This is how a startup should handle pricing changes, so long as the old pricing scheme was viable.
This is the opposite of what Recurly did a month or two ago when they dramatically raised prices and the same revolt occurred. Their response was a big "F You", and their latest e-mails finally announcing even more pricing changes show they lost enough users in the process that it threatened their viability.
I have to defend the Recurly folks here. They made a bet on flat-rate pricing over per-use pricing. Turns out that a flat-rate plan hurts you on the low end (people who won't use you at all, and where the uproar was) and on the high end (you're leaving money on the table from your potentially most profitable customers).
Flat-rate pricing works for the vast, vast majority of internet companies since the day AOL won over CompuServe because they went to the $20 per month unlimited plan back in 1996.
The lesson I've learned from Recurly is that developers find per-use to be less risky than flat fees, which is the opposite of normals.
It may just as well have been that they misjudged the demographic of their prospective customer base to be mostly the larger accounts, but instead they found themselves with prospects a lot smaller than the ones they hoped to target.
Wait so are you saying that flat rate is usually better than per-use from a biz perspective or vice-versa?
EDIT: I guess it depends. Flat rate seems like an attempt to get more cash upfront to cover costs initially. The problem is you are leaving money on the table with large customers and you're potentially leaving a lot of money on the table at that. Flat rate makes sense up to a point but is anything really truly unlimited?
The reason for the uproar wasn't so much that flat-rate pricing is a problem, but that the company switched the API functions that were previously global across any pricing plan to the $199/month plan. So even if you could justify $50/month or $100/month for their service, you didn't have the option. You already implemented the API and can only keep using that implementation with the $200/month service.
I don't even pay my payment gateway $200/month, and they do automated recurring billing and credit card data storage too.
At the same time, the competing subscriptions-as-a-service startups already offered flat rate pricing. The per-transaction pricing Recurly offered was their main differentiator to some of these alternatives. That's the reason so many bootstrappers chose them, so switching to a $200/month fixed cost with zero notice (time to switch) and no grandfathering was a hit right to their primary customer base.
Of course I can't say for sure that's who most of their users are, but the fact that they've now backpedaled again, removed their pricing page entirely and started apologizing to users seems to indicate it wasn't a good move for them.
Sorry, I deleted my comment because no one had responded and I actually agree with you after I looked into it.
These services are asking for too much for what they do but I think everyone is conditioned to giving away so much to services that touch their money, that they think that they can get a piece of the pie.
Interesting to see the "too little too late" comments on their comments. Proof that 1) no matter how hard you try to apologize and make things right, you can't please everybody and 2) unfortunately, these people are the most vocal.
Well, they didn't try very hard to make things right. Users revolted, so they caved. That's all there is to it. The "unfortunately these people are most vocal" misses the mark completely -- had they been NOT vocal they would've faced enormous bills or they would have to spend 50 hours trying to migrate to a new system. That's if the data can be exported and imported freely, which is rarely the case.
So the customers spent hours comparing the offers of the competition, all the time being frustrated because this jumped on them from nowhere. And then, 2 days later, they hear "Whoops, my bad!". That just doesn't fix the damage, now does it?
If a thousand customers each spend 3 hours worrying about what to do, and these numbers are conservative, then you've created 3000 hours of unnecessary frustration. So the damage will exceed $300.000. Just with one ill considered move!
Before, back when they complained in the first place - that was completely awesome. But to gripe about having wasted time evaluating other solutions? This is something everybody should do. No matter how happy you are using any product, be it software, hardware, utilities, daily transportation, you consider evaluating costs/benefits of a "Plan B".
Well, most users would trust the service/company less after such an incidence. Also, not everybody does a evaluation on every service every day.
I guess most do a analysis when signing up and would either forget about it until they hear of something cheaper from somebody or do a reevaluation after a fixed period of time like say every 3-6 months.
This sudden price change made everybody stop what they were doing and look for an alternative now. And people spent time doing research, brainstorming alternate ideas and some made the switch already and now they say Oops!. This is why they are griping.
Reasonably well-handled. I didn't go through the effort of switching our business away from this because I thought something might happen.
