involved as well!
formercoder 7y ago
In reality by keeping their price flat for a decade they’ve lowered their price every year in real terms.
numbers 7y ago
I didn't need to read an explanation to why they're raising prices, this is something I really value and I'm happy paying a dollar more to know I can rely on Backblaze.

353 points by soheilpro 7y ago

For all things not purchased with debt, this is true. But look at the housing market. Or, consider industries with severe information asymmetry: see the healthcare industry. Raising prices is no problem for two of the most expensive line items in a middle class household's budget. For everyone else, it's probably best to start with high prices.

thorwasdfasdf 7y ago
Well, it's not a matter of debt. It's more a matter of whether or not new entrants can enter the market and provide that good. In both real estate and Healthcare, it's very difficult for new players to enter the market, especially in highly regulated states. The result is a market where prices are much higher than they need to be.

tempsy 7y ago

Doesn't this just depend on the price elasticity of the good or service in question...?

atYevP 7y ago
Yev here -> in purely academic terms maybe, but there are a lot of factors which go in to whether or not a person will leave or stick around. I thought it'd be interesting to write about our journey (since it was super atypical) and provide some insights into how we make decisions.
- isoprophlex 7y ago
  Your openness and engagement is highly appreciated. It's always very insightful and pleasant to read about how you're running your business!
  - atYevP 7y ago
    Thank you so much! We love sharing and hope it gets others to be more comfortable doing it as well (to our knowledge no one in SaaS really talks about churn rates if they can help it). The idea being, the more folks that talk about things the better. If you can avoid making a mistake someone else made because you read their story about it from their perspective, that's good for everyone!
- guiriduro 7y ago
  You could probably have saved yourself a lot of heartache if you started with an aspirational higher headline price (but with easy launch discounting/coupons.) Then you just reduce or remove the discount. Same effect financially, but very different psychologically.

thorwasdfasdf 7y ago

It all depends on the cost of switching. If the cost of switching is really high then you can screw over customers all you want and raise prices considerably before they move away. However, if the cost of switching is very low, you'll find it's much harder to raise prices. In industries and products where switching costs are low, prices tend to be much much lower anyway, especially if those users are easy to reach.

yoz-y 7y ago
According to the article some of the difficulty is self inflicted. For example they were planning to raise the price for some time but then one of their competitor left the consumer space. It would be the best time for them to do the hike but they decided against it because it would be a nasty move.

jaytaylor 7y ago

Wow, the sensitivity, consideration, and care Backblaze consistently shows towards their customers is inspiring. I love companies like this, it's The Right Way To Be. Beautiful.

atYevP 7y ago
Yev from Backblaze here -> thank you Jay! Our customers were one of the reasons that we felt it would be interesting to share our process, so they could read about how we shot ourselves in the foot :D plus the story is so odd that it was just plain interesting!
- toomuchtodo 7y ago
  Backblaze customer here. Charge me more!
  - atYevP 7y ago
    Yev here -> Hah, we have an internal joke about setting up a digital tip-jar for folks who just really want to give us more money. Maybe some day! :)
- mywittyname 7y ago
  It makes me confident to recommend your service to people. I know that I'm going to be recommending a product that will take care of the people I care about. I won't need to worry about you guys starting to use dark patterns to milk your customers (i.e., my grandma) for more money!
  - atYevP 7y ago
    Yev here -> Yea! In the article I mention a few of our company core beliefs and one of them is "be the good guys" - we take that very seriously.

jackcodes 7y ago

I’ll possibly be going against the grain, but they have really made a fanfare about this one. I’m a subscriber and I remember the email coming though and it felt a little too over-sensitive to me. You’re putting the prices up by a dollar a month, you’ve been losing out in real terms because of inflation for years, and I already have gigabytes upon gigabytes of data stored with you. I’m not moving for an extra $12 - and even then I was too lazy to take the promotion because it’s a business expense and having to process the additional invoice didn’t feel worth the bother. But I’ll admit that one is a more of a reflection of me than Backblaze. I understand you’d be worried about a price increase but the email, promotion, two years of lead up time, and now the blog post comes across and a little too apologetic, perhaps. Just stick the prices up by a dollar and give me a quick “sorry guys, we’ve not raised them in a decade - we need to stay competitive” and I wouldn’t have even remembered it.

