Running a business has its ups and downs. Right now I’m feeling like I’m on a roller-coaster of feelings. On one hand, I had to make a difficult but necessary decision to raise Nozbe prices. There’s a new pricing structure coming to both Nozbe Personal and Nozbe starting from July 1, 2023. This post is about the why, the how and the timeline of the whole process, with some lessons learned from the past. Here goes:
- Why we’re raising prices of Nozbe?
- How NOT to raise prices - mistakes we’ve done in the past
- How to raise prices correctly, reward your customers and be fair to everyone
- How to communicate pricing changes - or why there’s no easy way to do it!
- P.S. How I made it even harder on myself when it comes to Nozbe pricing.
Why we’re raising prices of Nozbe?
In the 16 years of running Nozbe I’ve only raised the prices a handful of times. Last time was in 2017, so 6 years ago. Six years.
That’s why the obvious answer is - inflation. Everything is more expensive now. While we’ve managed to keep our costs as low as can be, to be able to really serve our customers the best way we know how, we need to be able to have a little breathing room in our finances.
After all, we are a privately-held company by choice, so our only investors are our customers. We don’t report to any other bosses. We answer to our customers and we hope we have an understanding with them:
We promise to deliver the best productivity app for our customers so that they can save hours and earn more money with the time they’ve gained. In return we ask for a small monthly fee that ideally is just a tiny fraction of the value they get from using Nozbe to run their life and business.
That’s what I strongly believe in. That’s what keeps me going!
The monthly fee pays for everything - servers, salaries, taxes and all other costs. I feel a strong bond with my customers thanks to this WIN-WIN relationship. We’re trying to offer as competitive a price as possible so that the customers get lots of value from it.
Our additional goal was to harmonize the prices between the two products. Starting from July 1, prices of both Nozbe Personal and the new Nozbe will be the same for similar plans. As we’ve made the new Nozbe the future of Nozbe, we’ve added there the most requested features and made sure the transition from Nozbe Personal is as seamless as possible. Now we want to make sure the decision to stay with one product or go with the other isn’t based on price. Just on the features and personal preference.
Ultimately it’s a bet on the future. We want to stay in business for years to come (16 more at least!) while providing our customers with the best product we can. Again, it’s a win-win. If we’re doing great, our customers are being productive and are doing even better. This however sometimes means making a difficult decision of setting new pricing.
Given the choice, I prefer to raise the prices to be able to offer the customers even better level of support, instead of staying with lower pricing and figuring out how to cut costs, while lowering the quality of service just to keep the business running.
How NOT to raise prices - mistakes we’ve done in the past
One of key value for me is fairness. I strongly believe in fair play. That’s why in my company we have a salary formula so that the compensation is calculated fairly.
That’s why I didn’t like how in the past I’ve handled the price changes. What we’ve typically done is this: we kept the current customers on old prices and we’ve only introduced the new prices to the new customers. This way we’ve basically created different prices for different people, paying for essentially the same product. This is what you call in business: grandfathering customers. It sounds good in principle, but when you think about it:
It’s NOT FAIR.
We felt we needed to act like this, not only because we wanted to reward our long-time customers for trusting us, but we also feared their reaction. We were afraid to tell them we needed to raise prices.
Someone wise told me once: Decisions based on fear are not good decisions.
That’s why we’ve learned from our mistakes and here’s how we think we can do both, reward our current customers while setting prices fair for everyone:
How to raise prices correctly, reward your customers and be fair to everyone
Over the past year or so, many companies also had to raise their prices and we’ve been watching how they’ve done it. Some were repeating our mistakes from the past. Others have raised the prices from one day to the other without any notice. However between these extremes I believe we’ve found a way to make it right: how to appreciate the past and bet on the future.
Step 1. Set a date for new prices - July 1, 2023
We’ve decided that from that day on, all the customers will be bound by the new prices. All the future transactions will be calculated based on them. And there will be no exceptions. We will have only ONE pricing for Nozbe.
Step 2. Announce the change to the current customers and let them extend their accounts today!
