Pricing is hard. We need your help.(blog.keen.io)
blog.keen.io
Pricing is hard. We need your help.
http://blog.keen.io/post/32269955563/pricing-is-hard-we-need-your-help
35 comments
You vastly underestimate the value of predictability in billing to a business's "Chief Fretting Officer".
If you asked companies if they'd rather pay a random amount between 100$ and 500$, or always pay 500$, 9 out of 10 would opt for the latter. And if you don't understand why, then you've never spent any amount of time pondering a business's cash flow.
If you asked companies if they'd rather pay a random amount between 100$ and 500$, or always pay 500$, 9 out of 10 would opt for the latter. And if you don't understand why, then you've never spent any amount of time pondering a business's cash flow.
"pay a random amount between 100$ and 500$, or always pay 500$, 9 out of 10 would opt for the latter"
Why so ? You are perhaps referring to a business's ability to project/forecast cashflows which is critical but even then, if the number is always going to be less than or equal to 500, I would rather choose the first option.
Why so ? You are perhaps referring to a business's ability to project/forecast cashflows which is critical but even then, if the number is always going to be less than or equal to 500, I would rather choose the first option.
At my old day job, my boss literally instructed me to pay $200 rather than rand(10..40) because otherwise he would have been committing to a minute of work every month updating an ERP entry. Plus, not his money, but certainly his minute...
New pricing strategy: the low-end tier is metered.
That's also a big argument in favor of formulating seat-based pricing models as blocks as opposed to per seat. It reduces the update frequency.
That's also a big argument in favor of formulating seat-based pricing models as blocks as opposed to per seat. It reduces the update frequency.
Metered low-end looks similar to what AWS does, doesn't it ? Spot prices are metered, but if you want to get a flat fee per month, no worries, you can get the reserved instances. Which also have a better bang per buck.
reserved instances aren't totally flat fee. Reserved instances allow you to pay a fixed cost up front for a reduction for the rest of the month.
"not his money"
In that case, totally agree with you. If, however, it was his own money, I am sure it would be a different story.
In that case, totally agree with you. If, however, it was his own money, I am sure it would be a different story.
And also the fear of an app (and consequently the API) getting hammered by the mobile equivalent of a clickbot (should such a thing exist), or some developer on the product accidentally programming in an infinite loop.
Oops, there goes thousands of dollars.
FWIW when I was recently involved in pricing an API, after much thought I decided the best option was tiered pricing with different rate limits (requests per hour) at each tier. At least with that structure you don't have to worry about angry customers with huge bills or customers bankrupting you with usage gone wild that they'll never be able to pay for.
The other risk of pure usage based pricing is that it attracts a cost-minimization approach to usage. That was my original plan but speaking to prospects put me off when I realized that many were willing to forgo all business sense and invest crazy amounts of development time to minimize API costs. And you still have to support them. (NB Yes you can have a base charge but many seem to think that inherently unfair when they have to pay for usage on top.)
Oops, there goes thousands of dollars.
FWIW when I was recently involved in pricing an API, after much thought I decided the best option was tiered pricing with different rate limits (requests per hour) at each tier. At least with that structure you don't have to worry about angry customers with huge bills or customers bankrupting you with usage gone wild that they'll never be able to pay for.
The other risk of pure usage based pricing is that it attracts a cost-minimization approach to usage. That was my original plan but speaking to prospects put me off when I realized that many were willing to forgo all business sense and invest crazy amounts of development time to minimize API costs. And you still have to support them. (NB Yes you can have a base charge but many seem to think that inherently unfair when they have to pay for usage on top.)
My above statement is actually aligned with your sentiment. I think people use data analysis to help predict future events like how many customers you'll have or how much an expense will be.
I figured, since Keen is in the business of helping people with those predictions it would be a really awesome application of their own API. Customers could see their usage as part of the visualizing product and it would help them predict their bill.
I figured, since Keen is in the business of helping people with those predictions it would be a really awesome application of their own API. Customers could see their usage as part of the visualizing product and it would help them predict their bill.