I do have the sneaking suspicion that if we grow a bit the business case for either switching or rolling an in-house solution ourselves will become much more compelling though, especially if I'm forced to upgrade from my current plan to a new one.
When we decided to make a change to the Zendesk pricing structure for our existing customers, we tried to be as thoughtful, transparent, and straightforward as possible.
Transparent? Maybe you should've given your customers a warning first..?
While the letter is certainly worded very nicely (and carefully), it reeks more of damage control than sincerity. The picture with the puppy dog face puts it way over the top.
Because they are apologizing for the wrong thing. "We have also been reaching out to our customers to truly understand the heart of why you are upset" suggests that it never even occurred to them that people would be mad about this. I mean, really? They knew very well what they were up to; businesses don't do this sort of thing on a whim. I'd bet you anything this guy has a spreadsheet showing revenue shooting through the roof as a result of the new pricing.
This is an apology for carelessness, but the real issue is greed. That is why it strikes me as insincere.
By apology time it is already to late, they would have lost the trust of many customers. I'm assuming they didn't just come up with these prices overnight.
I think the apology makes them look worse, like they never justified the prices in the first place. Keeping them may have lost customers but would have shown they were carefully chosen and justified prices. Now it just feels like they were trying to bleed there customers for as much as they could get.
How do you spend two and a half years "putting your customers first" and not realise that a 300% price increase would annoy them?
for those customers who took action this week to convert to an extended billing cycle, please contact us if you would like to revert back to the billing cycle that you held as of Monday isn't putting customers first, it's putting employee convenience first. Find the customers who converted to an extended billing cycle, contact them and offer to revert them even if it's inconvenient. That's putting them first. Which they claim to be doing but aren't.
Well for one thing pissing off your customers is not "letting them down."
It's pissing them off. Side stepping the fact in the "apology" is like a little kid apologizing for something because he knows it is a required action. Not because he's sorry.
This company is sorry that the customers got angry and forced the pricing change. They are not sorry for "letting them down"
Interesting - I never thought of it before, but does it even make any sense to apologize for something that you did intentionally? It is what we force children to do, but mostly because it is a part of a sound upbringing.
If you spill coffee on someone, an apology makes perfect sense. You caused someone harm and you acknowledge that, but it wasn't intentional.
However, if you steal from someone, saying that you are sorry is not as simple; why did you do it in the first place, then?
We use apologies as a cheap substitute for empathy. A wronged party would like to know that you see their hurt and if you could do it all over again you wouldn't because of that hurt.
While I do force my kids to apologize on occasion, more as a way of teaching that when you hurt somebody (either intentionally or not), you should try to make it better and an apology is part of that, I know what they are thinking:
For the lack of a better answer, it sets off my spidey sense. Everything is too nicely worded- there is nothing spontaneous or "real" about it. Imagine if you were hearing those words spoken in person. I don't think they'd ring true.
The photo really is the kicker. Nobody has a photo like that just sitting around on their computer. Obviously a lot of effort, from a number of people, went into producing and editing this blog post. Do you believe the same, obviously skilled, team that produced this finely crafted apology could have unintentionally introduced a pricing structure that jacked up the bill for many of their customers?
I'm honestly surprised that so many people fell for it.
>Instead of our intended result, many of you read my Tuesday e-mail and thought, “You want to send me a big bill for something that I didn’t order and haven’t agreed to? WTF?”
The above line makes no sense. The apology never actually mentions what the "intended result" was. The intended change was exactly what the customer thought it was. Zendesk intended the result to be the customers just shut up and take it. Zendesk just couldn't cope with the customer reaction.
It's not the "what", but the "how". It doesn't matter anyhow- obviously the apology worked. All the pitchforks have been traded in for hugs and kisses already.
> How do you get more sincere than, "We failed. We let you down. And we apologize."?
I've noticed with hacker news there is always a few people (different people, not the same ones) that are not satisfied with the apology of the day.
I'm not sure why this is. My initial theory is that the apology didn't address a highly specific issue in the exact manner that person wanted. Apologies like this are (necessarily) non-specific because they address everyone.
