One of the most difficult parts of running a WordPress business is coming up with a revenue strategy. In a post on the official SIDEKICK blog, Ben Fox explains that in the past two weeks, customers went through a pricing experiment with an opportunity to provide feedback. The feedback to SIDEKICK highlighted areas ripe for improvement including pricing, the number of plans, and determining value.
One of the biggest lessons learned from the article is to base a price on value, not on cost.
Our biggest mistake when we started discussing price was trying to determine what it would cost us to support our platform and each customer, not what the value of our platform was to our customers. When you price based on cost, you leave money on the table. When you price based on value, everybody wins.
I’m happy to see SIDEKICK stick by its instincts after receiving the following feedback, “SaaS has no place in WordPress” and “I will only ever pay a flat fee for a plugin.” If SIDEKICK restructured its plans to cater to this mindset, they’ll almost certainly go out of business. Fox points out three things that would happen if SIDEKICK accepted a one-time flat fee and unlimited updates.
- We would never see a return on our investment and our customers would never see the value they’ve paid for
- The quality of our product would never really improve because we couldn’t afford to add new features or do much more than bug fix
- Our prices would go up exponentially because we would need to make sure we’re covering the lifetime COSTS of a customer. Not a smart way to do business.
It’s been said before and bears repeating, “the days of low-priced plugins and unlimited everything are going by the way side.” WordPress product businesses that operate with unlimited anything are almost certain to fail as it’s an unsustainable model. Customers need to realize this sooner rather than later.
If pricing is something you’re having trouble with in your business, Chris Lema has written a series of posts you can read for free on the topic of pricing. If you want something more in-depth, consider purchasing and reading The Price is Right by Chris Lema. Matt Medeiros of MattReport.com also has a lot of content on pricing and general business practices.
I appreciate the transparency Fox offered regarding SIDEKICK’s pricing structure and the reasons behind it. It would be nice to see more companies share the lessons they’ve learned in the pricing game. By sharing knowledge, everyone in the WordPress ecosystem wins.
“It’s been said before and bears repeating, “the days of low-priced plugins and unlimited everything are going by the way side.” WordPress product businesses that operate with unlimited anything are almost certain to fail as it’s an unsustainable model. Customers need to realize this sooner rather than later.”
Actually, it gets no truer when it’s repeated than it was the first time someone said this. Since when has there only been one way to compete in a marketplace?
Each plugin developer needs to work out for him- or herself how s/he plans to compete and be successful (including financially successful). Sometimes the apropriate model will involve charging recurring fees and providing long-term support. But by no means always: providing support can be very expensive, and it can also be difficult to ensure consistency and accuracy among support staff. Lack of consistency and accuracy can undermine the brand so badly that the whole thing unravels.
There is another way to compete, which you seem to have overlooked. That is simply to sell more units. (Interestingly enough, the world’s biggest corporation essentially follows this model.) Unless the market in WordPress plugins is already saturated, which it clearly is not, this will also continue to be a perfectly viable business strategy for some.
I don’t think either of us in a position to tell each plugin developer which model will suit them best. All we can say for sure is that it is a question they need to consider and make an informed decision on.