Ask HN: Should I drastically increase my pricing (grandfathering included)?
My SaaS app tends to attract a lot of customers who upgrade to paid plans but are actually ultimately not really interested in running a business long-term. Our app is actually an ecommerce platform. Our churn is pretty high, but customers are not switching to competitors, just dropping out. I know because their domain names tied to their online stores remain abandoned.
Should I increase my pricing by at least 200-400% to see if this attracts only the most serious customers, and so that I can better focus my effort on serving them instead of spreading myself too thin? Currently, we are definitely underpriced in the market (an indirect consequence of me being the sole employee and living in a country with much lower expenses), and there are also signs that potential customers have problems taking us seriously because of that.
Once we hike our price (to $200/mo), we will be comparable to other competitors. I just felt that undercharging hasn't done us any good for so many months.
What do you think?
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Yes, you probably should increase prices, but just increasing prices isn't going to get you instantaneous credibility to make sales with more qualified clients. It is difficult to point to things you could do to improve perceived credibility without seeing your site, but examples would include a) making sure the English is flawless (only mentioned because of the country with lower expenses -- your writing here is very good), b) displaying social proof such as logos of credible existing customers and/or media mentions and/or vanity stats, and c) generally having a design and experience which screams Credible.
You'll note that your situation is seen over and over and over again by folks who build business tools, by the way. At low prices you get pathological customers. This is exactly what Spreedly and Chargify reported on HN previously, and it comports with the experience of many other companies which have not said so publicly.
If your intial costs are very high, and that is causing the issue, just wrap people into a contract - maybe 6 months up front (with a 30 day trial) and then you can go month-to-month after that.
It's becoming bad form to charge 'registration fees,' because everyone thinks that with IT you can do all of the paperwork for free. Especially in business-to-business when you're dealing with tightwads quite often.
Figure out what your minimum contract duration to break even (t) would need to be at your current prices. Multiply t * 1.25 and round to the nearest 4 or 6 month interval. That's your new initial minimum contract length.
I think you need to consider how this will impact your bottom line. Is your cheapness (excuse the pun) your major selling factor i.t.o competitiveness?
Is your 'market share', only the cheap clients? Generally businesses carve out a niche inside their market.
If that above statement is true, you'd probably lose almost all your business.
If you want more money (without losing your client base), add functionality and give them the option to use it (at a price).
I'd say if you already have all or most of the el'cheapos, then cater for them. Make it easier to setup shop and for you to manage them.
why not add a 'platinum tier' with an easy to give away service that you know most customers already don't use, and charge extra for it?
or add incremental charges to existing plans to push customers towards the new platinum tier?
and, btw, if you don;t know the lifetime value of your customers by source and date, you should do more tracking
A relevant HN'ers blog post and the HN discussion:
http://jacquesmattheij.com/Double+your+price+%28and+no%2C+I%27m+not+kidding%29
http://news.ycombinator.com/item?id=1639712