Creating a Customer-Focused, Risk-Free Pricing Model

June 23, 2015 at 6:45 PM by John Keith in release announcement

The_Risk-Free_Approach

Pricing is hard.

As a software-as-a-service company, you want pricing that is:   

  • Easy to understand
    So people can quickly figure out what they’d pay.
  • Competitive
    Not too cheap, not too expensive, and easy to match up when comparing alternatives. 
  • Sustainable
    If you aren’t relying on outside investors or advertising, then you need to establish prices that support your business.

We’ve struggled with this! We tried several different approaches to our pricing strategy, seeking one that works for our customers and for us as a business. Each time we made a shift, we felt like we were getting closer, but it still wasn’t right. We just didn’t feel like we’d nailed it.

Until now.

The Risk-Free Approach

Today we are introducing our risk-free pricing model, based on these tenets:

  • Pay for what’s important
  • Pay only for what you’re using
  • Automatic price reduction if usage drops
  • Full control over usage and price increases

Paying for What Matters Most

With Lucid Meetings we want to make it as easy as possible for your entire team to meet with anyone, at any time, in any context. Lucid Meetings provides value when you can use it to improve all your meetings - when you can make "meeting well" a natural and frequent part of how your organization operates.

In the past, we’ve tried charging based on the number of meeting spaces an organization needs. More recently, we charged based on seats, or the number of people on an organization’s team with access to create meetings and review records. This is the most common way to price online collaboration software, and a close cousin to the “hosts” model the web conferencing vendors use.

Both models pass the “easy to understand” and “sustainable” tests, and it’s easy to make them competitive too.

But neither the creation of projects nor giving seats to people meant that they were using Lucid to run meetings. These things are easy to explain, easy to count, yes, but otherwise artificial.

We Needed to Ditch the Artificial Billing Metrics

We want to avoid introducing artificial constraints that limit our customers’ ability to use the service fully.

In our experience, it is incredibly easy for pricing models to influence behavior in ways that introduce the very constraints we want to avoid.

By trying to keep our pricing inline with what other companies do, we’d been clear, but didn’t feel like we were connecting well with what matters most to the people we’re trying to help.

  • With pricing based on the number of groups, rooms, or meeting spaces, customers limit the number of meeting spaces they create. The value of a meeting space is that it allows you to organize your conversations on a group, customer, or topic basis. If customers self-limit to reduce costs, the benefit of this organizing mechanism is lost.

  • With pricing based on the number of meeting participants, customers limit the number of participants in their meetings or simply choose to forgo the use of the service entirely. This GREATLY reduces the utility of a system designed to facilitate high participation meetings!

  • With pricing based on the number of people “in the system,” (aka seats or hosts) customers limit this access to only the people “who really need to meet.” This behavior leads to shared logins, reduced usage, and handcuffs on an organization’s ability to standardize around the systemic benefits associated with having everyone in a common system.

Customers will limit the number of rooms, potential participants, or seats to reduce costs. In the process they will limit the value they receive. There could be a better way.

Paying When You Get Value

Online services like Lucid Meetings must deliver value worth paying for. So you have to ask the question: how does someone receive a meaningful value from what you deliver? Who, exactly, is your customer?

After much discussion and many customer interviews, we zeroed in on a pricing model that directly relates to the value people receive from the software.

In our case, the value comes when people actually run meetings.

Not the people who could run meetings, not the people attending meetings, but the people who actually make things go for a team or client.

These organizers are our customers, with real problems we can solve. We help them prepare quickly, present themselves professionally, and achieve their meeting goals. They value our product and we love solving their problems.

Sounds obvious now, doesn’t it?

Our customers are the lifeblood of our company and it’s critically important that we establish a mutually beneficial relationship. We want our customers to use the heck out of our system without being punished for it.

The Brave Part: Only Charging for Value

The following are “software constructs” that are cheap for us to provide, but important for customer commitment. Going forward, we no longer expect you to pay for:

  • Creating as many meeting spaces as you need to organize your teams or conversations
  • Adding all your team members to ensure participation and critical mass
  • Setting up as many meeting organizers as you need to drive adoption by your core people
  • Inviting as many meeting guests as you need to accomplish your goals
  • Conducting as many online meetings as you need to realize your productivity gains

So what do Lucid Meetings customers pay for then?

Starting today, our customers will pay only for the number of people who actually click the "Start Meeting" button and run meetings in a given month.

For Lucid customers, this means that:

  • You control the number of organizers who could run meetings.
  • If no one runs a meeting, you pay nothing.
  • If only a few organizers run meetings, you’ll pay very little.
  • As more organizers use the system, you’ll gradually pay more.

From a billing perspective, we don’t care how many meetings you run, how many team members join, how many guests you invite, or whether you organize your meetings in one room or ten.

Do what you need to be successful.

Customer-Oriented Pricing

I think of this as a transaction-based, per-seat model. You pay for meeting organizers (seats), but only when there are meetings (transactions) that give those seats value.

Do the Right Thing: Don’t Charge People for Something They Aren’t Using

People sign up with us to run meetings, so now we'll charge based on that. Again, seems obvious, but you can also see why we needed to be brave.

We no longer have any mandatory minimum price for the Lucid Meetings Business Flex plan. Every month our customers start with a zero balance and only incur charges to the extent that they use the service. This ensures an immediate price reduction when usage declines or stops entirely for any given month.

And we know this happens, even with the most dedicated Lucid fans! People go on vacation, hit a slump in business, or shutter their committees for a few months. By charging less or perhaps not charging at all during these slow periods, we tie our business's success directly to our customers’ success.

Related: Fair Pricing Policy

We want the message to be very clear: we’re in this together, and we’re working hard to help you succeed. If we can’t do that together, you won’t have to pay for our services.

And what about predictability?

If the price can drop when fewer people run meetings, then the opposite must also hold. More people running meetings means a higher price.

From our many conversations with customers, we know that people build up a set of pricing expectations based on historical usage patterns. If I’m in the habit of paying for two or three organizers per month, but suddenly get billed for five or six in one month, I’m going to wonder what happened.

In this case, our customers determine how many people have access to run meetings, so they have complete control over what the maximum bill could be. But we all know that people forget what they've set up and how the system works.

To prevent any surprises, we’ve built in regular communication to help customers understand and predict their bills. Each month they’ll get a report explaining how many people ran meetings, how many people could have but didn’t, and that month’s charges. A detailed list of every meeting held accompanies each report.

Finally, for those who need absolute predictability and pretty much know how many people in their team will run meetings in the coming year, we still offer an annual plan at a discounted rate.

The Bottom Line

As one of the customers we shared this idea with said:

“It’s either crazy or brilliant, and possibly both!”

Crazy, brilliant, or both, this is pricing we feel good about.

Our goal in creating a sustainable business is to enter into equitable, balanced arrangements with our customers. We deliver the value our customers need, when they need it. Our customers pay for that value when they receive it.

Sounds pretty good to me.


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