24: Raising Prices
Darren is looking to raise his pricing for the first time ever. He and Aaron discuss the many aspects of raising your SaaS product's price, from the amount of the raise to communication best practices. No doubt, raising prices has an emotional aspect to it.
FULL SHOW NOTES
[INTRO music]
00:12 Aaron Weiche: Episode 24: Raising prices.
00:16 INTRO: Welcome to the SaaS Venture podcast. Sharing the adventure of leading and growing a bootstrapped SaaS company. Here are the experiences, challenges, wins, and losses shared in each episode, from Aaron Weiche of GatherUp and Darren Shaw of Whitespark. Let's go.
00:45 AW: Welcome to the SaaS venture podcast, I'm Aaron.
00:48 Darren Shaw: I'm Darren.
00:50 AW: And the best way to sum me up right now is I am malaised in Minnesota, if that's even a correct way to say that.
01:00 DS: I have no idea, I have to look it up.
[laughter]
01:03 AW: I don't know if I should be inventing words, but as we were just talking before hitting record, Darren and one thing, we haven't recorded in almost two months, which is just silly of us.
01:18 DS: It's been a while.
01:20 AW: Yeah. Too long, we need to do better. If we wanna keep listeners going up into the right, people have probably forgotten about us, so we'll try to win your hearts and minds back, but yeah, we were just discussing... I've just been in a little bit of a funk for various reasons, some of the obvious things, COVID and restricted or compressed life of not as many freedoms or...
01:47 DS: For sure.
01:50 AW: Especially, I don't know, I consider myself to be a creative person, and so I feed off of other environments and travel and observation and things like that, and my world just so much consists of home, work, home, work, and work is just pretty much zoom, home, zoom, home. So...
02:09 DS: Yeah. We would just call it Groundhog Day around here, it's like every day, it's like that movie Groundhog Day, where it just feels like you're going through the motions day after day, and there's no variety in life right now.
02:21 AW: And... I don't know, I was trying to talk about it with Marci, my wife, and there's just this little piece of, when you don't... I don't know, and I just might be messed up in how I see this, but when you don't have certain things to look forward to like time with friends or an outing or a trip, or being at a sporting event, things like that. Those are things that definitely provide a little bit of spark and optimism and all those different things and yeah, it's just so severely lacking, and with the season change in Minnesota, we've flipped back to life being a lot more indoors, at least until we get some snow on the ground and then hopefully I can get... I'm gonna... I'll probably do more snowboarding this year than the last five years combined, so...
03:09 DS: Yeah. What are you gonna do about the hill, like when you go to the hill, are you gonna bring your own lunch? Are you gonna go into the lodge? Are you gonna eat lunch in the lodge? Are you gonna use the washrooms in the lodge? Just... I'm all super COVID sensitive, so I'm just wondering how you handle that.
03:22 AW: Yeah. I haven't thought that far yet. The hill that's closest to me literally only takes 25 minutes to get there, and it's super small, it's like eight runs, so going there for two to three hours of runs, and then you can call it a day, but there's definitely... There's a couple of others around here that take an hour, a couple of hours to get to that are worth it, and yeah, then I'll probably... I probably just bring something along and bust it back out to the car and refuel, so...
03:56 DS: Yeah. Yeah, sounds good. [04:00] ____.
04:01 AW: Yeah, that's easily one of the consistent things I just not have been... I have at any point had a meal inside of a restaurant, cafe, anything like that since all this started, I did use... We have some very nice and well-spaced outside patios and things like that, but we've done a few times within the local community, especially to support some of the local business owners in addition to doing take out, but that's been above it.
04:28 DS: Yeah. We've been like all meals all the time, making them at home. No take out either. So it's been... It's a lot of work. This is a, that Groundhog Day thing where we're just going through the motions all day along, it'd be nice to just get a break from dinner where just shows up at the door, right, but we're... We're just extra careful.
04:50 AW: Yeah. No. Totally get it. So anyway, I feel like I'm working my way out of it, I'd probably hit the bottom of it a couple of weeks ago, and just been trying to pay more attention to exercise and alcohol intake and screen time, and just all those different things, it's not... There's not one thing to cure when you do feel that way, you gotta take all the pieces and say, "How do I bump all of these things up a level to contribute to finding a better place to be."
05:25 DS: I think it's just a natural ebb and flow. You're gonna go through really solid awesome months and you're gonna have some time where you feeling a little lower, like, gosh, it's just a constant up and down for me over the months.
05:39 AW: What have you been doing to fight that off?
05:42 DS: So exercise has been a thing for sure, I'm trying to get more sleep lately, I've been really diligent about my exercise routine, actually COVID's been great for exercise because it's just part of my routine and I have it all kinda locked in and my schedule has gotten really good. I've got a new morning routine, I'm feeling productive and focused and it's going pretty well actually. I'm going through a good period right now.
06:09 AW: Awesome. Good for you.
06:11 DS: I don't feel like I really need too much. I think I might be a little bit introverted in some ways, where I'm like, if I didn't see my friends in person for two years I'd be like, "Oh. That's okay." And then I'll see them in two years, and be like, "Hey. Great to see you." It doesn't wear me down. Really, I've always been... As a teenager, I just spent every weekend locked in my bedroom, playing video games, so I'm used to this. I come from a long history of COVID times.
06:40 AW: See, I'm definitely more social, I would say I was probably in the social extreme in my youth where I was always with friends, always playing sports, always doing things. And then as time has gone on and especially just being more dedicated or turning into the workaholic or whatever, else, that isolation has crept in much more, but I still like if I had to put a time frame on it, every once a month or once every couple of months, I would like to have a day or an evening of adult socialization, something to do conversations to be had to... I don't wanna go for years without seeing some of my friends and things like that, so I need a little tighter cycle.
07:30 DS: Yeah. And I used to get that all the time. Every week there would be multiple things happening because my wife does such a good job of sort of organizing our social calendar, but now it doesn't exist anymore. I guess one thing I'm just noticing is that I guess it doesn't bother me too much, which is, I guess maybe a little surprising.
07:47 AW: Yeah. Well, good for you. You got it under control. I'm working on it and I'll figure my way out the other side, I can see if you raise the light, I'll get there.
08:00 DS: I feel like I'm unusual. I think most people certainly want more social engagement, I want it too, but I'm able to progress without it. What's going on with the business? What's happening with your SaaS company?
08:16 AW: Yeah. A lot of... End of the year, I always kinda look at like this, you have to face the reality of what you actually can accomplish for the remaining couple of months of the year, and it's usually not what you had planned, so that's the facing the reality part of like, Alright, we still have these five things, and we actually can do two of them now, so that really kind of shapes up how the year is gonna end, and then you start Q1 planning with what's there, so that's been... I'm used to how that works. So that feels pretty normal. We had an opportunity pop-up, we're using an integration partner? So we're using a solution called Tray.io, and the easiest way to explain this is they help make integrations direct integrations possible with their software, and more of like being able to create like a Zapier-type connection inside of your product, so we'll be able to have an integrations tab, the first one that we're working on right now for us is Salesforce...
09:26 DS: Nice.
09:27 AW: So within a handful of clicks, you'll be able to sink to your Salesforce account and start going through those, and... So Salesforce is our first one, and then we will have four others in the subsequent sprints, I think we're just gonna try to tackle one integration every sprint, so probably like QuickBooks Online, Mailchimp, just some of the ones that when we pull customers or what people have asked about for integration, so excited about that, but that kind of popped up into the radar within the last few months and rapidly shot to the top, so that's also been part of throwing off some of the product plan and roadmap, so...
10:08 DS: That's interesting. So basically right now, integrations are kind of... The onus is on a customer to create this Zap, they've gotta go and create that Zap and on their own, whereas now you can just press a button in the software. That would be the difference?
10:22 AW: Really what exists now is we will do an integration for a customer and use that product's API, or a customer could use our API and do the integration if they have a home-built CRM or a different piece of software that they wanna integrate with, and then obviously, Zapier is like a third-party marketplace where you build... We've built the GatherUp Zapier app years ago, and there's 2000 apps in the Zapier marketplace, so you can use Zapier and pay them, and then you get to build as many connections as you want between different tools and things like that, and then... Yeah.