kalleboo 7y ago
You and I feel that way, but there are a LOT of people who are extremely price sensitive, especially in a world accustomed to race-to-the-bottom app pricing. When we adjust our app price, or have a sale, we can really notice it in reactions in our support in-box.
- jackcodes 7y ago
  You likely have more experience in that regard than I do so I’ll take that on board, but to frame my point in a more semi-positive light; I feel enough goodwill to backblaze that embarking on a 6 month project with some of your most senior engineers to deliver a credits system just to soften the blow of a price increase, in a market without a clear competitor feels like overkill. You don’t need to do all this for my dollar a month! I do actually trust them enough to not screw me over, their price increase history alone showed me that. Sometimes the quick and forgettable slap to the face is more pleasant than the long drawn out apology - although as you mentioned from your experience, maybe I’m in the minority.
  - timcederman 7y ago

no_wizard 7y ago

I have to say well done BackBlaze. This to me is an integrity move!

eclipxe 7y ago

Nice article. I just signed up as I've been having a heck of a time with my time machine backups just failing. Great timing!

atYevP 7y ago
Yev here -> Welcome aboard!

rootusrootus 7y ago

I am totally okay with them charging however much money they need to in order to be reliable. I switched recently from Crashplan over to Backblaze because Crashplan just couldn't reliably get a complete backup of my workstation. Backblaze does not seem to have any problem with that at all. This is what I want from a backup -- after all, as they say, backups are worth nothing but restores are priceless. Another dollar a month is nothing.

atYevP 7y ago
Yev here -> Thanks! Staying reliable and in-business are two things that we care deeply about!
- microcolonel 7y ago
  Your desktop application for Windows (which I do not use personally, but have set up for a couple other people) is pretty great as far as backup provider applications go. The one thing that wasn't spectacular was the signup flow. I found it a bit confusing: IIRC if you subscribe to Backblaze from the prompt in the application, it doesn't automatically configure when that subscription is purchased, so you have to download the custom installer or whatever the normal process is (I don't exactly remember, except that it was a bit less smooth than I wanted). Nonetheless, once that was out of the way, my brother's two-seat setup works great, and it has given me considerable peace of mind that he will not simply lose all of his audio production files, and be crushed. B2 is great value and I use it wherever I can.
- jve 7y ago
  Yep, for years there has been 0 issues with Windows backup application itself.
Faark 7y ago
Crashplan is kinda reliable to me... but sloooow. Recently had a drive die on me. Restore was buggy at first. Support seemed competent (hope that weren't just common text blocks) and gave me a more recent installer with my primary gripe fixed. That was about 10 days ago and I'm at 11% down of 3TB :( Yeah, I can understand that not fitting someones use-case. Backblaze on the other hand didn't offer client side encryption when I last checked, so I'll have to stick with the slow one.

teach 7y ago

Goodness, I wish Backblaze had a Linux client. I pay for Backblaze for my wife's Windows workstation _and_ a second license for her Windows laptop, yet I'm stuck with CrashPlan for Small Business to back up my Linux workstation. And before I get comments about B2 and Duplicity, my Linux workstation is also our NAS, so I'd be backing up roughly 4-5TB. I greatly prefer Backblaze, but not enough to pay an extra $200 a year.

pcurve 7y ago
5tb?! They may not want your business ;)
- gmanley 7y ago
  I backed up 11TB. As long as we are outliers I don't think it's an issue. I can't imagine what would happen if everyone started downloading all the media they watch, though. Hopefully streaming continues to be realistic in the near future.
  - brianwski 7y ago
    Disclaimer: I work at Backblaze. > I backed up 11TB. As long as we are outliers I don't think it's an issue. I work on the backup client, and I like larger customers for the reason that if the client works for the larger customers today, then it will work really really well for average size customers for several years to come. Larger customers help stretch and test the datastructures for me. :-) We politely ask the larger customers to recommend Backblaze to their friends and family with less data. We live on the averages, so as long as that works out, we're happy to free customers from worrying about exactly how much they store.
    - teach 7y ago
      So if you need a beta tester for a Linux client, you know who to ask! And I just double-checked and it looks like I'm only backing up a little less than 2TB in Crashplan after all.

