On October 28th 2011, we started a big discount on our 1-user Oempro license. The regular Oempro price of this license type was $299 and we reduced it to $29. Yes, we made a big discount. It was a big risk for our sales revenue. Even though 1-user license sales have a small impact on our Oempro revenue stream, it was still a big risk.
When making this decision, we were inspired from Atlassian’s JIRA pricing model where they have $10 10-user license. To those who don’t know JIRA, it’s a well-known enterprise level issue tracking software. We decided to give it a try and started the big discount on 28th October. The discount period ended at the end of November 2011, which means it last for around ~34 days.
In this period, we sold 25x more Oempro 1-user licences. In just 34 days, we gained new customers whom were being gained in 10 months. It was a big success from customer-base and sales quantity side. However, was it really a success?
This was the first time we were reducing our enterprise level email marketing software to a low price level. There were some risks such as;
- Damaging Oempro’s brand. Selling a software with a low price may cause to position it on a “Personal” category instead of a “Professional” or an “Enterprise”.
- Acquiring customers who don’t believe in our product. When you keep the entrance barrier low, anyone can purchase easily which means your product will loose its value on customer’s side.
- Loosing the customer feedback. When you purchase a product, which is cheap, you tend to provide feedback to developers less likely. You see it as a time loss.
- Loosing the customer loyalty. They purchase it almost free. So, they can easily switch to an alternative solution, because their loss will be nothing. Just $29.
These were the main risks involved in our big discount period. However, we wanted to give it a try, because it was working well for Atlassian and many other successful software companies.
In the beginning everything was great. We were making lots of 1-user Oempro sales and our charts hit the ceiling. We were selling tens of 1-user Oempro licenses every day. We were getting tens of new customers every day. We were quite happy and believed that this pricing model was working.
However, a few weeks have passed and we were measuring our success (or failure), we noticed something weird. Even though our customer base was increasing dramatically, the numbers of provided feedbacks were decreasing. The numbers of support requests were decreasing. We decided to wait a week more to see the big picture. On the third week of November, we started to analyze every single parameter and noticed a few things;
- Our 1-user Oempro sales volume has increased dramatically. We sold almost 25x more 1-user licenses compared to previous periods.
- Other Oempro license sales decreased a lot. 1-user license sale was great, but our high profit licenses such as 10-user and unlimited-user licenses were going down. Everyone was purchasing our 1-user license, which was $29, but they were not purchasing $699 or $1979 licenses.
- Numbers of feedback shared with us through our community forums and support desk didn’t increase just like our customer base and sales volume. This was pointing to a warning, because softwares cannot live without feedback provided by users.
- Our revenue didn’t increase a lot. Even though the number of units sold increased, our revenue had no valuable change.
- Support requests didn’t increase. This seems to be good in the beginning (considering customer maintenance costs), however support means questions and questions means feedback for the future of the software. We were loosing this advantage.
So, this “easy entrance barrier” pricing model didn’t work for our software and we decided to stop the big discount at the end of November.
1-User Oempro license is now $299 again just like before the discount. We also have higher licenses with the following prices:
- 5-User Oempro License – $499
- 10-User Oempro License – $699
- 20-User Oempro License – $1099
- Unlimited User Oempro License – $1979
We are still not happy with our pricing. Oempro is one of the best and most powerful email-marketing software designed for ESPs mainly. With Oempro, anyone can build a new ESP business. And it’s the only ESP software which is being used by its developers to run another successful ESP business; Sendloop.com. We believe that we are leaving money on the table.
We are now working on a new pricing model on Oempro. We will announce new pricing in following months but until then we will continue experimenting and measuring.
I want to learn your thoughts. What kind of pricing model do you apply and how do you measure your success. Feel free to share by posting comments below.