More Thoughts on Pricing

24 Comments

airline pricing modelWhether it was the sixty seven comments on my last pricing post, or the fact that it spawned two more articles from others about WordPress plugin prices, it’s clear that pricing is not only a hot topic but a challenging one.

Pricing for Value

Phil makes the case that you need to price for value – and he’s right. Unfortunately, the challenge is that no two people are alike, and they don’t all value things equally. This is the challenge that Jeff highlights when he mentions that he would hate to see Gravity Forms raise their single site license to a higher rate.

He’s highlighting that the value of the plugin is different if you’re an end user with a single site, compared to a serious developer creating tons of sites using this plugin on all of them.

Value is in the eye of the beholder – making it a really difficult challenge to setting the right price for a plugin.

When Value is Variable

So what do you do when value is variable? How do you define a price that nets you enough to serve your customers and still make enough profit to make things worthwhile?

One way to think about this is to step far away from the WordPress world and the dynamics of plugin pricing. We need to look at other models and see what they can teach us.

Before I do that, I want you to watch this quick (parody) video.

Looking at Airline Ticket Pricing

What’s funny about the video is how true it often feels, right?

The other day I booked a flight for a friend. During the process I was offered the following options:

  • To pre-purchase the option for them to check a bag.
  • To pre-purchase the option for them to skip to the front of the security line.
  • To pre-purchase the option of sitting in a seat with greater leg room.
  • To pre-purchase the option to upgrade to a seat in business class.

It seems a bit silly, doesn’t it – almost as if they’d seen the same video we’ve just watched.

If you read the comments, you’ll see real airlines like Spirit getting called out for the same techniques. Another you see mentioned is Ryanair.

Buyers buy different Benefits

When we talk about value, we’re often thinking the value the product delivers to the buyer. That’s good stuff, but it’s not the only way we can think about value-based pricing.

We can also think about it from the values a client has for different “perks, benefits, and interests.”

Think about airline pricing for a second:

  • Want to fly during peak times (Monday morning)? You’ll pay more.
  • Want to fly first class? You’ll pay more.
  • Want to be able to change your flight? You’ll pay more.
  • Want to be able to cancel the flight altogether? You’ll pay more.

Ryanair takes it further.

  • Want to print your boarding pass at the airport? You’ll pay more.
  • Want to check a bag? You’ll pay more.
  • Want to take a car seat or stroller? You’ll pay more.

I know what you’re thinking. That sounds like the video above. People will just find an alternative, right?Well, it’s not true. Ryanair isn’t losing customers.
It’s gaining them – by giving them options.

It’s crazy, but they saw sustained growth in the midst of this piecemeal approach to pricing – growing from 42 to 75 million yearly passengers (2006 to 2011).

Pricing WordPress Plugins

All of this brings us back to WordPress plugins and their prices. I wrote, saying that I thought some plugins were priced too cheaply.

The issue isn’t just a matter of price. Instead it’s a matter of options.

When I go to buy an airline ticket, I get a base price – it’s fast and easy. But I also, as I get ready to check out, see various options (some more prominently placed than others).

I can upgrade to a refundable ticket. I can upgrade to a better seat. I can upgrade to boarding early. I can even send my luggage from my home to my destinate and never take it to the airport.

Those options are all available for additional fees. But they don’t stop me from seeing a baseline price and the ability to check out quickly with defaults.

Most importantly, the selection of those options by a plugin developer’s audience, would help that developer segment their customer base, which could help them with LTV calculations (always a good thing).

So one suggestion I have, when it comes to pricing, is that we start looking at breaking things apart a bit more like Thomas Griffin or Jason Coleman have done. They’ve modeled a world where you can pay extra to install and set up a plugin (in the case of paid memberships pro) or pay for tokens after your first support ticket (in the case of soliloquy).

  • http://wpninjas.com James Laws

    This is the very thing plugins like Easy Digital Downloads by Pippin Williamson and Ninja Forms (me) do. We offer a solid plugin, in our case free, and then offer all kinds of features if they want to extend the plugin further.

    For me the beauty of this model is the benefit to the end-user. They only pay for the features they want so they don’t get the bloat of something that has a ton of features they may not need or want and they can choose their own cost. Meaning they can buy as many or as little additional features as they want.

    I’ve gotten an overwhelming response to this methodology from our customers and as the site owner I’m certainly not complaining either. :)

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  • http://www.billerickson.net Bill Erickson

    Unfortunately due to the GPL, you’re only able to charge separately for “features” (more plugins), not “usage of these features”.

    Any plugin that is publicly distributed (free or paid) must be licensed under the GPL. When you purchase a GPL plugin, you’re free to do whatever you like with it.

    So when it comes to plugins like Gravity Forms that have two different types of usages – the average person using it on their site and developers using it on many sites – they really can’t differentiate too much. If they were to raise the developer price by 5x or 10x to get it closer to the actual value for developers like me, we would just opt for the personal license.

    They can’t charge me extra for using it on multiple sites as that’s a core tenet of the GPL. They can only charge more for providing support for multiple sites. And a developer like me doesn’t really need their support (I don’t think I’ve ever submitted a ticket with them).