pcurve 7y ago

I used to manually back things up on premise but then it became just too painful and without proper raid I never knew quite when my number would come up. With BB I never worry about. Hopefully I won't ever have to use their retreival service. So far so good.

cortesoft 7y ago
I have had to use their retrieval process.... and it has been SUPER easy. Just selected the drive that failed, they sent me the new one..... copied the data off, sent it back..... no cost to me! I have had to do it twice so far (my system has 6 drives in it... all included in the standard plan!) Been super happy with the service.
- atYevP 7y ago
  Yev here -> Glad you enjoyed it and that it was so easy!

noncoml 7y ago

Backblaze, don't worry about the prices. You are good. Two things you can improve are (1) more official sdks (2) see if you can simplify your REST APIs. Other than that, thank you! You are awesome

atYevP 7y ago
Yev here -> Noted!

js2 7y ago

FWIW, I switched from the Backblaze client to Arq + B2 in the past year or so. At this point Backblaze is little more than commodity storage to me and I stick with it because it provides the best combination of pricing and speed. I switched to Arq once I had multiple computers to backup and paying by the GB for me is cheaper than paying per computer. From a client-side perspective, Arq and Backblaze each have their own pros and cons.

snotrockets 7y ago
Arq also sells a service* (rather than software) which stores on Wasabi. Slightly cheaper for my own needs (<1TB) and much less of a headache. * https://www.arqbackup.com/arqcloudbackup/ https://www.arqbackup.com/arqcloudbackup/
stu_k 7y ago
Thanks for mentioning Arq, that looks really useful. What are the cons you've found?

aidenn0 7y ago

I'm guessing the negative churn rate on their churn rate graph is due to using inappropriate smoothing, rather than anything real?

davidw 7y ago

Would be curious to read "raise prices" patio11's opinion on this one.

eruci 7y ago

I had a 100EUR per month subscription deal on geocode.xyz and someone was dubious as to "why it was so cheap". Doubled it to 200EUR per month and everybody is happy now.

jedberg 7y ago

I love the detailed writeup, but it seems like they made this a lot harder than it needs to be. Most SaaS companies, when they raise prices, will announce that new customers will pay the new price starting in X days, where X is usually 30 or 60. This gives people on the fence a chance to jump on board at the lower price, and lets current customers keep their pricing. Then they tell their current customers that their existing price will be grandfathered in for X months. If you make X big enough, most people don't really notice, because when you announce it, it seems far away, and when it happens, they probably don't even check their subscriptions that often. The whole credit thing felt like a ploy to raise some immediate cash and create artificial lock in, and after this post, it seems like it didn't even really help them all that much.

ultrasaurus 7y ago
Agree 100%: - Announce price increase for new users to existing customers. Allow them to expand or sign longer term contracts to lock in the current price for X days. - Apply new pricing to new customers & expansions. - Migrate existing customers closer to new pricing on a timeline. I'm a sucker for heirloom pricing for your oldest customers :) Understand where you are in the growth curve though; if you're growing 200% YoY and your early customers are thought leaders, then focus on new customer pricing and don't worry about raising prices. Oh, and whenever possible sell differentiated, mission critical products to businesses whenever possible.
dwd 7y ago
I found their approach refreshing open, especially when you compare it to cPanel's recent price hike debacle. That was a good example of how not to do it,

hinkley 7y ago

Wouldn't it have been simpler for them to raise prices for new customers a year ago and leave the existing base grandfathered in? It seems like I have this discussion at work from time to time. The faster we grow our customer base the harder it is to monetize our improvements, because we have a smaller and smaller pool of new users. Getting big before you get your feature set and cost structure down means you have to go ask forgiveness from old users. If instead you launch a big ad campaign after improving functionality and increasing the prices...