As a reward for their loyalty, our job in June of this year is to announce to all current and past customers that the new prices are coming and give them a chance to extend their accounts at their current prices.
Again, it’s not technically grandfathering, because after July they’ll not be able to extend at the old prices. But it’s a chance for them to reap savings in June just because they know what’s coming.
We even let them pay for a few years into the future, and quite a few have extended their accounts for 3-5 years!
Step 3. Respect customers’ payments while making the new pricing official.
This is again where I think we’ve gone above and beyond. If you’re a Nozbe Personal user today and extend your account until September of 2025, and sometime in 2024 you decide to switch to a similar plan on the new Nozbe, your account will still be valid until September 2025. There’s no re-calculation or anything. Come September 2025 you’ll be charged for your account at the new prices. This way we respect what you’ve pre-paid for, while having one new pricing for all customers.
How to communicate pricing changes - or why there’s no easy way to do it!
Price changes are always hard. I have a hair-dresser who comes to my home every 2 months and cuts hair of my entire family (and with my 3 daughters, we’re 5 people!). She used to charge 10 EUR per cut and one day last year she announced that she was raising prices for the first time in years - from 10 to 12 EUR. That’s 20%! I’d have to pay 10 EUR more for my family.
When I look at that from the value perspective, it’s a no-brainer - because she’s coming to my household, cutting everyone’s hair and saving me lots of time and stress while delivering a great haircut. And I want her to stay in business. I want her to keep coming to my house! But I saw how uncomfortable she was announcing the change. How anxious she was. She was afraid to lose me as her customer.
This is how I feel now communicating this change.
That’s why we’ve decided to take our time and during the entire month of June try to communicate this change to all of our current and past customers. We’re taking our time, answering their concerns and just trying to be there for our customers.
And our customers are awesome.
When we sent first emails to our paying customers last week I got this response:
To be honest, when you wrote that “you haven’t changed prices since 2017 despite all costs of everything raising significantly”, my first thought was that “there’s no way that in 6 years I haven’t paid for Nozbe more each year”. Then I checked back and saw my invoice from 2018 and I saw the exact same amount as this year. So… thank you for the heads up about raising the prices. I’ll be extending my subscriptions for years to come!
This was such a heartwarming response! Of course, not emails were like that and we do have to react to many people disappointed with our announcement and we’re doing the best we can to explain ourselves and do good by them.
There’s also the silent majority of already hundreds of customers that have quietly extended their accounts. Some for 2, 3 or more years in advance. These are the true believers in our long-term win-win strategy. Thank you! 🙏
Next step is to keep communicating the change. We’ve got more emails lined up in the weeks to come, we’re recording No Office FM podcast episode with Q&A next week.
I think the only way forward is to bet on the future, bet on your customers and bet on the long term win-win relationship we’re building here.
This is the way.
P.S. How I made it even harder on myself when it comes to Nozbe pricing.
I think that if I would just be like my hairdresser and announce an X% price increase it would have been easier. However due to my past mistakes and wrong pricing decisions, I’ve made it additionally harder on myself.
With this change we’re harmonizing pricing between two products that had different prices in the past, so there are differences across the board - some are almost the same as they were (it’s still $10 a month for a single user), some are a few percent more but others are significantly more expensive. This results in some customers being more annoyed than others, for a right reason! The weight of the past is following me here and is haunting me.
That’s why when designing the new pricing I’ve set up some ground rules in the spirit of fairness:
- Fairness of having just one pricing
- Savings for yearly payments at 20%
- Savings as customers’ team grows
- More tiers for smaller teams (in accordance with our WHY)
- Payless upgrade for maximum customer convenience
Posted as of June 19: 5 principles for designing a pricing scheme for SaaS companies - how to charge per user with savings and fairness in mind
Suffice to say, changing pricing is a roller coaster 🎢 of a ride but I’m hopeful that when all is said and done, it’s going to be OK for everyone involved.
If you’re a Nozbe customer and this change affects you, I hope these words helped you understand where I’m coming from. Thank you for your trust and your business!