Comment by patio11 | Hacker News Reader

Comment by patio11 | Hacker News Reader

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And when a company changes their pricing scheme, what happens to customers who were paying a former price/scheme?

Best practice -- and I'm shamelessly stealing this lesson from Joel Spolsky -- is to grandfather SaaS accounts in indefinitely if you raise prices. This a) lets you get a nice bump in sales if you announce the incoming price increase (no reason you can't do the A/B test quietly but announce the conclusion that prices are going up "loudly"), b) rewards people for taking the risk on you "early", and c) incentivizes them to keep their account active because if it lapses then they lose their super-sweet not-available-anywhere deal.

If I were to redo a pricing scheme in such a way that some customers would benefit from switching, I'd switch them automatically if the new pricing dominated their existing plan ("More quota for less price!") and tell them to make the call if it weren't obvious ("More quota for less price but this new plan doesn't have a particular feature that you may want to have in the future.")

Fair, but what if simple economics/margins do not allow you to offer the old price/package. Ex, say you license Twitter data at $0.10/1k, and Twitter decides one day that they want $0.15?

What do you do when your old pricing scheme is no longer profitable?

You can head this issue off by charging more, because your margins for a SaaS should probably be in the 80~95% region, and if you're finding yourself thinking "I'll just add a 20% markup on top of Twitter's API rates then compete on price" or "I'll make a payment processing solution which charges 0.25% on top of credit card costs" then you can reasonably anticipate that this will eventually happen to you. So, for anyone thinking they might ever be worried about this, charge more. Cost-plus pricing has no place in software.

There's some costs which are difficult to anticipate prior to launch. One is ongoing customer support, and it is entirely possible to price below profitability if you get a lot of pathological customers in on the ground floor. If you've just got a few and the business is fundamentally sound, consider it a marketing expense and let them get weeded out by attrition. If you're like Spreedly or Chargify and discover that a lot of the early adopters in your space are toxic, then it's time to have the "Look, we're not in the business of subsidizing you" discussion. I'd have the messaging for that discussion stress that you'd like to continue offer the old terms but circumstances are tying your hands, and try to be generous on e.g. giving 6 months or so of lock-in to the old prices or assistance in moving them to a provider which is more suited to their needs. But honestly, at the end of the day, if the choices are a) not making payroll for my employees and b) ticking off a bunch of pathological freeloaders, I know what I'd pick every single time.

This post compares that strategy with giving customers discounts (and the former wins): http://blog.asmartbear.com/discount-gambit.html

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