atYevP 7y ago
Yev here -> Maybe! That was one avenue we were considering - do the announcement, then make the increase only effective for new users instead of existing. I think one of the reasons we shied away from that was it would create different user "classes" and we'd need to keep that tracked somewhere, so it would still have been some engineering effort to make sure that all the billing code worked correctly. Eventually we decided on the extension program because it also moved up some revenue, even though it was deferred.

juliansimioni 7y ago

I'm glad the people at Blackblaze really look like (from this writing and others) good people who want to run a successful business while doing right by their customers. But... Jeez, clearly they did not hire patio11 While they technically did _raise_ prices, I'm quite certain they had a lot of leeway to have raised them a lot more

mherdeg 7y ago
Yeah he had some thoughts on how tarsnap should price itself at https://www.kalzumeus.com/2014/04/03/fantasy-tarsnap/ https://www.kalzumeus.com/2014/04/03/fantasy-tarsnap/ which I think suggests that he would consider Backblaze underpriced.
- csytan 7y ago
  It's funny running into this article for the first time. I've been using Tarsnap for a couple years now for our SAAS. After receiving the first month's email receipt for $0.25, I replied: saying something along the lines of "damn this is cheap! you could charge a lot more!". No reply of course. He's probably heard it a million times already. Having gained a bit more experience with pricing our own product this past year, I think it might not be as simple as "he sucks at business". Here's some potential (and highly speculative) reasons: - He may not need the money. He's got a respectable day job that pays well. - Higher prices mean less value for your users. Less value means less geek cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably wouldn't if it started at $100/mo. - Higher prices mean you sell to a different audience with more responsibility. High touch sales, support email threads with 10+ folks all demanding different things, handling exotic types of billing, etc. Many devs don't like dealing with this kind of stuff. - What if he's doing this as a lead gen for his consulting services?
  - cperciva 7y ago
    I replied: saying something along the lines of "damn this is cheap! you could charge a lot more!". No reply of course. He's probably heard it a million times already. I do hear that quite a bit, but I also hear a lot of people saying that Tarsnap is too expensive. I figure that as long as I have complaints coming from both directions I'm probably somewhere close to the right price. ;-) Sorry about not replying -- I usually do reply even to emails like that, but it's possible that I was overwhelmed with email at the time. - Higher prices mean less value for your users. Less value means less geek cred/love. I'd recommend Tarsnap to a fellow techie in a heartbeat. I probably wouldn't if it started at $100/mo. This is part of it -- Tarsnap wouldn't get nearly as much free advertising if its prices were higher. - What if he's doing this as a lead gen for his consulting services? No, I'm not doing that. In fact I do very little consulting these days.

sanbor 7y ago

I gave a try to Backblaze but stopped using it when I noticed you have to send to their servers you private key to restore your files. For me it's not acceptable.

encoderer 7y ago

* For consumer products. B2B products often have annual price increases built into contract.

NKosmatos 7y ago

One of my favorite companies! I plan to become a customer when we finally get proper VDSL/fiber connections here in Greece, currently 900kbps upload :-( They’ve just opened an EU datacenter(DC4) in Netherlands. It would be nice to see a future blog about distribution of customers.

iagooar 7y ago

> The year following Crashplan’s announcement we saw a huge increase in customers, which is simultaneously good and bad No, this is GREAT, but you have to do it right! You should have increased dramatically the pricing for new customers to keep the growth at acceptable levels (in terms of absolute numbers). This way you would have had a lot better margins from new customers and could have scaled your business in a more controlled way. > raising prices on the day when the industry started having fewer options would have been the right financial decision, but not the right Backblaze decision. It would have been the right Backblaze decision, because you would have secured a decent margin to provide the best service you can to your customers. > We’ve all been subjected to price increases that were clandestine, then abruptly announced and put into effect the same day, or were not well explained. Not sure if I use radically different services, but this never happened to me! Usually, you get months of time in advance to get adjusted to the new pricing.

atYevP 7y ago
Yev here -> Interesting takeaways! It was difficult to map how many customers we'd gain after Crashplan left the business and how many we'd have gained if we had raised prices by a lot more. It was made more complicated by the fact that they partnered with our 2nd largest competitor, so we also had to do a quick "sanity-check" about whether or not we wanted to raise prices to near their level, or stay the same until things calmed down. Thanks for the insights!

