3 Things You Can Improve On This Pricing Page

Take a look at this pricing page from AppDynamics, an amazing application analytics platform. Can you find at least three things you can fix or improve on this pricing page?

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  1. Look at the “meter” for pricing – units. It does not say what a unit is.  Is it an application? Or its parts, server, API, …? Are all units identical? Do customers understand what unit is or is this defined from inside-out product perspective than customer perspective?
  2. There really are only two plans. The Free plan for single Application and the single Pro Plan (not two as pricing page says). The second Pro Plan is really volume discount or non-linear pricing. As I have written before plans should not hard code non-linear pricing. If you offer multiple plans or versions there should be clear differences based on select dimensions, if not these are not versions.
  3. Look at the statement on discounts below second Pro Plan. Stating discounts available for volume. It goes without saying that customers with many different applications, servers, databases to monitor will expect far better pricing as they commit to a single platform. Likely these have professional buying centers, deal negotiation and process that will likely result in bigger discounts. So why bother stating this?

Do you see the same 3 things that can be fixed? Here is million extra credits for those who pointed out the real mistake:

We see pricing meter based on units. Where is the value meter? How does the customer know what they are getting for $33,000 they would pay for monitoring 10 units? Where is the pointer to economic value add math?

 

 

One right price is better than three wrong prices: SurveyGizmo Simplifies Pricing

This post is my interview with CEO of SurveyGizmo, Christian Vanek on their pricing strategy.

A few weeks back I wrote about the continuing changes to SurveyGizmo pricing. It turned out they have been A/B testing their pricing for a while and I had slipped through the crack, finding both the offers. Last week I sat down (over phone) with SurveyGizmo CEO, Christian Vanek and their web marketing lead Kipp Chambers for a conversation on their new pricing.  Christian happily shared with me  the genesis and details of this simplified pricing.

The details are sure to add new dimension to the thinking of most startups that see pricing as simple freemium model or do it as tactical afterthought. Their analytical process, understanding of customer mix and their willingness to go against the conventional wisdom are exceptional traits that need to be commended.

Pricing is lot more than an eye-candy pricing page!

What was their pricing before the change?

Take a look at their previous pricing page. Their pricing options and the pricing page design look not much different from numerous other webapps out there. In fact there are wordpress templates available to show this classic three column design with the “suggested version” highlighted.

One glaring difference is, while most webapps include their free version as one of the three presented, SurveyGizmo showed their free version as a footnote.
Otherwise this is nothing more than a  instance of what Hal Varian described as Goldilocks pricing.

What is the change?

Gone are the multiple editions and the pricing page eye candy to nudge customers to a specific edition. There is just one edition with all the features including the advanced features that used to be available only in the higher priced versions. Most importantly, they used to limit the number of responses per month and now they eliminated that limit as well.

In the past they had a cheaper $19 plan even though it was not prominently featured in the pricing page. Now that is gone along with the $159 Enterprise Plan that was prominently featured and highlighted in the middle of the pricing page.

After this pruning, all is left is just one version – no name  for it (like the new iPad)- offered at $50 for the first user and a flat fee of $20 per additional user.
Another point to note is there is no non-linear pricing built into the price list. Whether it is 100 additional user of 1 additional user, the price is the same, $20 per additional user.

To discuss this change, the drivers behind it and how they arrived at it, I talked to SurveyGizmo’s Christian Vanek, their CEO, and Kipp Chambers. Here is what they had to say.

Why are you open to sharing this information? Isn’t pricing strategy meant to add to your competitive advantage?

“We have a company policy of no secrets”, said Vanek. He stayed true to this policy even when I later asked him about SurveyGizmo’s future product roadmap.  “Regarding SurveyGizmo’s pricing there is nothing really to be protective about. As soon as  the pricing page went up our competitors likely saw it. Or they will know when your article goes up. Even before this, people were copying the pricing plans and the pricing page down to the name of our plans and their feature set. Once they had comparable plans they were competing on price”. Vanek adds he could either spend all his energy protecting ideas or spend his energy on better execution and coming up with newer ideas. The choice is clear to him.

What are the drivers for this major pricing change?