This basically, I use Zapier the same kind of way because you don't have to do any coding with it, it's a series of selections to set up the integration, and what's the trigger and what's the action and things like that, Tray is the one that handles those... So they basically have done the work from the API of all those other solutions into their interface, and then they take our API and do that into the interface, and then we're able to... iframe in that integration builder that here's your API credentials, your key, what account, what are you looking to do and build up that process without... You don't have to touch any code, it's just kind of click away and builds your integration how you want it to work.
11:51 DS: Nice I'm gonna look into that. That sounds pretty handy.
11:53 AW: Yeah, absolutely, it's a little spendy it's not cheap, but when you just start looking, right, when you have thousands of customers and you just kinda need a few hundred that can utilize it, and integrations make your product so sticky and the efficiency that's there, and just getting things to automatically talk to each other without human interaction is a big benefit.
12:15 DS: Yeah. Definitely huge value. Makes sense.
12:17 AW: What about you?
12:20 DS: We've got a lot of things coming up that I'm very excited about, and I'm looking forward to a number of launches, one, which is like getting the very final tweaks on it today is a whole new design for our Local Rank Tracking products, so we rebuilt and redesigned our Local Citation Finder back in the spring, and then it really made our Local Rank Tracker look like garbage, so it's like, "Oh. I got this nice new design on the Local Citation Finder, I wish we had a nice look in Local Rank Tracker, which the Local Rank Tracker actually looked pretty decent before, but we're now trying to have a common design, feel, UI elements, everything should be the same across all products, and so we're implementing that design of the Rank Tracker, which I'm thrilled about. It looks fantastic. Once you get into doing this kind of work, you end up having a bunch of features too, so it's got some improvements and so... Yeah. Can't wait to launch that, that's basically done. It needs... It just needs marketing, which we're working on now is...
13:22 DS: What's our launch plan? Right, so we're putting that together. Our brand new accounts system, which has been in development for ages, is pretty much done as well, so we'll be launching that, it's just a new ordering system, your authentication, logging in, your billing, receipts, all that stuff will be in accounts, and so our first version was built back in 2011, and its ancient and frankensteiny, it's just been bolted on, everything has been put together, and it's just unmanageable now. So this new one has been built in a modern tech stack and can't wait to launch that, and then we also have on the horizon our local listing scan tool, so just a tool, you can type in your business info, it'll show you all your listings and audit them and show you inconsistencies?
We're integrating that into our Local Citation Finder, which kind of brings us to the topic of this podcast. Because when we launch this huge new feature, I plan to finally raise prices, we've had the same prices for the Local Citation Finder for the past 10 years, we've never increased our pricing plans, and so this... So one, it's overdue because we've improved the tool significantly, we didn't even increase prices when we completely redesigned it, and to this feature that we're launching brings significant additional value, so I'm really thinking about raising prices, how to structure the prices whether I grandfather in and so I'd love to chat about all that on the podcast today...
14:50 AW: Yeah. Wow. There are some interesting components to that, especially with probably the amount of time that you've had a product out there and have improved it and made it better and added more things, and yet the prices remained untouched in the entire period of time.
15:09 DS: Way under-priced right now.
15:11 AW: So I think... Let's start with one place I would love to hear you comment on, and I know it's an area that I've gone through like prior to COVID GatherUp was planning our second price raise in our six-year history, and more of one than we had done our first time, and the first thing I thought that I just watched both in myself and then watched across our team as we discussed it and everything else is just the emotional grappling with this uncomfortable of, "I'm gonna ask people for more money and they're going to have a reaction to that," and what has that been like for you especially?
15:53 DS: Yeah. I guess I don't feel too emotional...
16:00 AW: Is that is what has kept you from doing it for the last 10 years? Why haven't you raised prices? Maybe we should start there, and that might be that answer...
16:07 DS: I actually think that our product for the last 10 years has been relatively priced correctly because we did not enhance it too much over those 10 years, it just kinda sat there, it still had its old design, we could have looked at raising prices when we launched the new version in the spring. That would have been a time. But prior to that, honestly, I wouldn't have felt just justified raising prices, 'cause while prices didn't change for 10 years, the functionality didn't really change for 10 years either, it did not get that much better, we were not iterating on it, we were working on other products and so that's probably the main reason that I'd never raised prices, and this time around, I don't really feel too emotional about it, I feel like... Yeah. Sure.
I feel like everyone's been getting an awesome free ride for the last 10 years, so when I raise prices, I feel completely justified to do it, but maybe I should be a bit more careful, I don't really wanna piss people off, but I feel like they'll understand the reasoning and they'll also see the value in the new features...
17:13 AW: Yeah. And I think along the topic of grandfathering, the first time we did a price raise, we grandfathered and said, "Hey, if you're currently with us, we're not changing your pricing on this plan." Ours had a few different elements to it, we had one plan at the time, and then we rolled out three additional plans and we said, "Hey, if you're on the basic plan, pricing for that is not changing, you'll stay there," and then here's the new plans and their pricing, which was our new pricing model, so it was basically all new customers were going to be paying more, and there were now more plans out there, so In one essence for us, it wasn't where we were going to anyone and saying, "Okay, you were paying $200 a month this month, and in two months from now, you're gonna pay $300 a month," there's a 50% increase, and that becomes a lot different, but I feel like in your case, with the amount of time that's gone by and everything else, I would probably take grandfathering off the table because you've kind of grandfathered people for 10 years with the same price.
18:18 DS: I'm definitely taking grandfathering off the table. I think it creates a bit of a problem down the road with our account structure too, it's like I just want everybody to be on the same plans, we don't have these legacy accounts, right, I just want everybody to be on the same pricing model, and I'm not we will lose them. So I was originally thinking to go hard core with it and double prices across all of our plans, but I scaled it back a bit. And now I'm gonna go 50% increase across all of our plans, and I expect to lose maybe 20% of the clients or of our customers, but since I've raised prices by 50%, it'll be a net positive and then it'll certainly help going forward, that's important. Really, it's like building a better base for going forward, and with these new features we're launching, there's a whole new marketing push, we will drive more customers coming in and we will retain more customers, so I feel like it's gonna be probably the biggest lever we've ever pulled at this company to improve the business overall.
19:26 AW: Yeah, so what went into you arriving at the thinking of a 100% price increase, then coming down to a 50%, what are the things... What is the research decision making? What went into that?
19:38 DS: It's mostly a gut feel, it's like I put it into a spreadsheet, the old price and the new price, and I tried to put myself in the shoes of a customer and thinking about what is palatable, so it is a bit of a guess, it's like, is it... If you double prices on me, even if this new functionality you're offering is pretty awesome, I'd be like, "Damn, screw you. That's too much."
20:02 DS: It just feels like a double price is just a little too hefty, I could go double price and grandfather everyone in. And I think that would be fine, and I think the product may have that value, but I also think it's a bit too harsh to double prices, and so that's why I scaled it back to 50% because the value is certainly still there from the company perspective, the value we get from it, and I think it'll help us retain a much larger percentage of customers, I think we might see a mass exodus with a doubling of prices, that's a little bit unheard of. That's the rationale anyway.
20:42 AW: What if you doubled the prices for new customers and 50% for your existing?
20:48 DS: I could, but then I end up with those mixed plans, grandfathering, which I don't love.
20:56 AW: It's obviously a lot to think through, but when you looked at... I guess there's a couple of things that it just leads me to ask in my head ... One, it's just it is that emotional change, the what's the value that people feel? What's the market look like? You have all these pieces. And so you have one set group that is price-anchored because they've been paying X amount of dollars for X how long, and so that's the number in their head, so they're gonna feel that one way or another, but then you have an entirely different group that they have none of that, they come into your product and they have a problem, they need a solution for it, you're the solution, and the price you put out there again, it has some weight based on the competitive market and what other choices they have, but they don't have that historical emotional price anchoring, and I just wonder... It's hard for me not to wonder if you're going to leave money on the table for those new customers coming in at a pretty significant amount.
