Lessons about pricing

Spanning Sync, the calendar syncing tool I mentioned a while back, came out of beta today and announced they were going to start charging for their product. I think they’ve done a fantastic job developing a helpful little app and deserve to make some money. What’s interesting though is where they decided to set their fees and the instant reaction from their 18,000 current users.

Under the new pricing $25 gets you a one year account and $65 a permanent license. There is a 15 day free trial but no basic free option with a chance to upgrade later. The prices seem high to me. A one off payment of $20-25 is closer to what I was expecting, and what I would have paid.

So, first interesting thing is that they choose such high fees (keep in mind Apple iLife, with a whole host of complex applications, is only $79). Second interesting thing is the noise that their upset users have made. Check the comments here and here for the almost universal objection to the fees.

From a comment on the Unofficial Apple Weblog: “$65 once or $25 for a yearly subscription is well North of ridiculous. There’s no way I’ll even consider buying this product. The developer simply hasn’t built that kind of value into it.”

And from the Spanning Sync blog: “I have already uninstalled Spanning Sync. As lots of ppl say, price is outrageous. And I do think Apple will release some kind of Google sync service with Leopard, seeing that the collaboration between the two is becoming increasingly evident. Plus, what are the guarantees that the service won’t stop working next week?”

It will be interesting to see the response from Spanning Sync over the next couple of days. Maybe they will lower the price and try to win back the upset users. Or maybe they will conclude that these users will never pay them and decide to target a different kind of user who sees more value in the product.

As we get closer to launching our web application (still a few months away I’m afraid) we are beginning to think about how much value we will be creating for different users. In our case the value won’t be even. We expect many people will get great value from a free service but some will want to pay for premium features to access even more value.

One thing we will need to be very aware of, no matter what our pricing strategy, is the expectations of our users. If there is a lesson to be learned from the Spanning Sync example it is that you can never under deliver and over price in the eyes of your customers if you want them to stick around.

2 Comments

• 
  Charlie Wood March 13, 2007 at 6:44 pm

  Pema,

  Thanks for the post. I’ve responded to some of the comments on our blog and will be posting more in the next few days, but I did want to make one point.

  Whenever you go from “free” to “not free” there’s going to be some negative reaction. But even knowing that, we were surprised by the volume of responses. On the other hand, we expected that some people would go ahead and buy a subscription on day one even though they still had 15 days left in their free trial. But even knowing that, we were amazed by the volume of orders.

  What today tells me is that people are passionate about this service. If they weren’t, they would just shrug and walk away. If I wanted to sell to people like that we’d be writing Windows software. But I don’t. I’m both energized and challenged by the strong reactions we’ve gotten.

  I suspect that the people who had the strongest objections to our pricing wouldn’t ever be customers of ours regardless of price points. John Gruber wrote a great article on exactly this. But I’m honored that so many people value our service so highly that not only did they decide to pay for it, they did so before they even had to.

  Check the Spanning Sync Blog (blog.spanningsync.com) for followups to this in the coming days.

  Regards,
  Charlie
  spanningsync.com
• 
  Pema March 13, 2007 at 10:08 pm

  Hi Charlie,
  Congratulation’s again on a great product, and what sounds like a great first day of sales.

  Yes, you certainly have some passionate users – me included. I get the feeling they are trying to tell you something though ;). I realize a company that begins charging will always drop some users who were just along for the free ride, but I think your post this morning announcing the fees came as a big surprise to many of your fans. Maybe you might have shared more information about the fees in advance, or asked your beta users for input into pricing, or maybe offered beta users a discount to ease the blow?

  I’m certainly not trying to preach from my position of relative in-experience. I’m just finding the reaction particularly interesting because I’m sure my company will be grappling with similar issues soon.

  I wish you the best of luck with Spanning Sync, Charlie. I think you have a fantastic product, and it sounds like more great things planned for the near future.