magicalhippo 7y ago

I considered them when Crashplan threw me away. I've really liked what I see of Backblaze as a company, but sadly their services come up short for me. Personal is cheap but too basic (keeps file versions for 30 days only, no backup on external drive/NAS). B2 is seems to be too expensive for my 1TB of data. They also lacked a data center in EU, learned my lesson with Crashplan on that one, though I hear that is about to change. Currently I've settled for Acronis True Image. Not exactly the same, but more options, faster to get things running again after a proper HD crash (tried that a few times already) and they're cheaper than B2. But yeah, had I been a customer, the price hike would have been totally fine.

atYevP 7y ago
Yev here -> things have changed! For 1TB of data on B2 the cost of the service is actually LESS expensive for B2 than the computer backup ($6/month unlimited). B2 is priced at $5/TB/Mo - so that price has stayed the same. We also just opened a data center in Amsterdam - so you can create an account in the EU and your data will be stored there! Not sure if that helps, but figured I'd let you know!
- magicalhippo 7y ago
  Thanks for the reply, it does indeed make it a lot more attractive. The main issue I have with B2 is that I'll be using some client where the API transaction costs are a complete unknown, at least to me. I have no idea how many API calls of the various sorts the different clients will use, and how they scale with my data. I have a almost two million files, if a client uses one or two B or C API calls per file when processing the backup set, then that's 5-10 bucks right there.
  - atYevP 7y ago
    Yev here -> very true, but for a backup those should only occur once and there's a free amount per day. The nice thing about our integration partners like Cloudberry is that they go through qualification and we help them develop so if their apps start to go haywire it's usually caught quickly and fixed rapidly. It's been pretty rare for the transaction calls to go haywire. Another thing you can do to protect yourself if that's a big worry is by placing a Cap or an Alert for a transaction type. That way with an alert we'll notify you when you're nearing that cap so you'll have forewarning instead of just being charged (or if you set the cap, we'll stop until it's been lifted or reset).

thorwasdfasdf 7y ago

Based on the price comparison tool they have, their prices are 4 times Lower than Amazon, Microsoft or Google Cloud!! I would think that people would flock to this platform. I'm bookmarking it, that's for sure.

zhte415 7y ago
Likewise. I've known the name for a while, just never looked into it much. The prices seem very good!
deleted 7y ago
[deleted]

ademup 7y ago

This article makes me truly appreciative that my product/service is not essientially a "commodity". Absolutely no disrespect intended for BackBlaze, as they have obviously gone the distance in adding value to their core "we store data" product. That said, I generally find it easy to raise prices. Indeed, price discovery is "fun" in my tiny tiny niche. Basically, I just increase the price every time a new customer signs up. I honestly think this is completely fair to both past and new customers. Sign up early and you reap the benefits of lower cost. Sign up for a longer term and you keep those benefits. It's a struggle with inflation, and I strongly appreciate the argument in accounting for it. It is so obviously real, yet customers seem to have an extremely hard time wrapping their heads around it.

gowld 7y ago
If you sell a scarce popular product, soak the people first in line. If you build your business on the word-of-mouth advertised of the loyal customers who took a big risk on you, share the wealth they helped you accumulate.

anonymoushn 7y ago

I hope Backblaze lets me pay them to back up everything including /Applications, my home directory, and /Library one day.

idonotknowwhy 7y ago

I agree with some of the other comments here, this sounds too apologetic. I'm signing up this weekend for a personal account to backup around 100GB of family photos and videos. I've been using the HDD reliability data to choose my drives for many years and this looks much cheaper than S3. I was also impressed by being greeted as a linux user and sent to this page when I hit sign up: https://help.backblaze.com/hc/en-us/articles/115001518354-How-to-configure-Backblaze-B2-with-Duplicity-on-Linux https://help.backblaze.com/hc/en-us/articles/115001518354-Ho...

microcolonel 7y ago
That was my experience too. B2 is great value and a heck of a lot easier to configure through their web portal than S3.