22:05 DS: Yeah, it's a pretty good thought. It's a great line of thinking that I need to maybe sit with a bit and think about that as an option, because the one thing that takes me back is our primary competitor, I know that it's less expensive over there, but I also know that we're X percent better than them on many things, particularly with the launch of this new feature. And so that's where it's like, I think I could easily sell against it even at our more expensive price, It'd be like, "Yeah, we are more expensive. But look at what we do versus what the competition does." Right?
22:42 AW: Yeah, well, it's all value-based, right? I've played all sides. Number one, you don't ever wanna be the cheapest solution in the market like, that's ever... I don't ever wanna be that. We worked to move, GatherUp from close to the bottom to get us into the middle, and even that was hard for fields like I never wanna be winning customers just based on price, I wanna be value winning customers across all of these other things. And then when I look at the high end of our category, there are people at 2 to 5 X our price, and they're creating enough value to create that amount of distance, and so there's no reason I can't create enough value to be in the middle ground of what's there or to be higher in some areas, so I get... Believe me, I'm a fan of simplicity, consistency, all of those things, but for the things that you have in your situation, I would be really tempted... 'Cause you can always... If you roll it out for a month and it goes bad, then you just change your pricing on the website, then you bring it back down, but if you're bringing in two-thirds of the same amount of customers you used to land at twice the price, right, that's all the reasons you do these things, even the things you laid out, if you raise the price 50% and you only lose 20% of your customers, the added MRR to your bottom line is significant.
24:17 DS: It's huge. Yeah, that's why it's like such a standard saying in SaaS, which is to raise your prices, "Charge more, charge more." That's what you hear all the time, right?
24:29 AW: Yeah, and the longer you're around the harder it is to do it often. So that's why I also look at... I think people should always consider, "Am I raising prices for right now here and today, or am I raising them for also what I'm gonna grow into in the next six months or even the next year?" Because going back and then, again, cashing that emotional check, asking people to pay more again in six months or a year, that might be the more difficult part, rather than reaping a little bit higher to start and saying like, "Yeah, it might be a little questionable in the moment, but with what we have planned and the trajectory we're on and what we're adding like, we're gonna fulfill this next level of what we're asking sooner than later."
25:18 DS: Sure, yeah, we did just raise our prices on one of our services, and I've certainly seen a drop off in sign-ups for it. So pricing does feel like it is this thing that you've gotta get right and so... And it always... I just hate pricing it's just such a gut feel all the time. It's hard to decide what your value is and just to pick a position against your competition, I just... Pricing is a tough one.
25:52 AW: Yeah. No, it definitely is, but it's so important because the biggest thing that you have to look out of it is like margin, because of a margin of what you get to invest in the business to help it grow, to build more features, like all of those things. And if you don't have...
26:08 DS: Hire more people, yeah, absolutely.
26:10 AW: Yeah. If you don't have the right amount of margin, then you're never going to continue to ratchet things up, it's always like, we have enough to get by or maintain this level or do whatever else, but we're not creating enough of a gap and enough margin to take some bigger steps forward with what we wanna do with the product or the amount of marketing that we wanna do, or T hires, things like that.
26:39 DS: There's so much more you can do when you just have more money. Especially as a bootstrap company, we've always been restricted by our revenue and it's just been tough, that new developer you wanna hire is always like, oh, 50 more subscriptions away, and that's just this frustrating way to operate, whereas if I could pull that lever now and be like, "Boom, now we've got the margin to hire two more developers, get another person on the marketing side, just hire a salesperson." All these things that I have in mind that I wanna do to help the company grow. We're cash-strapped, and so if you get your pricing right, then your growth is also increased, so yeah, I don't know. It's important to get it right.
27:28 AW: Yeah, I would say in order to get it, you maybe have to push the ceiling, right?
27:34 DS: Yeah, sure.
27:35 AW: You maybe have to look at because you can... Granted it creates work and other pieces and whatever else, but you can go too high and then say, "We went too high," and bring it back down, it is more difficult to only take half a step up and realize we could have gone a whole another step and then you have to figure out how to take that next step and let enough time go by, or now you have to tie it into more value features, whatever that might be, and that's why I just say, I really think it's important when people look at this to take a calculated step and like, "How do I take the step that's right where I'm not feeling like I need to do this again in six months or a year?"
28:19 DS: Sure.
28:21 AW: Because I just fell short. I could have gone further.
28:23 DS: Right, yeah. Okay, so we are definitely going to raise prices, the amount that we're raising by is still in question, we're figuring that out. What's the process? So we've gotta communicate it to our users, do I just launch the feature and be like, "As of tomorrow, everyone the price is doubling." Do I launch the feature? And then give a month's runway or three months for them to know it's like, "Hey, we've just given you this awesome new functionality, and please know that in three months your price is going up." What do you think?
29:00 AW: Yeah, so number one, early and often, communication is definitely key to the ease. I've watched a number of companies, I've listened to other people and read articles, and what you see over and over again is like, people need time to adjust to what it is gonna be. So to me, with any pricing change, I would at least be 60 to 90 days ahead of it. Now, depending upon how your customers are constructed, like if you have bigger VIP, stronger customers, I would book a call with them and say, "Hey, here's what we're planning for February 1st or March 1st. The first time in our history, we're gonna raise prices, it's also coinciding with this and everything else, and let me give you a sneak peek of what these other things are. What questions do you have? Do you have any feedback?" And give some of those trials where you have personal conversations with your best customers on it, it'll help you in how you think about communicating with it before you send out any emails or anything, I would have... I would have those test conversations and those VIP conversations with them.
30:20 DS: Yeah, okay, I think that's great advice. What do you do when you speak to one of these VIP customers and they're like, "Well, those features sound cool and everything Darren, but honestly, if you double my prices, I'm out of here." So what do you do then? Do you then be like, "Okay, well, for you we'll keep the old prices." It feels like a tight rope to walk.
30:45 AW: Yeah, and that's where I think some of the nuances to it are, one, you have to understand where you sit in the marketplace. You'll have to have a few different talking points, "Here is the factual things, here is where we sit in the marketplace, this is what the other options look like and how we compare to that, here's the things that we've done. As being a long-time customer, you understand how well we support you, you understand our uptime, our delivery of quality, like all those things, you're already aware of these aspects." And then you're also like, "This is also a calculated move to allow us to grow more and to accomplish the things that we wanna do, and in that time, likely our cost to make these things happen have also gone up." So you're never gonna win in a tit for tat conversation, and... But you also can't let one customer determine your pricing either, you're gonna have some of those things. You're gonna have a few people that you know by name that have been with you a long time, that this might cause them to leave because the only reason they're staying with you is because of price.
32:03 DS: Yeah, and this feature actually does come with a significant additional resource cost for us, so there's that too. That has to be factored in.
32:11 AW: Yeah.
32:12 DS: So I might say, "Okay, we'll lose 20% of our customers, but because we're raising the price by 50%, we're making 30% more money," that's not actually true. So it's important to actually think about these features and how they impact your expenses, and so this new feature will cost us a decent amount of additional in expenses, and so I have to factor that in as well.
32:35 AW: Yeah, and I would definitely like... I would stay out of numbers, I would also stay out of anchoring it too hard to just the one feature because then people will say like, "Well, just don't give me that feature."
32:47 DS: Exactly, yeah. There's so much more.
32:51 AW: Yeah, for so many... Especially in the early years, I fought off so many people that were like, "I'd like to pay this because I only wanna use this feature in your platform," and it's like, "Nope, it's the plan, you choose what you wanna use, and that's on you, but I'm not taking and giving you only monitoring for $5 a month." To me, it's not the best play that's out there, so I'd really look at it like you will develop probably three to five main talking points on like, "Here's why we're doing this. It's to allow us to invest in our future development and take the product path that we want. It's to allow us to roll out the current features and to be able to serve you at a high level."
33:36 AW: So you'll develop those and to the ones that... If you do have those conversations, I would just turn them into product calls and then ask questions, "Why is it that you feel that way? What is it that's anchoring you to that number?" And see what they have to say to you, and see if it's like, are these worth considering or not, are they valid, or is it just their position, their emotion or just the basic fact of, "I don't wanna pay more money." They would respond to their most favorite tool in the world, even raising the price five bucks, and they would have that response.