We had our $19 plan, the $49 plan and the $159 plan. We found several key things from our analysis of our customers.

  1. Very people were opting for the $19 plan. Some of those who chose it for price realized they did not have all the features they needed and were calling us about that. In most cases we ended up enabling the additional features for them. We are not going to tell our customer, ‘you need to pay additional just for that feature’. Some upgraded to higher priced plan just for a brief period to use the advanced features and downgraded right away when their job was done.
  2. Those who picked the $159 plan were using only 10% of all possible features they get with it. We were taking lot more money from our customers who were not taking full advantage of what they were paying for.
  3. What if a customer wants only one of the feature offered in higher priced version and that is the only one they want? Why should they pay more just for that? We tried for a time some kind of a la carte pricing but it was not the best of experience for our customers.
  4. Surprisingly, customer satisfaction was low among those who chose the lowest priced plan and high among those who chose the higher priced plans. You could argue this is because their purchasing decision itself may have something to do with satisfaction rating.

Considering all these we thought, there is really only plan that served customer needs and presenting three options is likely aggravating customer choice by adding to their cognitive costs. So we decided to test this hypothesis.

This is so different from what every other webapp startup is doing.

Presenting  three plans, any three plans, at different price points and hoping customer will pick the one they want is shotgun approach to customer segmentation. It came apparent to us to retire the shotgun and get sniper”. (Vanek calls this his Call of Duty metaphor, “almost any business lesson can be learned from Call of Duty”, and adds The Lord of The Rings after my prompting*. )

“I think we are seeing now the end of the freemium model, signing up for free and then trying to up-sell. Our value is in providing both a great product and great service to go with it to customers who need and value our product”.

So you are giving up those customers who are willing to pay $20?

These customers were never ours to begin with. Customers who want free survey or want to pay $10 or $20 a month have always been SurveyMonkey’s customers. We are okay with that. If a customer is happy with a competitor we are okay with that. These were the customers who anyway ended up getting the features from higher priced plan because we did not want to say to them, that is extra.

What about profits lost by eliminating $159 plan?

“This was our fear as well and we discussed this internally. It would seem silly to give up on the higher priced plan. In essence you have to bring in 3 new customers at $50 level for every $159 customer we are giving up by eliminating this plan. We asked internally, can we do this? Happy to say we are doing very well after we moved to single price plan.”

“When we discuss our features with customers showing them how we compare feature for feature with competitors and then show them the price, they ask, ‘okay, why such a low price? What is the catch?’. There is no catch. We don’t have to overcharge for the product.”

About the change process?

“We did lots of A/B testing. We found that customer decision was easier with just one pricing option. In fact when we presented the simplified plan in split testing  that charged $50 for first user and  $20 for each additional user we found customers were signing up more than one user than they did with three pricing options.  We are serving marketing research field, we should be doing our homework before such change. Only after a lengthy testing process and data analysis we decided to go with this change.”

It is acceptable for a pricing geek like myself to say cognitive cost, how is that you are thinking about it?

For this Vanek seems to believe this is common sense. A customer who has to weigh multiple plans, the features it has and the price points suffers significant cognitive cost. “We work with lots of researchers who work on cognitive research and we understand the cost to customer from choice.”

Final words?

By eliminating the three plans and going to a single plan we have narrowed the field. We are targeting only those customers who want and value the advanced features.


*Talking of The Lord of The Rings, Vanek says his super power is he has the voice of Saruman.

Pricing Multiple Editions – SurveyGizmo Takes a New Approach

My favorite survey platform is SurveyGizmo. In the past I have written about its pricing and how it effectively used multiple versions and visual nudges in its pricing page. SurveyGizmo has been experimenting with their editions and pricing page since then. From presenting five options, to four options and now there are only three options when you visit their pricing page.

