Sorry. We Messed Up. (Zendesk responds to pricing criticism)

[dangrossman]

This is how a startup should handle pricing changes, so long as the old pricing scheme was viable.

This is the opposite of what Recurly did a month or two ago when they dramatically raised prices and the same revolt occurred. Their response was a big "F You", and their latest e-mails finally announcing even more pricing changes show they lost enough users in the process that it threatened their viability.

[sachinag]

I have to defend the Recurly folks here. They made a bet on flat-rate pricing over per-use pricing. Turns out that a flat-rate plan hurts you on the low end (people who won't use you at all, and where the uproar was) and on the high end (you're leaving money on the table from your potentially most profitable customers).

Flat-rate pricing works for the vast, vast majority of internet companies since the day AOL won over CompuServe because they went to the $20 per month unlimited plan back in 1996.

The lesson I've learned from Recurly is that developers find per-use to be less risky than flat fees, which is the opposite of normals.

[Barnabas]

I was curious about the Recurly blog post you mentioned, so I looked it up. Here's the URL for anyone else: http://blog.recurly.com/2010/03/new-pricing/

[Mark_B]

Interesting to see the "too little too late" comments on their comments. Proof that 1) no matter how hard you try to apologize and make things right, you can't please everybody and 2) unfortunately, these people are the most vocal.

[gizmo]

Well, they didn't try very hard to make things right. Users revolted, so they caved. That's all there is to it. The "unfortunately these people are most vocal" misses the mark completely -- had they been NOT vocal they would've faced enormous bills or they would have to spend 50 hours trying to migrate to a new system. That's if the data can be exported and imported freely, which is rarely the case.

So the customers spent hours comparing the offers of the competition, all the time being frustrated because this jumped on them from nowhere. And then, 2 days later, they hear "Whoops, my bad!". That just doesn't fix the damage, now does it?

If a thousand customers each spend 3 hours worrying about what to do, and these numbers are conservative, then you've created 3000 hours of unnecessary frustration. So the damage will exceed $300.000. Just with one ill considered move!

Whoops, sorry!

[mattmaroon]

Reasonably well-handled. I didn't go through the effort of switching our business away from this because I thought something might happen.

I do have the sneaking suspicion that if we grow a bit the business case for either switching or rolling an in-house solution ourselves will become much more compelling though, especially if I'm forced to upgrade from my current plan to a new one.

[jimboyoungblood]

When we decided to make a change to the Zendesk pricing structure for our existing customers, we tried to be as thoughtful, transparent, and straightforward as possible.

Transparent? Maybe you should've given your customers a warning first..?

While the letter is certainly worded very nicely (and carefully), it reeks more of damage control than sincerity. The picture with the puppy dog face puts it way over the top.

[mcantor]

How do you get more sincere than, "We failed. We let you down. And we apologize."?

I'm asking this in all honesty; I don't really understand where you see this as being insincere. Just curious.

[WiseWeasel]

That was the warning. The pricing change doesn't go into effect until July 1st, I believe.

[danielnicollet]

I get a sort of "spin doctor: feel from this move, with the big glaring eyes looking at me as I make my way to the message on the zendesk blog post... Maybe not so well handled since one could think Zendesk is trying to turn a difficult situation into a PR blitz: why are you posting here, rather than just emailing your customers?

[verdant]

They got some bad press for the pricing move. I don't blame them for trying to generate some good press out of it.

[dangrossman]

The same thing was e-mailed to customers before it was posted on the blog.

[rjurney]

This is how you do a public apology. Nicely played.

[DenisM]

Joel's school of apology: apologize unreservedly, it buys a lot of goodwill.

My theory is that when there is an unfortunate outcome the righteous sub-person in us thinks that blame must be assigned before progress can be made. This is might be true in some cases and not in other cases, but overcoming the mental habit might be harder than playing into it.

[bosch]

"It’s always easier to apologize for something you’ve already done than to get approval for it in advance." - Grace Murray Hopper, quoted in Computerworld, September 10, 1984.

[joevandyk]

For what it's worth, Zendesk is definitely worth it for the five customer support people we have. The amount of flexibility they give you and the api hooks are fantastic.

[jacquesm]

The damage is done though, and zendesks competitors are the ones that gained the most from this, even those that didn't switch are now more than aware of who they are and what their offering is.

The last thing you want to do when you have a good thing going is to get your customers to invest a bunch of time in to researching your competition.

[bradgessler]

Did Zendesk bother to grandfather the pricing on their existing customers and instead charge more for new customers?

[mikeryan]

no originally existing customers would only be grandfathered in for a year and they had to pay up front.

[bcardarella]

Glad to see they changed course. I was a developer at ZD for a few months when they were in Boston and I can tell you that they're a great group of people. Listening to their customers and changing course is evidence of that. Most other companies would just barrel ahead despite the outcries.

[ahoyhere]

Their customers & readers aren't going to forget the chortling, self-satisfied tone of their earlier communications.