34:11 DS: Sure, yeah. Yeah, no one wants to pay more money, so...
34:14 AW: Yeah, yeah, but the products that we love and depend on, there's plenty of times you're like, "Okay, I get it."
34:22 DS: Exactly, yeah. That's the thing, if someone came to me and said... Like, if Mailchimp, we're so dependent on Mailchimp at this point. If they raise their price, I'd be like, "Well, what are we gonna do?" Am I gonna spend the next month researching the alternative, transferring everything over setting up our funnels in something else? Like all that stuff is such a pain, and so that's actually a really important thing to think about building into your product, how do you make your product... It's like your customers are dependent on your product and it would be really hard for them to switch to something else, there's huge value there, and I actually see that with GatherUp quite a bit. I think GatherUp has pretty solid retention rate for that reason, because once you hit your trailer to that horse or whatever the phrase is, you're kinda... You're invested.
35:12 AW: Yeah. Yeah, no, the more things... Just as we were talking about the integrations being very sticky, the more you get the hooks deeper into their processes, their marketing, things like that, we definitely know if you're gonna install our review widget on the website, you're gonna connect us to your point of sales or your CRM, like doing all those things, it's harder to rip you out, like you have efficiency, you have things that took some time to build or connect or to configure, and that's why the whole challenge is getting them to unlock those things and get just a little bit deeper with you, that's for sure.
35:54 DS: Yeah. For sure. Well, I'm feeling, I'm feeling good about it. This has been a really helpful conversation to kinda wrap my head around some the things I wanna think of, you're always great to talk to about this stuff Aaron.
[chuckle]
36:03 AW: It's definitely an area like I've only experienced mildly once, planned to go through it a second time, and I was really interested to go through it was after we sold, and so I had a little more emotional detachment, and our parent company had already raised prices in a couple of products before, so they had some data modeling and some historical expertise and things like that. The other thing is, once you have those conversations, then planning like a three email series where it's like, "Hey, in two months we're gonna raise the price," and then in another month you're saying, "Hey, just a reminder again, on February 1st, we're gonna raise the price. Here is how much, here's how you're affected."
Those are some of the things that I've seen... When people fail and it turns into either a Twitter storm or hate on some social channel or grumblings is like companies communicate and the change is too fast, where it's like, "Hey, starting next week... " And then if it's unclear, where they're not saying, "This is how it's changing, and here's how you're affected," and they just give it, "We're gonna raise prices, you'll find out whatever that might be," and I've experienced this as a customer too, I've seen people do it correctly, and it's like, okay, I get it, makes sense.
37:26 AW: You're giving me a heads up, you allow me to wrap my mind around it, you allow me to like... You need to give somebody time to budget or maybe they need to pass along that cost to their end-user, but on the other side of things, when you do it too fast and you're not clear and you can't explain even some of the core things behind it, then you're really asking for your customer to be frustrated about it because they're gonna create their own answers, and usually their own answer is just gonna be, "These guys are greedy," or they just want more money instead of understanding that it's what they need to do to be successful.
38:06 DS: Yeah, and then when we're successful, then we're providing a better product for you, so you're successful.
38:11 AW: Yeah, and then after you do the increase, then you also need to think through your support team and responses, how do you respond when people reply to the email with what about this what about that? Having Talking Points and having pre-built answers that they can work off of, instead of trying to invent things to reply or one-offs or being inconsistent in your messaging, you definitely wanna do it. All the more reason, for me, have a handful of those conversations, see how people react, what they say, how you respond or what's important to them and does that calm the waters, and then you can build out that script for your support team when they get dozens of these on the very first email that you send out to your customers.
38:58 DS: Yeah. That makes a lot of sense. Those initial conversations, I'll probably pick our top five clients, they've been with us the longest, they're at the higher-level plan, they're active, they're using the tool all the time. Those are people I wanna talk to, and I just wanted to let them know that this is coming, this is what the new feature is, These are the reasons why we're increasing pricing, and then get their thoughts and some of those things that they'll raise will be... Can be scripted out for our support team, how to respond to these things.
39:26 AW: Absolutely.
39:27 DS: Makes sense. Makes sense. I think it's gonna be worth it, for sure. I think it's gonna drive significant value for the company, but of course, I feel a bit nervous about it. I feel nervous. Can you imagine if we lost more than half of our user base, that would suck.
39:46 AW: It definitely would, yeah. That would definitely not be fun, but it would also create... Here's the other way to look at some of those things is like, depending upon your price range, it's like, okay, I still have the same amount of money, but I don't have to support as many people. And I get that's... It's not you want out of it, but there's definitely... You're gonna learn, you're gonna learn about how people value your product, how they view you, their sensitivity to these things, all those other things you are gonna learn. You're right to be wary. It's just like an anxious apprehensive, but I think if you communicate early, you're prepared, you have all those pieces, I think it'll work out.
40:41 DS: I think so too. Yeah, I'm looking forward to it. I'm a little nervous, but I think it's gonna be a net positive for the company overall. It could be the thing that totally sky-rockets us to the next level, it... If we don't lose too many customers, we increase our growth, then I could see myself making a lot more money and hiring, increasing our development resources, increasing our support, increasing sales, increasing marketing, and then all of those additional investments allow us to grow even further. So I think it's this lever that we must pull now and it'll pay dividends in the long term.
41:24 AW: Yeah, and then you probably need to condition yourself to hopefully be able to pull that lever in two to three years again instead of another decade. [laughter]
41:30 DS: Sure. Well, I'll have some experience. So I would've been through it once.
41:34 AW: There you go, you'll know alright you'll survive.
41:37 DS: Exactly, yeah.
41:41 AW: Awesome, well, good. What's roughly your planned timing on this?
41:46 DS: Well, the feature is, I would say it's about three weeks of development out, so still some tweaking of the software, getting it ready, and then I'd give it another couple, three weeks to sort of get our... All of our marketing in place to do the launch, so I'd say, I don't know, roughly a month and a half from now, but then of course, we don't wanna launch on December 25th or anything like that, so it's an early Q1 of 2021. We're gonna pull the trigger on this. It would come up, and then I do think we'll stagger the price increase, so we'll launch the new plans at this rate, and then we'll communicate to our existing customers that their rate will be going up, I wanna give them a chance to see the new feature, experience it, see the value that we're bringing with it, and that they have a little bit of a runway before their price will go up, that's my general feeling on how I'm gonna roll it out.
42:46 AW: Okay, cool. No, sounds good. I'll be watching and holler at me if you wanna talk anymore on figuring out some of the little things in it.
42:57 DS: I will, thank you. Yeah.
43:00 AW: Yeah. Alright, well, and it'll be good for us to check in on this, I have a feeling, let's just say call it a hunch, we're gonna have a lot to talk about in our upcoming episodes, I just feel it.
43:09 DS: I feel it too. Yeah, we got... As soon as we get off this recording, we gotta just book the next one, so we don't go another two months.
43:16 AW: There you go, consider that my... I don't know, I'm probably foreshadowing. So be on the look out. Big things are coming.
43:23 DS: Big things coming from both of us. Sounds good.
43:26 AW: Alright, awesome, Darren. Great to catch up with you. We are gonna book our next one and at least get another episode out before the year ends here, and not spend another two months in between you and I have an elongated conversation. That's just silly.
43:42 DS: Sounds good.
43:44 AW: Alright, take care of my friend.
43:46 DS: Take care.
43:46 AW: Alright, see you everybody.
43:47 DS: Bye everyone.
[INTRO music]
00:12 Aaron Weiche: Episode 24: Raising prices.
00:16 INTRO: Welcome to the SaaS Venture podcast. Sharing the adventure of leading and growing a bootstrapped SaaS company. Here are the experiences, challenges, wins, and losses shared in each episode, from Aaron Weiche of GatherUp and Darren Shaw of Whitespark. Let's go.
00:45 AW: Welcome to the SaaS venture podcast, I'm Aaron.
00:48 Darren Shaw: I'm Darren.
00:50 AW: And the best way to sum me up right now is I am malaised in Minnesota, if that's even a correct way to say that.
