Accounting for the Pricing Journey
You will undoubtedly undervalue your product or services, and your pricing will be wrong; this I am sure of. It will be echoed by every seasoned business person, professional coach, and everyone in between. You will start researching and googling how to raise your prices and you’ll find over 7 million results offering you advice.
Your inability to make any sense of it will be frustrating, and with every article you read you’ll find some qualifier that holds you back. The fears you feel – “what if we’re wrong”, “can we just revert?”, “what will the impacts to the brand be?”, “will my market work with this change?” – never really go away. Your frustrations won’t be that you don’t understand the idea of raising prices, but more along the lines of how.
A Pricing Journey with Sucuri
While we are all accustomed to reading advice that starts at the conclusion, I instead want to focus on our journey. Specifically our journey with pricing at Sucuri. The real insights come from analyzing how someone reached a conclusion, because what we’re really after is the thought process more than the end result. How do I navigate the process of raising or changing my prices? I honestly have no idea, but I’ll tell you our story.
Our journey has been like everyone else’s, bumpy and checkered as we’ve stumbled between different milestones. Neither my partner nor I had any experience building or leading a company, let alone any insights into how to begin thinking about pricing. What we did have going for us was our naiveness, natural curiosity, willingness to take chances and our knack for questioning the status quo.
Pricing was always a heavily contentious subject at the management level. It was not that we didn’t realize our pricing was off, but more along the lines of what to do about it. Knowing and doing are two fundamentally different skill-sets. It got to the point that we were being told to raise prices so often that I literally wanted to scream.
January 2010
This is when we, Sucuri, first officially opened ours doors as a company. We sold our first $89.99 plan. It was set at $89.99 a year for unlimited cleanups on unlimited sites. What could go wrong? We even had a few options to purchase one-time cleanups. We quickly learned a lot. Who knew people had so many websites!! We hadn’t accounted for the way that hosting providers created accounts, in a one to many relationship between the account and the domains.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]PREMIUM[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]Unlimited Sites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]$89.99[/row_column]
[/table_row]
[/table_body]
[/table]
End of 2010:
We introduced a couple of different plans based on quantity closer to the end of 2010, driven by what we had learned earlier in the year that offering unlimited cleanups on an unlimited quantity was highly impractical. So we released three plans, thinking we understood the market, it was set at 1, 10, 100, because that is what people had. They went from 10 to 100. We’d quickly learn that wasn’t the case.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]PREMIUM[/th_column]
[th_column]BUSINESS[/th_column]
[th_column]ENTERPRISE[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]1 website[/row_column]
[row_column]10 websites[/row_column]
[row_column]100 websites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[/table_row]
[table_row]
[row_column]$89.99[/row_column]
[row_column]$289.99[/row_column]
[row_column]$1,500.00[/row_column]
[/table_row]
[/table_body]
[/table]
End of 2010:
It became apparent really quick what the price tolerance would be in our market. Especially at the stage we were at as a company, and at the maturity of the market, it became blatantly obvious the plans would not work as currently configured, so we adjusted and added a total of four plans. We reduced the quantity to 50 domains as it became apparent that not many would purchase 100 domains, and as an organization we weren’t configured to pursue them and offer them the service they’d require. Looking at the data we did have for signups it was apparent that there was some potential between 1 and 50, so we introduced 30 and 50 site signups.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]PREMIUM[/th_column]
[th_column]BUSINESS[/th_column]
[th_column]NETWORK[/th_column]
[th_column]THE BEAST[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]1 website[/row_column]
[row_column]10 websites[/row_column]
[row_column]30 websites[/row_column]
[row_column]50 websites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[/table_row]
[table_row]
[row_column]$89.99[/row_column]
[row_column]$289.99[/row_column]
[row_column]$589.99[/row_column]
[row_column]$789.99[/row_column]
[/table_row]
[/table_body]
[/table]
End of 2011:
At the end of 2011, we had gained enough insights into what people were signing up for that it became apparent that the volume of the 50 was not enough to keep it on the main pricing page. At this time we introduced a price slider that did allow potential customers to increase their quantity and get a quick price calculation, purchasing if they so desired. We adjusted the pricing table to three options though, and focused on 1, 10 and 30 quantity plans.
We could feel we were getting closer in our configuration.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]PREMIUM[/th_column]
[th_column]BUSINESS[/th_column]
[th_column]NETWORK[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]1 website[/row_column]
[row_column]10 websites[/row_column]
[row_column]30 websites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[/table_row]
[table_row]
[row_column]$89.99[/row_column]
[row_column]$289.99[/row_column]
[row_column]$589.99[/row_column]
[/table_row]
[/table_body]
[/table]
Early 2012:
In early 2012 we had our first management meeting, first time we all met, and it was at this time that we had an epiphany. While looking at our data, it was apparent that even at 30 sites all the emphasis seemed to be on the 1 and 10, with bigger emphasis being on 1. At the same time, internally, we were noticing a lot of questions from customers expressing their concern about the jump between 1 and 10 when they only had 2 or 3. So after much discussion, we decided that maybe we should adjust the plans one more time, but this time, keep it between 1 and 10, but introduce a 5 site plan and move all larger quantities to our pricing slider.
