3 ms·

I find pricing tiers distasteful in general -- A man after my own heart! How do you manage the float of your users' prepaid balances?

by blasdel 18y ago

cperciva 18y ago
At the moment, I'm not really managing it. It's just sitting in paypal. Unfortunately being a Canadian makes it hard to get USD out of paypal without having paypal convert it to CAD at a really horrible exchange rate -- I'm going to get a US bank account soon (a USD bank account at a Canadian bank isn't good enough) to get around this problem, but I haven't made it that far yet. Given how horrible interest rates are right now it's not as if there's a huge amount of money to be earned on the float anyway -- the main reason I want to get the money into a USD bank account is so that I can pay AWS costs in USD instead of having those converted to CAD (at a really horrible exchange rate) so that they can be billed to my CAD credit card.
- Andys 18y ago
  While you're a startup it doesn't matter much, but if you become a larger company, having the user's money that they haven't "spent" yet can be quite irritating for accountants, depending on which accounting method is being used. In essence you have may have to refund "unconsumed" funds and this affects how you do your books.
  - cperciva 18y ago
    Well, users' balances can be refunded whenever they want -- I'm not going to hold onto someone's money if they want it back. As for the accounting side of things: My understanding is (at least as far as Canadian accounting goes, which is what matters to me) that it's handled as a liability called "unearned revenue". So while it's certainly something to be aware of for accounting purposes, it's not a big problem.
    - chmike 18y ago
      From the user perspective, I find this a very attractive policy. I considered it for my own business model. Do you refund 100% of the initial fee or do you deduce some processing charges ? I'm thinking of this 7 day full refund law abused in the domain name business. People would get a name, test its "responsiveness" in hits, and ask for a refund of names below a threshold. What protection do you have against such type of abuse of your refunding policy ? Are the refunding cost "payed" by other clients ?
      - cperciva 18y ago
        Do you refund 100% of the initial fee or do you deduce some processing charges ? At the moment I refund 100% of any unspent amount. In light of payment processing costs, I might change this to deduct a small processing fee (say, $0.30 + 3%) in the future; but so far the number of people asking for refunds has been sufficiently small that it isn't really necessary.
      - wmf 18y ago
        I think domain tasting and tarsnap tasting are quite different concepts; I don't see any reason to open 10,000 tarsnap accounts and then ask for refunds. I'm also reminded of Joel's article about how, because he had a no-questions-asked full refund policy, he never had to actually give refunds. When a customer is asking for a refund seems like the worst time to nickel-and-dime them with fees.
davidw 18y ago
> Second, I find pricing tiers distasteful in general. I don't have the time to dig up a great explanation of them, but they're not inherently bad. If you can get more money from some people by giving them a bit more, that means more investment in your service and code, which is good for everyone, no?
- cperciva 18y ago
  I'm not sure if you understand what I mean by pricing tiers. I have no objection to people paying more in order to get more -- by pricing tiers I mean things like "plan A costs $5/month and lets you store up to 20GB; plan B costs $10/month and lets you store up to 40GB" because with a pricing model like that the 20,000,000,001st byte ends up costing $10/month, which is plainly absurd.
  - davidw 18y ago
    Oh, I was thinking more along the lines of price discrimination: http://en.wikipedia.org/wiki/Price_discrimination http://en.wikipedia.org/wiki/Price_discrimination Yeah, your example definitely wouldn't be good business.
    - cperciva 18y ago
      I also find price discrimination inherently distasteful -- but even if I didn't, I'm not sure how it would be possible for tarsnap without adding a lot of extra complication.
      - davidw 18y ago
        I'll take your word for it that price discrimination would be difficult for tarsnap, but I don't think there's anything particularly distasteful about it as long as you're not sneaky about it (i.e. Amazon showing different prices to different people, who then figure it out and get irritated).
        18y ago

I find pricing tiers distasteful in general -- A man after my own heart! How do you manage the float of your users' prepaid balances?

by blasdel 18y ago

I find pricing tiers distasteful in general -- A man after my own heart! How do you manage the float of your users' prepaid balances?

cperciva 18y ago

At the moment, I'm not really managing it. It's just sitting in paypal. Unfortunately being a Canadian makes it hard to get USD out of paypal without having paypal convert it to CAD at a really horrible exchange rate -- I'm going to get a US bank account soon (a USD bank account at a Canadian bank isn't good enough) to get around this problem, but I haven't made it that far yet. Given how horrible interest rates are right now it's not as if there's a huge amount of money to be earned on the float anyway -- the main reason I want to get the money into a USD bank account is so that I can pay AWS costs in USD instead of having those converted to CAD (at a really horrible exchange rate) so that they can be billed to my CAD credit card.

Andys 18y ago
While you're a startup it doesn't matter much, but if you become a larger company, having the user's money that they haven't "spent" yet can be quite irritating for accountants, depending on which accounting method is being used. In essence you have may have to refund "unconsumed" funds and this affects how you do your books.
- cperciva 18y ago
  Well, users' balances can be refunded whenever they want -- I'm not going to hold onto someone's money if they want it back. As for the accounting side of things: My understanding is (at least as far as Canadian accounting goes, which is what matters to me) that it's handled as a liability called "unearned revenue". So while it's certainly something to be aware of for accounting purposes, it's not a big problem.
  - chmike 18y ago
    From the user perspective, I find this a very attractive policy. I considered it for my own business model. Do you refund 100% of the initial fee or do you deduce some processing charges ? I'm thinking of this 7 day full refund law abused in the domain name business. People would get a name, test its "responsiveness" in hits, and ask for a refund of names below a threshold. What protection do you have against such type of abuse of your refunding policy ? Are the refunding cost "payed" by other clients ?
    - cperciva 18y ago
      Do you refund 100% of the initial fee or do you deduce some processing charges ? At the moment I refund 100% of any unspent amount. In light of payment processing costs, I might change this to deduct a small processing fee (say, $0.30 + 3%) in the future; but so far the number of people asking for refunds has been sufficiently small that it isn't really necessary.
    - wmf 18y ago
      I think domain tasting and tarsnap tasting are quite different concepts; I don't see any reason to open 10,000 tarsnap accounts and then ask for refunds. I'm also reminded of Joel's article about how, because he had a no-questions-asked full refund policy, he never had to actually give refunds. When a customer is asking for a refund seems like the worst time to nickel-and-dime them with fees.

davidw 18y ago

> Second, I find pricing tiers distasteful in general. I don't have the time to dig up a great explanation of them, but they're not inherently bad. If you can get more money from some people by giving them a bit more, that means more investment in your service and code, which is good for everyone, no?

cperciva 18y ago
I'm not sure if you understand what I mean by pricing tiers. I have no objection to people paying more in order to get more -- by pricing tiers I mean things like "plan A costs $5/month and lets you store up to 20GB; plan B costs $10/month and lets you store up to 40GB" because with a pricing model like that the 20,000,000,001st byte ends up costing $10/month, which is plainly absurd.
- davidw 18y ago
  Oh, I was thinking more along the lines of price discrimination: http://en.wikipedia.org/wiki/Price_discrimination http://en.wikipedia.org/wiki/Price_discrimination Yeah, your example definitely wouldn't be good business.
  - cperciva 18y ago
    I also find price discrimination inherently distasteful -- but even if I didn't, I'm not sure how it would be possible for tarsnap without adding a lot of extra complication.
    - davidw 18y ago
      I'll take your word for it that price discrimination would be difficult for tarsnap, but I don't think there's anything particularly distasteful about it as long as you're not sneaky about it (i.e. Amazon showing different prices to different people, who then figure it out and get irritated).
      - 18y ago