01:00 DS: I have no idea, I have to look it up.
[laughter]
01:03 AW: I don't know if I should be inventing words, but as we were just talking before hitting record, Darren and one thing, we haven't recorded in almost two months, which is just silly of us.
01:18 DS: It's been a while.
01:20 AW: Yeah. Too long, we need to do better. If we wanna keep listeners going up into the right, people have probably forgotten about us, so we'll try to win your hearts and minds back, but yeah, we were just discussing... I've just been in a little bit of a funk for various reasons, some of the obvious things, COVID and restricted or compressed life of not as many freedoms or...
01:47 DS: For sure.
01:50 AW: Especially, I don't know, I consider myself to be a creative person, and so I feed off of other environments and travel and observation and things like that, and my world just so much consists of home, work, home, work, and work is just pretty much zoom, home, zoom, home. So...
02:09 DS: Yeah. We would just call it Groundhog Day around here, it's like every day, it's like that movie Groundhog Day, where it just feels like you're going through the motions day after day, and there's no variety in life right now.
02:21 AW: And... I don't know, I was trying to talk about it with Marci, my wife, and there's just this little piece of, when you don't... I don't know, and I just might be messed up in how I see this, but when you don't have certain things to look forward to like time with friends or an outing or a trip, or being at a sporting event, things like that. Those are things that definitely provide a little bit of spark and optimism and all those different things and yeah, it's just so severely lacking, and with the season change in Minnesota, we've flipped back to life being a lot more indoors, at least until we get some snow on the ground and then hopefully I can get... I'm gonna... I'll probably do more snowboarding this year than the last five years combined, so...
03:09 DS: Yeah. What are you gonna do about the hill, like when you go to the hill, are you gonna bring your own lunch? Are you gonna go into the lodge? Are you gonna eat lunch in the lodge? Are you gonna use the washrooms in the lodge? Just... I'm all super COVID sensitive, so I'm just wondering how you handle that.
03:22 AW: Yeah. I haven't thought that far yet. The hill that's closest to me literally only takes 25 minutes to get there, and it's super small, it's like eight runs, so going there for two to three hours of runs, and then you can call it a day, but there's definitely... There's a couple of others around here that take an hour, a couple of hours to get to that are worth it, and yeah, then I'll probably... I probably just bring something along and bust it back out to the car and refuel, so...
03:56 DS: Yeah. Yeah, sounds good. [04:00] ____.
04:01 AW: Yeah, that's easily one of the consistent things I just not have been... I have at any point had a meal inside of a restaurant, cafe, anything like that since all this started, I did use... We have some very nice and well-spaced outside patios and things like that, but we've done a few times within the local community, especially to support some of the local business owners in addition to doing take out, but that's been above it.
04:28 DS: Yeah. We've been like all meals all the time, making them at home. No take out either. So it's been... It's a lot of work. This is a, that Groundhog Day thing where we're just going through the motions all day along, it'd be nice to just get a break from dinner where just shows up at the door, right, but we're... We're just extra careful.
04:50 AW: Yeah. No. Totally get it. So anyway, I feel like I'm working my way out of it, I'd probably hit the bottom of it a couple of weeks ago, and just been trying to pay more attention to exercise and alcohol intake and screen time, and just all those different things, it's not... There's not one thing to cure when you do feel that way, you gotta take all the pieces and say, "How do I bump all of these things up a level to contribute to finding a better place to be."
05:25 DS: I think it's just a natural ebb and flow. You're gonna go through really solid awesome months and you're gonna have some time where you feeling a little lower, like, gosh, it's just a constant up and down for me over the months.
05:39 AW: What have you been doing to fight that off?
05:42 DS: So exercise has been a thing for sure, I'm trying to get more sleep lately, I've been really diligent about my exercise routine, actually COVID's been great for exercise because it's just part of my routine and I have it all kinda locked in and my schedule has gotten really good. I've got a new morning routine, I'm feeling productive and focused and it's going pretty well actually. I'm going through a good period right now.
06:09 AW: Awesome. Good for you.
06:11 DS: I don't feel like I really need too much. I think I might be a little bit introverted in some ways, where I'm like, if I didn't see my friends in person for two years I'd be like, "Oh. That's okay." And then I'll see them in two years, and be like, "Hey. Great to see you." It doesn't wear me down. Really, I've always been... As a teenager, I just spent every weekend locked in my bedroom, playing video games, so I'm used to this. I come from a long history of COVID times.
06:40 AW: See, I'm definitely more social, I would say I was probably in the social extreme in my youth where I was always with friends, always playing sports, always doing things. And then as time has gone on and especially just being more dedicated or turning into the workaholic or whatever, else, that isolation has crept in much more, but I still like if I had to put a time frame on it, every once a month or once every couple of months, I would like to have a day or an evening of adult socialization, something to do conversations to be had to... I don't wanna go for years without seeing some of my friends and things like that, so I need a little tighter cycle.
07:30 DS: Yeah. And I used to get that all the time. Every week there would be multiple things happening because my wife does such a good job of sort of organizing our social calendar, but now it doesn't exist anymore. I guess one thing I'm just noticing is that I guess it doesn't bother me too much, which is, I guess maybe a little surprising.
07:47 AW: Yeah. Well, good for you. You got it under control. I'm working on it and I'll figure my way out the other side, I can see if you raise the light, I'll get there.
08:00 DS: I feel like I'm unusual. I think most people certainly want more social engagement, I want it too, but I'm able to progress without it. What's going on with the business? What's happening with your SaaS company?
08:16 AW: Yeah. A lot of... End of the year, I always kinda look at like this, you have to face the reality of what you actually can accomplish for the remaining couple of months of the year, and it's usually not what you had planned, so that's the facing the reality part of like, Alright, we still have these five things, and we actually can do two of them now, so that really kind of shapes up how the year is gonna end, and then you start Q1 planning with what's there, so that's been... I'm used to how that works. So that feels pretty normal. We had an opportunity pop-up, we're using an integration partner? So we're using a solution called Tray.io, and the easiest way to explain this is they help make integrations direct integrations possible with their software, and more of like being able to create like a Zapier-type connection inside of your product, so we'll be able to have an integrations tab, the first one that we're working on right now for us is Salesforce...
09:26 DS: Nice.
09:27 AW: So within a handful of clicks, you'll be able to sink to your Salesforce account and start going through those, and... So Salesforce is our first one, and then we will have four others in the subsequent sprints, I think we're just gonna try to tackle one integration every sprint, so probably like QuickBooks Online, Mailchimp, just some of the ones that when we pull customers or what people have asked about for integration, so excited about that, but that kind of popped up into the radar within the last few months and rapidly shot to the top, so that's also been part of throwing off some of the product plan and roadmap, so...
10:08 DS: That's interesting. So basically right now, integrations are kind of... The onus is on a customer to create this Zap, they've gotta go and create that Zap and on their own, whereas now you can just press a button in the software. That would be the difference?
10:22 AW: Really what exists now is we will do an integration for a customer and use that product's API, or a customer could use our API and do the integration if they have a home-built CRM or a different piece of software that they wanna integrate with, and then obviously, Zapier is like a third-party marketplace where you build... We've built the GatherUp Zapier app years ago, and there's 2000 apps in the Zapier marketplace, so you can use Zapier and pay them, and then you get to build as many connections as you want between different tools and things like that, and then... Yeah.
This basically, I use Zapier the same kind of way because you don't have to do any coding with it, it's a series of selections to set up the integration, and what's the trigger and what's the action and things like that, Tray is the one that handles those... So they basically have done the work from the API of all those other solutions into their interface, and then they take our API and do that into the interface, and then we're able to... iframe in that integration builder that here's your API credentials, your key, what account, what are you looking to do and build up that process without... You don't have to touch any code, it's just kind of click away and builds your integration how you want it to work.
11:51 DS: Nice I'm gonna look into that. That sounds pretty handy.
11:53 AW: Yeah, absolutely, it's a little spendy it's not cheap, but when you just start looking, right, when you have thousands of customers and you just kinda need a few hundred that can utilize it, and integrations make your product so sticky and the efficiency that's there, and just getting things to automatically talk to each other without human interaction is a big benefit.