The discussion here is exactly why we started the conversation.
Certainly, if we go this route, we'll make sure our users can readily monitor their usage so as to minimize surprises. Even still, we don't want our customers to have to kill the service in the middle of a billing cycle.
Certainly, if we go this route, we'll make sure our users can readily monitor their usage so as to minimize surprises. Even still, we don't want our customers to have to kill the service in the middle of a billing cycle.
I agree, but only because in practice the choice is usually a little different:
- always pay $500 vs. pay a random amount between $100 and $500, except when you have a really heavy month and you pay $3,000.
Utility pricing without the ability to set caps is problematic.
- always pay $500 vs. pay a random amount between $100 and $500, except when you have a really heavy month and you pay $3,000.
Utility pricing without the ability to set caps is problematic.
If you asked them that way they'd opt for the former. However, most pricing structures don't provide such a clear-cut range; the edges feel quite fuzzy, and that uncertainty does indeed drive customers towards predictable-but-higher pricing.
Nope. You can use accounting to absorb the volatility.
I've always found Mailgun's pricing intuitive yet technical friendly. There's some tiering involved, but it's just a nice wrapper around utility pricing that doesn't feel like you're negotiating in cents.
It would be nice to have an explanation of what Keen.io does in the article. Actually, even after browsing your site I still don't have any idea what you guys do, besides collect data and visualize it. There also doesn't seem to be any indication of -how- you guys do visualization. It's hard for me to think about pricing for your service when I have no idea what you offer.
Good point. We're not released yet, and there are probably < 100 people who have a good enough idea of what we're doing to really dig in and give us feedback
We'll edit the blog post to add a bit more background
update:
here's the working copy:
--
We make three kinds of APIs:
Once your app is sending us stuff, your product manager may ask you to make her a little analytics dashboard, so she can agonize over it every morning. For instance, this dashboard could have answers to questions like "How many people opened the app each day over the course of the last week?" That question (and many way more advanced ones) can be answered using one of our analysis APIs (in this case, the Series API https://keen.io/static/docs/data_analysis/series.html)
Finally, suppose a few weeks later she's tired of staring at numbers and wants to see this information graphed visually in a line graph. That can be done using our visualization APIs (not yet released).
We'll edit the blog post to add a bit more background
update:
here's the working copy:
--
We make three kinds of APIs:
-data collection APIs
-data analysis APIs
-data visualization APIs
Once your app is sending us stuff, your product manager may ask you to make her a little analytics dashboard, so she can agonize over it every morning. For instance, this dashboard could have answers to questions like "How many people opened the app each day over the course of the last week?" That question (and many way more advanced ones) can be answered using one of our analysis APIs (in this case, the Series API https://keen.io/static/docs/data_analysis/series.html)
Finally, suppose a few weeks later she's tired of staring at numbers and wants to see this information graphed visually in a line graph. That can be done using our visualization APIs (not yet released).
I think the what here might be less important than why for pricing. It's easy to get a sense of your platform from your website, but who is your target customer and why are they paying you? Does this save them time? Money? Make them money? Got any scenarios or customer sketches?
(Disclosure: I wrote the post)
These are all great questions. Thinking long-term, the answer should be yes to all of those questions. We should save time (and therefore money) and be a vehicle for increased revenue. And, we intend to do a lot more writing about how folks are using/could use/should use our product. At the same time, in the long run, we’re all dead. So, in the present, we’re looking to work with Series-A type companies who are in the midst of early product development. We want to work alongside them to understand their analytics needs and tweak our roadmap accordingly.
Those customer sketches/white papers are extremely important to us. We’re still learning (and probably always will be). It’s my hope that we will be in a position to blog about customer experiences soon. Dominos are certainly lining up for that.
These are all great questions. Thinking long-term, the answer should be yes to all of those questions. We should save time (and therefore money) and be a vehicle for increased revenue. And, we intend to do a lot more writing about how folks are using/could use/should use our product. At the same time, in the long run, we’re all dead. So, in the present, we’re looking to work with Series-A type companies who are in the midst of early product development. We want to work alongside them to understand their analytics needs and tweak our roadmap accordingly.