We had found the sweet spot. Our Premium signups would enjoy about 70% or so of the signups, the Power about 25% or so, and the rest would fall on the Business plan. It had solved a big problem for us, the right configuration for our market.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]PREMIUM[/th_column]
[th_column]POWER[/th_column]
[th_column]BUSINESS[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]1 website[/row_column]
[row_column]5 websites[/row_column]
[row_column]10 websites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[/table_row]
[table_row]
[row_column]$89.99[/row_column]
[row_column]$189.99[/row_column]
[row_column]$289.99[/row_column]
[/table_row]
[/table_body]
[/table]
November 2014:
The 2012 pricing stayed for about two years, and was picking up a lot of momentum. But even with the price changes in previous years, we hadn’t really increased the prices as much as we had introduced different plans around quantity. The desire to change was there, but we were very unsure of what that would look like. Things were further convoluted because we had introduced a new product (Sucuri Firewall) that would add some unexpected dimensions to the entire process.
With the configuration we felt worked, we began to explore the idea of increasing the price itself, but it took us until the end of 2014 to take the plunge (three years of discussions and debates). We started very modestly; we added $10 to each plan, in our mind it felt it would be marginal enough where the change would not be too drastic.
Boom! There was no impact, the market bared the change perfectly.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]PREMIUM[/th_column]
[th_column]POWER[/th_column]
[th_column]BUSINESS[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]1 website[/row_column]
[row_column]5 websites[/row_column]
[row_column]10 websites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[/table_row]
[table_row]
[row_column]$99.99[/row_column]
[row_column]$199.99[/row_column]
[row_column]$299.99[/row_column]
[/table_row]
[/table_body]
[/table]
February 2015 to Present:
In 2013 we had introduced the Sucuri Firewall, a Website Application Firewall (WAF) / Intrusion Prevention System (IPS), but it was actually never built to be sold separately as its own product. It was always designed and built to service our customers that were having reinfection problems brought about by their inability to upgrade for whatever reason. It worked so well, we decided to see if there’d be any interest in the market. There was, but it also had unintended consequences; the minute “protection” was released, immediately we learned how little customers would understand the difference between a monitoring / remediation service, and a separate protection product.
The release of the product actually turned into a blessing in disguise. While it did introduce some hiccups, it allowed us to approach the pricing discussion from a different angle – bundling. It had to be one product, but with the product in it’s infancy in 2013 it was too difficult a decision to bundle into one solution at that time. The product would need to mature, and in February 2015 we found ourselves at the right point in which we could combine the products to deliver a better solution to our customers. Customers assumed when they purchased security from us, they were getting everything, without knowing what everything was, so we needed to offer it. This is what drove our change, offer a more complete solution to customers and we did it by combining products and extending the value proposition.
We made our biggest pricing increase to the core product in our 6 year history on February 18th, 2015. In reality though it was a price reduction, we had combined products, and reduced the pricing. To the outside world however, all that was seen was the number changed, not the features or value. In addition to the price change, we tackled the problem of quantities by doing away with them outright and focusing on feature based pricing.
For about three weeks after the change we lost close to 40% of our signups, we spent a lot of time changing our underpants. It was perhaps the scariest moment in our history, in which both Daniel and I barely slept and repeatedly tested the signup process to makes sure it was functional. Within 48 hours of the release we knew we had a problem, but we also knew that changing too quickly would be ill-advised; we would have to reach deep and see if the market normalized. The market normalized, and within a month that 40% reduction, turned to a 10 – 15% drop, which when you compare to the price change was more than acceptable.
[table width =”100%” style =”” responsive =”false”]
[table_head]
[th_column]BASIC[/th_column]
[th_column]POWER[/th_column]
[th_column]BUSINESS[/th_column]
[/table_head]
[table_body]
[table_row]
[row_column]1 website[/row_column]
[row_column]1 websites[/row_column]
[row_column]1 websites[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[row_column]Unlimited Cleanups[/row_column]
[/table_row]
[table_row]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[row_column]Unlimited Monitoring[/row_column]
[/table_row]
[table_row]
[row_column]$199.99[/row_column]
[row_column]$299.99[/row_column]
[row_column]$499.99[/row_column]
[/table_row]
[table_row]
[row_column]Protection[/row_column]
[row_column]Protection[/row_column]
[row_column]Protection[/row_column]
[/table_row]
[table_row]
[row_column]12 HR SLA[/row_column]
[row_column]6 HR SLA[/row_column]
[row_column]4 HR SLA[/row_column]
[/table_row]
[/table_body]
[/table]
Price Changes and Increases
In hindsight it’s easy to say that yes increasing our prices mades sense, but it’s the furthest thing from simple as illustrated above. There a number of things I’ve learned (which I’ll outline in more detail in another post), but the biggest is that price changes are dependent on two things: the phase that you’re in as a company and your market. Had we increased our prices too early, I would probably be writing an article on how we collapsed one of the fastest growing consumer based website security companies with one “simple” price change.
How we started with our pricing is easy to understand when you understand our motivations. For us it was about bringing security to the masses as cost-effectively as possible. In fact, for a long time, two years to be exact, Sucuri was a project more than a business. The only reason it turned into a business was because of the demand, it started to get so crazy that the time commitment was unsustainable. We wanted to make security attainable to the everyday website owner.
This was a rare thing in the security industry, in security it was always about up-market (the enterprise). We wanted to change that, we honestly felt that if done correctly a product could work in that market. We wanted to put the experience and ownership of security issues on our shoulders, not the webmaster. If you understand the website infection / remediation market you’d understand why, when you’re at your lowest point the last thing you care about are the specific nuances like number of pages, reinfections, etc… you just want it addressed, yesterday. This is where our naiveness kicked in again, how hard could that be? We didn’t know, and thankfully my partner Daniel Cid is a genius, so we felt confident we would figure it out. I mean seriously, what could wrong?
Stay tuned, I’ll be sharing a more comprehensive lessons learned article in the coming weeks. Hopefully though this initial post helps you realize that it’s ok if your journey is not as perfect as all the articles you read.
What’s your pricing journey been like?