12:15 DS: Yeah. Definitely huge value. Makes sense.
12:17 AW: What about you?
12:20 DS: We've got a lot of things coming up that I'm very excited about, and I'm looking forward to a number of launches, one, which is like getting the very final tweaks on it today is a whole new design for our Local Rank Tracking products, so we rebuilt and redesigned our Local Citation Finder back in the spring, and then it really made our Local Rank Tracker look like garbage, so it's like, "Oh. I got this nice new design on the Local Citation Finder, I wish we had a nice look in Local Rank Tracker, which the Local Rank Tracker actually looked pretty decent before, but we're now trying to have a common design, feel, UI elements, everything should be the same across all products, and so we're implementing that design of the Rank Tracker, which I'm thrilled about. It looks fantastic. Once you get into doing this kind of work, you end up having a bunch of features too, so it's got some improvements and so... Yeah. Can't wait to launch that, that's basically done. It needs... It just needs marketing, which we're working on now is...
13:22 DS: What's our launch plan? Right, so we're putting that together. Our brand new accounts system, which has been in development for ages, is pretty much done as well, so we'll be launching that, it's just a new ordering system, your authentication, logging in, your billing, receipts, all that stuff will be in accounts, and so our first version was built back in 2011, and its ancient and frankensteiny, it's just been bolted on, everything has been put together, and it's just unmanageable now. So this new one has been built in a modern tech stack and can't wait to launch that, and then we also have on the horizon our local listing scan tool, so just a tool, you can type in your business info, it'll show you all your listings and audit them and show you inconsistencies?
We're integrating that into our Local Citation Finder, which kind of brings us to the topic of this podcast. Because when we launch this huge new feature, I plan to finally raise prices, we've had the same prices for the Local Citation Finder for the past 10 years, we've never increased our pricing plans, and so this... So one, it's overdue because we've improved the tool significantly, we didn't even increase prices when we completely redesigned it, and to this feature that we're launching brings significant additional value, so I'm really thinking about raising prices, how to structure the prices whether I grandfather in and so I'd love to chat about all that on the podcast today...
14:50 AW: Yeah. Wow. There are some interesting components to that, especially with probably the amount of time that you've had a product out there and have improved it and made it better and added more things, and yet the prices remained untouched in the entire period of time.
15:09 DS: Way under-priced right now.
15:11 AW: So I think... Let's start with one place I would love to hear you comment on, and I know it's an area that I've gone through like prior to COVID GatherUp was planning our second price raise in our six-year history, and more of one than we had done our first time, and the first thing I thought that I just watched both in myself and then watched across our team as we discussed it and everything else is just the emotional grappling with this uncomfortable of, "I'm gonna ask people for more money and they're going to have a reaction to that," and what has that been like for you especially?
15:53 DS: Yeah. I guess I don't feel too emotional...
16:00 AW: Is that is what has kept you from doing it for the last 10 years? Why haven't you raised prices? Maybe we should start there, and that might be that answer...
16:07 DS: I actually think that our product for the last 10 years has been relatively priced correctly because we did not enhance it too much over those 10 years, it just kinda sat there, it still had its old design, we could have looked at raising prices when we launched the new version in the spring. That would have been a time. But prior to that, honestly, I wouldn't have felt just justified raising prices, 'cause while prices didn't change for 10 years, the functionality didn't really change for 10 years either, it did not get that much better, we were not iterating on it, we were working on other products and so that's probably the main reason that I'd never raised prices, and this time around, I don't really feel too emotional about it, I feel like... Yeah. Sure.
I feel like everyone's been getting an awesome free ride for the last 10 years, so when I raise prices, I feel completely justified to do it, but maybe I should be a bit more careful, I don't really wanna piss people off, but I feel like they'll understand the reasoning and they'll also see the value in the new features...
17:13 AW: Yeah. And I think along the topic of grandfathering, the first time we did a price raise, we grandfathered and said, "Hey, if you're currently with us, we're not changing your pricing on this plan." Ours had a few different elements to it, we had one plan at the time, and then we rolled out three additional plans and we said, "Hey, if you're on the basic plan, pricing for that is not changing, you'll stay there," and then here's the new plans and their pricing, which was our new pricing model, so it was basically all new customers were going to be paying more, and there were now more plans out there, so In one essence for us, it wasn't where we were going to anyone and saying, "Okay, you were paying $200 a month this month, and in two months from now, you're gonna pay $300 a month," there's a 50% increase, and that becomes a lot different, but I feel like in your case, with the amount of time that's gone by and everything else, I would probably take grandfathering off the table because you've kind of grandfathered people for 10 years with the same price.
18:18 DS: I'm definitely taking grandfathering off the table. I think it creates a bit of a problem down the road with our account structure too, it's like I just want everybody to be on the same plans, we don't have these legacy accounts, right, I just want everybody to be on the same pricing model, and I'm not we will lose them. So I was originally thinking to go hard core with it and double prices across all of our plans, but I scaled it back a bit. And now I'm gonna go 50% increase across all of our plans, and I expect to lose maybe 20% of the clients or of our customers, but since I've raised prices by 50%, it'll be a net positive and then it'll certainly help going forward, that's important. Really, it's like building a better base for going forward, and with these new features we're launching, there's a whole new marketing push, we will drive more customers coming in and we will retain more customers, so I feel like it's gonna be probably the biggest lever we've ever pulled at this company to improve the business overall.
19:26 AW: Yeah, so what went into you arriving at the thinking of a 100% price increase, then coming down to a 50%, what are the things... What is the research decision making? What went into that?
19:38 DS: It's mostly a gut feel, it's like I put it into a spreadsheet, the old price and the new price, and I tried to put myself in the shoes of a customer and thinking about what is palatable, so it is a bit of a guess, it's like, is it... If you double prices on me, even if this new functionality you're offering is pretty awesome, I'd be like, "Damn, screw you. That's too much."
20:02 DS: It just feels like a double price is just a little too hefty, I could go double price and grandfather everyone in. And I think that would be fine, and I think the product may have that value, but I also think it's a bit too harsh to double prices, and so that's why I scaled it back to 50% because the value is certainly still there from the company perspective, the value we get from it, and I think it'll help us retain a much larger percentage of customers, I think we might see a mass exodus with a doubling of prices, that's a little bit unheard of. That's the rationale anyway.
20:42 AW: What if you doubled the prices for new customers and 50% for your existing?
20:48 DS: I could, but then I end up with those mixed plans, grandfathering, which I don't love.
20:56 AW: It's obviously a lot to think through, but when you looked at... I guess there's a couple of things that it just leads me to ask in my head ... One, it's just it is that emotional change, the what's the value that people feel? What's the market look like? You have all these pieces. And so you have one set group that is price-anchored because they've been paying X amount of dollars for X how long, and so that's the number in their head, so they're gonna feel that one way or another, but then you have an entirely different group that they have none of that, they come into your product and they have a problem, they need a solution for it, you're the solution, and the price you put out there again, it has some weight based on the competitive market and what other choices they have, but they don't have that historical emotional price anchoring, and I just wonder... It's hard for me not to wonder if you're going to leave money on the table for those new customers coming in at a pretty significant amount.
22:05 DS: Yeah, it's a pretty good thought. It's a great line of thinking that I need to maybe sit with a bit and think about that as an option, because the one thing that takes me back is our primary competitor, I know that it's less expensive over there, but I also know that we're X percent better than them on many things, particularly with the launch of this new feature. And so that's where it's like, I think I could easily sell against it even at our more expensive price, It'd be like, "Yeah, we are more expensive. But look at what we do versus what the competition does." Right?