Causality1 7y ago

The whole online backup thing would be great if I wasn't already bumping up against my ISP's 1TB monthly transfer limit.

imhoguy 7y ago
You generate >1TB of fresh new data to backup every month? That is not like average user usage. Large initial backup is a problem indeed but you can split your initial dataset for months.
- Causality1 7y ago
  No, I just already use almost a terabyte with no backup activity at all, and how much I download is something I have to be conscious of. Having to balance that along with upload usage would be a significant hassle for me.

Lich 7y ago

Backblaze, here's a story. My dad used to run a mailing service, kind of like a UPS store, but non-franchise. We also had private mailbox rentals (PMB) for customers. My dad ran the business for about 12 years. About year 7-8, my dad was like, I have to raise the prices of the PMBs. You know what his longtime customers said? They weren't mad, but they were surprised. They said, "Damn, it's about time. I've been wondering for a long time when it was going to up. Good for you."

atYevP 7y ago
Yev here -> that's similar to what we saw too! It's one of those things where because we'd not done it, there was a bit of dread (not because we thought we'd be skewered, but because we really don't want to let folks down). However, once we saw the early responses rolling in, there was a collective sigh of relief.

Osiris 7y ago

> This became a full-time job for a handful of our most senior engineers, and resulted in a six month project before we were ready to put it through our QA testing. So let's say that you pay your senior engineers $150k, 6 months is $75k per engineer, say 3-5 engineers, that's $225-375k. Plus QA time, etc. It might have cost the company $500k just to implement a program that would reduce their revenue by letting people by in at a lower price. I'm not saying this is the case here, but I often see companies I've worked for not do this kind of math, the opportunity cost of implementing a feature or product.

atYevP 7y ago
Yev here -> while the numbers aren't entirely correct in our case the equation is correct. We do account for engineering time and opportunity cost of other projects that aren't getting worked on (though we tend to stack projects so while one team works on, billing, another will work on UI, when billing team is done they'll move on to the next project, etc..). One of the side-benefits for us in this case was building out the Extensions program meant we had to build a more robust crediting system, which is code we might be able to re-use later!

jwhite_nc 7y ago

I honestly didn't realize the price had gone up until I read this post. Checked my billing history and saw it's been $6 the last few months. Shrug. Underpriced service that I'll keep paying for.

jve 7y ago

My subscription got renewed this month. However I feel the pain of having to connect external hard drive every month (because at home, I don't use computer that much, but backups are must have). And actually my ext hdd broke down and there were no backups @ backlbaze, because I was too late :( Luckily, was able to restore data by buying identical external drive, resoldering bios and voila - turns out it was just the controller issue. May I ask (because Babklazers hang around here) why this limiation? Can it be increased? Can it be turned off? I don't have that much data and I feel I'm really overpaying for my gigabytes and better buy some home NAS or whatever. Probably wouldn't feel that way if I would be storing TB's @ Backblaze :)

atYevP 7y ago
Yev here -> glad you were able to restore your data! The limitation exists because the longer we keep data the more it costs us, the 30-Day Version History we have allows us to eventually reclaim space. That said, we're looking at ways to make it easier!

leosarev 7y ago

I loved Basecamp history of raising prices. Thay just made x2 increase overnight, but just for new customers.

eemil 7y ago

Maybe it's just me, but it always seems like a cash grab whenever a company updates its prices and allows customers to prepay x amount for the old price. Why not offer a discount, or coupon code instead? Not saying that I disagree with the price increase, just that specific method of rewarding existing customers.

atYevP 7y ago
Yev here -> it does absolutely move money "up" - but as a company (at least if you're disciplined) it doesn't mean you get to use it. You're basically deferring revenue (the amount lost from not increasing prices on existing customers for X amount of time) and the money you bring up is for a service you still have to provide, so for accounting purposes it's more or less "locked down". So you're absolutely right, it does bring money forward, but there's costs involved as well!

formercoder 7y ago

In reality by keeping their price flat for a decade they’ve lowered their price every year in real terms.

numbers 7y ago

I didn't need to read an explanation to why they're raising prices, this is something I really value and I'm happy paying a dollar more to know I can rely on Backblaze.