Before I point out the most critical change in their pricing, let us look at some of the secondary changes

  1. What is missing in the three options? What is one version you see in any pricing page you visit but is missing here? The free version. It is not prominently featured in SurveGizmo page. It is still there but as a footnote. It is an indication that their customer mix has changed as they move into next phase of the product adoption.
    Their current customer mix is more likely made of Enterprise customers with willingness to pay for a survey platform and a budget to match it. The focus has likely shifted from attracting freeloaders who may never convert to those who think differently about the product and have different buying process.
  2. What do you see about the prices? The highest priced option is listed first and the middle option is prominently featured (in the middle too). This points more to the size of organizations or groups within organizations they are targeting. While you may notice the two options as different you will later see this difference essentially going away.
  3. What do you think about unlimited number of responses in all three? Most webapps differentiate based on number of responses or equivalent – like number of Giga Bytes of storage in case of Dropbox or number of events per months in case of Kissmetrics). SurveyGizmo has done away with number of surveys or number responses as pricing meter. It is a very good approach as most likely customers are not seeing as many responses and it does not make sense as a meter to attach pricing to.

Now all these points are for naught when you try to upgrade your free account to a paid account. Despite what the pricing page says they have done away with any feature differences between the different editions. In essence there is just one version of the product with all the features.

Well the free edition comes with limitations, otherwise you would be happy with free.  Beyond that are no difference in the power of the tool, types of questions, reports, number of emails you can send, etc.

If they have done away with differences what is the pricing meter then? They rely on number of users. Want access to all these features? You can get it for $50 and after that it is $20 each additional user on the account.

Why have they done away with multiple editions? If one price is good, aren’t two better?

When you have  multiple versions (editions) these should differ in at least two dimensions. The mandatory dimension is price and you choose the second based on what the customer values and willing to pay the price difference.

For example, take MacBook Air. Its multiple versions differ in three choice dimensions. Price, screen size and capacity. Clearly the customers see value difference between 11″ and 13″ screens and are willing to pay for it.

But if the customers do not see value difference between versions, they serve no purpose. In fact they add to cognitive cost to customers in making their purchasing decision. When SurveyGizmo had Personal, Professional and Enterprise editions they tried to limit the advanced features like custom scripts to the certain versions. It is likely that only a small percentage cared about these and for the rest the most essential features of the survey platform were more than enough.

Hence their decision to get rid of multiple versions/plans/editions and charge only based on number of users.

How do you decide on offering multiple versions of your product?

Related Articles:

  1. Why there is only one version of Apple TV but three versions of Roku?
  2. Why are raspberry and strawberry yogurts priced the same?
  3. Should your Versioning differ in quantity or benefits?

Note: I have used words Plans,Editions and Versions interchangeably in this article.

Price as the first choice attribute or last – Pricing Page Recommendation

Take a quick look at pricing pages of most web services and products. Most offer 3 or 4 versions that differ in features, usage (number of users, responses etc) and of course price. In every pricing page I visited (sampling, not comprehensive) the first attribute is always price. Some of the pricing pages use font and other highlighting to make pricing prominent.

What if price isn’t the first attribute you present to your customers?

What if your pricing page pitches the benefits of each version before it talks about price?

What if price is the last attribute for each version listed in your pricing page?

Last week I wrote about the difference between the Price leader and Price-Less leader*. The core idea was to start the conversation with your customers about all other attributes but price. When price is not prominent, you get to talk to customers about factors that are relevant to them.

A version of the concept of Price-Less leader was published in Journal of Marketing Research Dec 2009. The  article used the term “Benefits leader” instead of  “Price-Less leader” and they made a very relevant finding,

“When customers choose benefits leader (purely based on benefits and without price information) they tend to stick with that choice even when the price information is revealed. Even when faced with a higher price, they tend to stick with their choice based on benefits”

Applying these findings to pricing page, I hypothesize, when price is listed as the last attribute:

  1. More customers will pick your higher priced versions
  2. More customers will signup for your basic version (higher conversion)

This hypothesis is based on previous research on pricing but from a different context. So it is worth testing for your pricing page before you roll out. This is definitely worth adding to the A/B testing that you probably are already doing for the rest of the pages. I recommend this A/B testing despite my earlier warnings about A/B testing.

Note that I am not recommending that you do not show the price at all or show it only after customers sign up – I am recommending that you move the price to be last attribute you list under each version.

I am every interested in hearing your results. Send me a note on your results, even if you did not find statistically significant difference.

For the analytically inclined: If you do not want to do the traditional A/B testing you can use Bayesian. But I do not recommend a full blown Bayesian verification in this case.