22:42 AW: Yeah, well, it's all value-based, right? I've played all sides. Number one, you don't ever wanna be the cheapest solution in the market like, that's ever... I don't ever wanna be that. We worked to move, GatherUp from close to the bottom to get us into the middle, and even that was hard for fields like I never wanna be winning customers just based on price, I wanna be value winning customers across all of these other things. And then when I look at the high end of our category, there are people at 2 to 5 X our price, and they're creating enough value to create that amount of distance, and so there's no reason I can't create enough value to be in the middle ground of what's there or to be higher in some areas, so I get... Believe me, I'm a fan of simplicity, consistency, all of those things, but for the things that you have in your situation, I would be really tempted... 'Cause you can always... If you roll it out for a month and it goes bad, then you just change your pricing on the website, then you bring it back down, but if you're bringing in two-thirds of the same amount of customers you used to land at twice the price, right, that's all the reasons you do these things, even the things you laid out, if you raise the price 50% and you only lose 20% of your customers, the added MRR to your bottom line is significant.
24:17 DS: It's huge. Yeah, that's why it's like such a standard saying in SaaS, which is to raise your prices, "Charge more, charge more." That's what you hear all the time, right?
24:29 AW: Yeah, and the longer you're around the harder it is to do it often. So that's why I also look at... I think people should always consider, "Am I raising prices for right now here and today, or am I raising them for also what I'm gonna grow into in the next six months or even the next year?" Because going back and then, again, cashing that emotional check, asking people to pay more again in six months or a year, that might be the more difficult part, rather than reaping a little bit higher to start and saying like, "Yeah, it might be a little questionable in the moment, but with what we have planned and the trajectory we're on and what we're adding like, we're gonna fulfill this next level of what we're asking sooner than later."
25:18 DS: Sure, yeah, we did just raise our prices on one of our services, and I've certainly seen a drop off in sign-ups for it. So pricing does feel like it is this thing that you've gotta get right and so... And it always... I just hate pricing it's just such a gut feel all the time. It's hard to decide what your value is and just to pick a position against your competition, I just... Pricing is a tough one.
25:52 AW: Yeah. No, it definitely is, but it's so important because the biggest thing that you have to look out of it is like margin, because of a margin of what you get to invest in the business to help it grow, to build more features, like all of those things. And if you don't have...
26:08 DS: Hire more people, yeah, absolutely.
26:10 AW: Yeah. If you don't have the right amount of margin, then you're never going to continue to ratchet things up, it's always like, we have enough to get by or maintain this level or do whatever else, but we're not creating enough of a gap and enough margin to take some bigger steps forward with what we wanna do with the product or the amount of marketing that we wanna do, or T hires, things like that.
26:39 DS: There's so much more you can do when you just have more money. Especially as a bootstrap company, we've always been restricted by our revenue and it's just been tough, that new developer you wanna hire is always like, oh, 50 more subscriptions away, and that's just this frustrating way to operate, whereas if I could pull that lever now and be like, "Boom, now we've got the margin to hire two more developers, get another person on the marketing side, just hire a salesperson." All these things that I have in mind that I wanna do to help the company grow. We're cash-strapped, and so if you get your pricing right, then your growth is also increased, so yeah, I don't know. It's important to get it right.
27:28 AW: Yeah, I would say in order to get it, you maybe have to push the ceiling, right?
27:34 DS: Yeah, sure.
27:35 AW: You maybe have to look at because you can... Granted it creates work and other pieces and whatever else, but you can go too high and then say, "We went too high," and bring it back down, it is more difficult to only take half a step up and realize we could have gone a whole another step and then you have to figure out how to take that next step and let enough time go by, or now you have to tie it into more value features, whatever that might be, and that's why I just say, I really think it's important when people look at this to take a calculated step and like, "How do I take the step that's right where I'm not feeling like I need to do this again in six months or a year?"
28:19 DS: Sure.
28:21 AW: Because I just fell short. I could have gone further.
28:23 DS: Right, yeah. Okay, so we are definitely going to raise prices, the amount that we're raising by is still in question, we're figuring that out. What's the process? So we've gotta communicate it to our users, do I just launch the feature and be like, "As of tomorrow, everyone the price is doubling." Do I launch the feature? And then give a month's runway or three months for them to know it's like, "Hey, we've just given you this awesome new functionality, and please know that in three months your price is going up." What do you think?
29:00 AW: Yeah, so number one, early and often, communication is definitely key to the ease. I've watched a number of companies, I've listened to other people and read articles, and what you see over and over again is like, people need time to adjust to what it is gonna be. So to me, with any pricing change, I would at least be 60 to 90 days ahead of it. Now, depending upon how your customers are constructed, like if you have bigger VIP, stronger customers, I would book a call with them and say, "Hey, here's what we're planning for February 1st or March 1st. The first time in our history, we're gonna raise prices, it's also coinciding with this and everything else, and let me give you a sneak peek of what these other things are. What questions do you have? Do you have any feedback?" And give some of those trials where you have personal conversations with your best customers on it, it'll help you in how you think about communicating with it before you send out any emails or anything, I would have... I would have those test conversations and those VIP conversations with them.
30:20 DS: Yeah, okay, I think that's great advice. What do you do when you speak to one of these VIP customers and they're like, "Well, those features sound cool and everything Darren, but honestly, if you double my prices, I'm out of here." So what do you do then? Do you then be like, "Okay, well, for you we'll keep the old prices." It feels like a tight rope to walk.
30:45 AW: Yeah, and that's where I think some of the nuances to it are, one, you have to understand where you sit in the marketplace. You'll have to have a few different talking points, "Here is the factual things, here is where we sit in the marketplace, this is what the other options look like and how we compare to that, here's the things that we've done. As being a long-time customer, you understand how well we support you, you understand our uptime, our delivery of quality, like all those things, you're already aware of these aspects." And then you're also like, "This is also a calculated move to allow us to grow more and to accomplish the things that we wanna do, and in that time, likely our cost to make these things happen have also gone up." So you're never gonna win in a tit for tat conversation, and... But you also can't let one customer determine your pricing either, you're gonna have some of those things. You're gonna have a few people that you know by name that have been with you a long time, that this might cause them to leave because the only reason they're staying with you is because of price.
32:03 DS: Yeah, and this feature actually does come with a significant additional resource cost for us, so there's that too. That has to be factored in.
32:11 AW: Yeah.
32:12 DS: So I might say, "Okay, we'll lose 20% of our customers, but because we're raising the price by 50%, we're making 30% more money," that's not actually true. So it's important to actually think about these features and how they impact your expenses, and so this new feature will cost us a decent amount of additional in expenses, and so I have to factor that in as well.
32:35 AW: Yeah, and I would definitely like... I would stay out of numbers, I would also stay out of anchoring it too hard to just the one feature because then people will say like, "Well, just don't give me that feature."
32:47 DS: Exactly, yeah. There's so much more.
32:51 AW: Yeah, for so many... Especially in the early years, I fought off so many people that were like, "I'd like to pay this because I only wanna use this feature in your platform," and it's like, "Nope, it's the plan, you choose what you wanna use, and that's on you, but I'm not taking and giving you only monitoring for $5 a month." To me, it's not the best play that's out there, so I'd really look at it like you will develop probably three to five main talking points on like, "Here's why we're doing this. It's to allow us to invest in our future development and take the product path that we want. It's to allow us to roll out the current features and to be able to serve you at a high level."
33:36 AW: So you'll develop those and to the ones that... If you do have those conversations, I would just turn them into product calls and then ask questions, "Why is it that you feel that way? What is it that's anchoring you to that number?" And see what they have to say to you, and see if it's like, are these worth considering or not, are they valid, or is it just their position, their emotion or just the basic fact of, "I don't wanna pay more money." They would respond to their most favorite tool in the world, even raising the price five bucks, and they would have that response.
34:11 DS: Sure, yeah. Yeah, no one wants to pay more money, so...
34:14 AW: Yeah, yeah, but the products that we love and depend on, there's plenty of times you're like, "Okay, I get it."
34:22 DS: Exactly, yeah. That's the thing, if someone came to me and said... Like, if Mailchimp, we're so dependent on Mailchimp at this point. If they raise their price, I'd be like, "Well, what are we gonna do?" Am I gonna spend the next month researching the alternative, transferring everything over setting up our funnels in something else? Like all that stuff is such a pain, and so that's actually a really important thing to think about building into your product, how do you make your product... It's like your customers are dependent on your product and it would be really hard for them to switch to something else, there's huge value there, and I actually see that with GatherUp quite a bit. I think GatherUp has pretty solid retention rate for that reason, because once you hit your trailer to that horse or whatever the phrase is, you're kinda... You're invested.