Then again, if I want to be cynical, it's possible that that person (not specific to jimboyoungblood) just won't except any apology as adequate.
For me, it's just gotten to the point that I'm tired of the exercise itself.
The current idea seems to be "Do whatever the hell you want", and if enough people get mad "apologize profusely and come out looking like you really care about your customers." Facebook has practically turned this into an art.
If you really cared about your customers, you probably wouldn't have done whatever you're apologizing about in the first place. At this point, having seen this play out over and over again, the whole thing does seem to lack sincerity.
I'm tired of people thinking "it's better to ask forgiveness than permission" as a properly moral way to conduct business.
> The current idea seems to be "Do whatever the hell you want", and if enough people get mad "apologize profusely and come out looking like you really care about your customers." Facebook has practically turned this into an art.
For the record, I'm not and have never been a customer of ZenDesk, nor any of their competitors- so there's nothing I could have "wanted" out of their apology.
So perhaps I am one of those people that wouldn't be okay with any apology.
That's not a lot of warning for folks who are using a product like ZenDesk. The whole point is that a tool like this is embedded into your companies work flows. To leave ZenDesk means that you have to find a new product. Figure out how to move all of your data into that new product. Figure out how to handle tickets that are still in process on July 1. Train your staff. Change any customer facing UI or other automated bits that utilize ZenDesk.
The product is the type of product that inherently has a lot of lock-in. Giving me a month and a half to change all of that is more or less equivalent to making the changes effective tomorrow.
I get a sort of "spin doctor: feel from this move, with the big glaring eyes looking at me as I make my way to the message on the zendesk blog post... Maybe not so well handled since one could think Zendesk is trying to turn a difficult situation into a PR blitz: why are you posting here, rather than just emailing your customers?
Joel's school of apology: apologize unreservedly, it buys a lot of goodwill.
My theory is that when there is an unfortunate outcome the righteous sub-person in us thinks that blame must be assigned before progress can be made. This is might be true in some cases and not in other cases, but overcoming the mental habit might be harder than playing into it.
And yet, when Joel made the decision to shaft the Stack Exchange 1.0 testers, they didn't get anything close to an apology. What they got instead was a pitch about why they should be happy to give up their business model.
I also don't recall ever getting an apology for his capping CityDesk without any recourse, open sourcing of the software, whatever.
I suppose in both cases the distinction is that Joel decided not to apologize. The original point was about how he does that when he actually does it. And all or nothing is a legit thing to do here.
"It’s always easier to apologize for something you’ve already done than to get approval for it in advance."
- Grace Murray Hopper, quoted in Computerworld, September 10, 1984.
For what it's worth, Zendesk is definitely worth it for the five customer support people we have. The amount of flexibility they give you and the api hooks are fantastic.
The damage is done though, and zendesks competitors are the ones that gained the most from this, even those that didn't switch are now more than aware of who they are and what their offering is.
The last thing you want to do when you have a good thing going is to get your customers to invest a bunch of time in to researching your competition.
Wow, yeah, that's a huge mistake. We always grandfather our customers anytime we change our prices; however, in our ToS we do reserve the right to change our prices for existing customers as long as we notify them first.
For other web startups out there who want to change prices, I highly recommend that you grandfather existing customers so you don't piss them off and because you don't have to communicate anything about pricing changes to them.
"We always grandfather our customers anytime we change our prices; however, in our ToS we do reserve the right to change our prices for existing customers as long as we notify them first."
What? You grandfather your customers, but reserve the right to increase your prices for them as long as you let them know? That doesn't make sense.
I think he means they have reserved the right to change prices for existing customers, but choose not to do so as a general rule. If they ever are in a situation where they need to change pricing for existing customers, the TOS would allow them to do so.
Glad to see they changed course. I was a developer at ZD for a few months when they were in Boston and I can tell you that they're a great group of people. Listening to their customers and changing course is evidence of that. Most other companies would just barrel ahead despite the outcries.
This is the opposite of what Recurly did a month or two ago when they dramatically raised prices and the same revolt occurred. Their response was a big "F You", and their latest e-mails finally announcing even more pricing changes show they lost enough users in the process that it threatened their viability.