Those customer sketches/white papers are extremely important to us. We’re still learning (and probably always will be). It’s my hope that we will be in a position to blog about customer experiences soon. Dominos are certainly lining up for that.
who is your target customer and why are they paying you? Does this save them time? Money? Make them money? Got any scenarios or customer sketches?
In addition to these questions, I'd also think about how to reach a point where customer feels a high switching costs. It seems that a service like yours can be offered by many, but the important competitive advantage is that the more customers have stored data on your service, the more 'expensive' for them to switch.
What part of your service increases in value the longer someone uses it? Is it the historical data of the customer's own app, or is it the cross-sectional data of apps in other categories? As mentioned above, mixpanel is a good example, so is new relic.
In addition to these questions, I'd also think about how to reach a point where customer feels a high switching costs. It seems that a service like yours can be offered by many, but the important competitive advantage is that the more customers have stored data on your service, the more 'expensive' for them to switch.
What part of your service increases in value the longer someone uses it? Is it the historical data of the customer's own app, or is it the cross-sectional data of apps in other categories? As mentioned above, mixpanel is a good example, so is new relic.
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Whether you price by usage or have tiers, always do value pricing, not cost-plus pricing.
Agree; it's most in line with what the customer wants, facilitates segmentation in a way that's fair to both parties involved, and allows upselling when material changes in product or service take place.
Even if you use utility pricing, it's still best to frame it in terms of something meaningful to your customers.
Even if you use utility pricing, it's still best to frame it in terms of something meaningful to your customers.
I've helped a number of companies put together pricing plans, and the first thing I usually say is "talk to your customers", so it's great that you are already doing that. However, the real question is not "how should I price this?" but "why is this awesome to you? (what is the value?)" You should absolutely price based on value-- if your value is greater than your cost, you can win. If not, you need to fix something. If you don't know what that value is, spend your time there, and the pricing will flow from that. As mentioned by others, you can always grandfather existing customers if you decide to change.
(That said, I'm guessing that simple tiers + custom enterprise plans if needed will be the way to go. The trick is figuring out how to set them up.)
(That said, I'm guessing that simple tiers + custom enterprise plans if needed will be the way to go. The trick is figuring out how to set them up.)
I think the description of what you do is just too vague to give any feedback on how to price it. "collect, analyze, and visualize" data could mean almost anything. I even browsed through the docs and couldn't figure it out.
Do you have a full blown example use case of how a customer would use keen.io?
The getting started page shows an example of inserting an "event" and counting it, but I'm not sure what that means, or what the end goal is, exactly.
Do you have a full blown example use case of how a customer would use keen.io?
The getting started page shows an example of inserting an "event" and counting it, but I'm not sure what that means, or what the end goal is, exactly.
We updated our description to make more sense and include an example
What do you think of it?
What do you think of it?
Our pricing at Repustate.com is fixed fee for a fixed quota of API calls. Usage-based billing sucks because of the unpredictability on both sides, plus it makes invoices much easier for us. Like others have mentioned here, predictable costs are good.
Keen looks to be another Mixpanel. I looked at mixpanel's pricing, and it sis nicely structured into tiers so one can estimate quickly how much it will cost based on the size of the business.
Mixpanel's pricing is utility based under the hood (they automatically pro-rate or upgrade the plan based on what is cheaper), but the marketing copy is tier based. That looks to be a good approach.
Mixpanel's pricing is utility based under the hood (they automatically pro-rate or upgrade the plan based on what is cheaper), but the marketing copy is tier based. That looks to be a good approach.
dsolomon(1)
If you need help with pricing, email me. Our company does algorithmic pricing via a REST API, I'll give Keen access for free.
To address your listed cons to utility style pricing:
1) Products aren't turned into a commodity because of how they are priced. They are commoditized when many perfect substitutions exist in the market.
2) I'm not sure if "not predictable" will go over well with your audience. Maybe you could use your own product to help people predict their bill with you. It would be a neat application of your software.