35:12 AW: Yeah. Yeah, no, the more things... Just as we were talking about the integrations being very sticky, the more you get the hooks deeper into their processes, their marketing, things like that, we definitely know if you're gonna install our review widget on the website, you're gonna connect us to your point of sales or your CRM, like doing all those things, it's harder to rip you out, like you have efficiency, you have things that took some time to build or connect or to configure, and that's why the whole challenge is getting them to unlock those things and get just a little bit deeper with you, that's for sure.
35:54 DS: Yeah. For sure. Well, I'm feeling, I'm feeling good about it. This has been a really helpful conversation to kinda wrap my head around some the things I wanna think of, you're always great to talk to about this stuff Aaron.
[chuckle]
36:03 AW: It's definitely an area like I've only experienced mildly once, planned to go through it a second time, and I was really interested to go through it was after we sold, and so I had a little more emotional detachment, and our parent company had already raised prices in a couple of products before, so they had some data modeling and some historical expertise and things like that. The other thing is, once you have those conversations, then planning like a three email series where it's like, "Hey, in two months we're gonna raise the price," and then in another month you're saying, "Hey, just a reminder again, on February 1st, we're gonna raise the price. Here is how much, here's how you're affected."
Those are some of the things that I've seen... When people fail and it turns into either a Twitter storm or hate on some social channel or grumblings is like companies communicate and the change is too fast, where it's like, "Hey, starting next week... " And then if it's unclear, where they're not saying, "This is how it's changing, and here's how you're affected," and they just give it, "We're gonna raise prices, you'll find out whatever that might be," and I've experienced this as a customer too, I've seen people do it correctly, and it's like, okay, I get it, makes sense.
37:26 AW: You're giving me a heads up, you allow me to wrap my mind around it, you allow me to like... You need to give somebody time to budget or maybe they need to pass along that cost to their end-user, but on the other side of things, when you do it too fast and you're not clear and you can't explain even some of the core things behind it, then you're really asking for your customer to be frustrated about it because they're gonna create their own answers, and usually their own answer is just gonna be, "These guys are greedy," or they just want more money instead of understanding that it's what they need to do to be successful.
38:06 DS: Yeah, and then when we're successful, then we're providing a better product for you, so you're successful.
38:11 AW: Yeah, and then after you do the increase, then you also need to think through your support team and responses, how do you respond when people reply to the email with what about this what about that? Having Talking Points and having pre-built answers that they can work off of, instead of trying to invent things to reply or one-offs or being inconsistent in your messaging, you definitely wanna do it. All the more reason, for me, have a handful of those conversations, see how people react, what they say, how you respond or what's important to them and does that calm the waters, and then you can build out that script for your support team when they get dozens of these on the very first email that you send out to your customers.
38:58 DS: Yeah. That makes a lot of sense. Those initial conversations, I'll probably pick our top five clients, they've been with us the longest, they're at the higher-level plan, they're active, they're using the tool all the time. Those are people I wanna talk to, and I just wanted to let them know that this is coming, this is what the new feature is, These are the reasons why we're increasing pricing, and then get their thoughts and some of those things that they'll raise will be... Can be scripted out for our support team, how to respond to these things.
39:26 AW: Absolutely.
39:27 DS: Makes sense. Makes sense. I think it's gonna be worth it, for sure. I think it's gonna drive significant value for the company, but of course, I feel a bit nervous about it. I feel nervous. Can you imagine if we lost more than half of our user base, that would suck.
39:46 AW: It definitely would, yeah. That would definitely not be fun, but it would also create... Here's the other way to look at some of those things is like, depending upon your price range, it's like, okay, I still have the same amount of money, but I don't have to support as many people. And I get that's... It's not you want out of it, but there's definitely... You're gonna learn, you're gonna learn about how people value your product, how they view you, their sensitivity to these things, all those other things you are gonna learn. You're right to be wary. It's just like an anxious apprehensive, but I think if you communicate early, you're prepared, you have all those pieces, I think it'll work out.
40:41 DS: I think so too. Yeah, I'm looking forward to it. I'm a little nervous, but I think it's gonna be a net positive for the company overall. It could be the thing that totally sky-rockets us to the next level, it... If we don't lose too many customers, we increase our growth, then I could see myself making a lot more money and hiring, increasing our development resources, increasing our support, increasing sales, increasing marketing, and then all of those additional investments allow us to grow even further. So I think it's this lever that we must pull now and it'll pay dividends in the long term.
41:24 AW: Yeah, and then you probably need to condition yourself to hopefully be able to pull that lever in two to three years again instead of another decade. [laughter]
41:30 DS: Sure. Well, I'll have some experience. So I would've been through it once.
41:34 AW: There you go, you'll know alright you'll survive.
41:37 DS: Exactly, yeah.
41:41 AW: Awesome, well, good. What's roughly your planned timing on this?
41:46 DS: Well, the feature is, I would say it's about three weeks of development out, so still some tweaking of the software, getting it ready, and then I'd give it another couple, three weeks to sort of get our... All of our marketing in place to do the launch, so I'd say, I don't know, roughly a month and a half from now, but then of course, we don't wanna launch on December 25th or anything like that, so it's an early Q1 of 2021. We're gonna pull the trigger on this. It would come up, and then I do think we'll stagger the price increase, so we'll launch the new plans at this rate, and then we'll communicate to our existing customers that their rate will be going up, I wanna give them a chance to see the new feature, experience it, see the value that we're bringing with it, and that they have a little bit of a runway before their price will go up, that's my general feeling on how I'm gonna roll it out.
42:46 AW: Okay, cool. No, sounds good. I'll be watching and holler at me if you wanna talk anymore on figuring out some of the little things in it.
42:57 DS: I will, thank you. Yeah.
43:00 AW: Yeah. Alright, well, and it'll be good for us to check in on this, I have a feeling, let's just say call it a hunch, we're gonna have a lot to talk about in our upcoming episodes, I just feel it.
43:09 DS: I feel it too. Yeah, we got... As soon as we get off this recording, we gotta just book the next one, so we don't go another two months.
43:16 AW: There you go, consider that my... I don't know, I'm probably foreshadowing. So be on the look out. Big things are coming.
43:23 DS: Big things coming from both of us. Sounds good.
43:26 AW: Alright, awesome, Darren. Great to catch up with you. We are gonna book our next one and at least get another episode out before the year ends here, and not spend another two months in between you and I have an elongated conversation. That's just silly.
43:42 DS: Sounds good.
43:44 AW: Alright, take care of my friend.
43:46 DS: Take care.
43:46 AW: Alright, see you everybody.
43:47 DS: Bye everyone.
Creators and Guests
Host
Aaron Weiche
I'm the Co-founder and CEO of Leadferno, a business messaging app. Leadferno creates delightful connections at speed through SMS and messaging platforms centralized in one app to close more leads faster. I designed my first website in 1998 and never looked back. I have co-founded and been in executive roles in multiple digital marketing agencies and SaaS companies. I speak frequenty at conferences of all types on digital marketing, customer experience, mobile and local SEO. I'm part of Local University and a founding board member of MnSearch. Outside of work I'm a sports fan, love Nebraska college football, Minnesota Twins baseball, snowboarding, boating, BBQ and anything with my 4 kids and amazing wife. I live to the west of Minneapolis, Minnesota.
Host
Darren Shaw
I'm the founder and president of Whitespark, a local search company with software and services that help businesses improve their rankings in Google. I started developing websites back in 1996 during my first year of university. I failed plenty of courses because I was skipping class to work on my HTML, CSS, and Javascript projects in the lab. Fortunately, people wanted to pay me to build websites, and in 2005 I started Whitespark as a web design and development company. In 2010 we stopped doing web development projects so we could focus on local search, and we launched our first SaaS software, the Local Citation Finder. We now offer multiple SaaS applications and services. When I'm not speaking at conferences, researching the latest in local search, or designing the next best local search application, I like to spend time travelling, skiiing, and dining with my wife and daughter in Edmonton, Alberta, Canada.