    I think on the whole the GPL creates more value for the WordPress ecosystem than it takes away, but it’s important to point out the features of the market in which we operate. Without the GPL I might have been charging for all the plugins and code snippets I give away. But because of the GPL I choose to make money in other means.

    Since this is a topic that comes up often I have a handy little table I draw. There’s four boxes. On one axis is scale of distribution (one person or many people). On the other axis is “built on WP code” (so falls under GPL).

    - Top Left: selling to single person, providing complimentary service to WP. For instance, a designer, coach or consultant. They can price themselves to match the market, making lots of money from few clients.

    - Bottom Left: selling to single person, building on WordPress code. This is theme and plugin developers. Since we’re providing a custom solution we can also charge appropriately, making lots of money from few clients.

    - Top Right: selling a complimentary service to many people. This is VaultPress, Sucuri, and all the other companies built around the WordPress community. They have no requirement to GPL their code (if they have code) and can charge what they like for their service.

    - Bottom Right: this is selling WordPress code (themes and plugins) to many people. This is a very crowded space, underpriced and you typically have to charge for complimentary services (ex: support) rather than the actual code due to GPL. If you charge too much for just code, people will start sharing it and cutting you out, which is within their right. You can’t charge for usage, so you end up breaking features into lots of separate plugins that you can charge extra for.

    There’s nothing wrong with the Bottom Right box and there’s some people who are really successful there (Pippin, Thomas Griffin…). But if I were just getting started in the WordPress ecosystem, I’d pick one of the other three boxes to start in. They’re less crowded, less restrictive, and have a higher profit potential in my opinion.

    • http://chrislema.com chrislema

      Just so I was clear, in case I wasn’t – I wasn’t suggesting a non-GPL approach to pricing. But additional items like installation, support, and customization, all provide the extra services that can generate additional revenue based on who the customer is.

      • http://www.billerickson.net Bill Erickson

        Just so *I* was clear, I wasn’t suggesting you were suggesting a non-GPL approach :)

        I was just pointing out that the GPL limits you to add-on features/services rather than charging a different price for actual usage.

  • http://phoenix.wordpress.com/ David Peralty

    Fun Fact: We still get people here and there asking why we don’t have a free version of Gravity Forms.

    I have seen many form creation plugins have pricing issues over time because of so many factors that they couldn’t have foreseen and I’ve been impressed with how rocketgenius hasn’t had to have price increases in their licensing. In fact, they still give large discounts for on-time renewal of their license fee, and have multiple coupon codes out in the world. They do this to provide value, and to keep their customer base as large as possible so that they can continue to have developers improve the software and add new add-ons.

    I am sometimes astounded that Gravity Forms hasn’t gone to a pay per add-on model, despite increasing the number of add-ons available for a developer license holder from like five to over a dozen since I started using the plugin. I think creating too many options creates a system where many buyers feel paralyzed, and in many situations it allows companies to hide fees. I am certain that if we came up with a pricing structure for Gravity Forms that was based around a Per Add-on system, the total price for someone that wanted them all would be higher than what they pay currently (especially if we partly based add-on cost on support requirements using history as a baseline for need).

    You would think that separating things out gives you, the consumer the option to pay for what you want, but it assumes you know what you want, and that your needs don’t change. Many software companies will bundle software and sell it piece by piece. You choose to buy the core and some pieces, thinking that’s all you’ll ever need, as it is cheaper, only to come back later to purchase the other pieces and pay more overall because you didn’t buy the original bundle that included everything. This happens all the time, on all kinds of products and services.

    Of course, businesses don’t have to price this way, but it allows them to determine where resources should be spent based on popularity while still giving a deal to those that want everything up front, thus pushing what’s best for their bottom line and the needs of their business. Note: Gravity Forms only charges you the difference in license cost to upgrade to the next tier.

    The whole thing can be so complex… Pricing, especially in the WordPress world is difficult, and I think you’ve only touched on the very tip of the iceberg, even with two articles yourself an two others written by some amazing people. I don’t think there is a perfect model, and when trying to please as many groups as possible (personal users, freelancers, businesses, corporations, educational institutions, non-profits), it can be very difficult to make things fair, easy to use, and beneficial to all involved parties.

    Again, please note that these are my thoughts, and not the comments or official statements of the company I work for.

  • http://phoenix.wordpress.com/ David Peralty

    Also, I think there is a lot that can be written about lifetime licensing and yearly licensing… I think that alone could make an interesting article. :)

  • http://wpninjas.com James Laws

    Another point is you can’t fairly compare pricing models because their value is highly dependent on the needs of the customer. An add-on model works great because it’s generally a one time fee to get just the thing you need. Certainly if the customer wants ever add-on it may cost more than the annual subscription model up front but probably not over the life of the customers need. But again that depends on the customer.

    The reason I like the add-on model so much as a user is for the very reason David states as a possible problem. When I’m starting a venture I may have no idea what I need and in the early stages of business I may also not have a ton of funds to invest. I like the model that allows me to purchase more as i discover additional needs over time. That’s one of the huge reasons why I love Easy Digital Downloads. I started with one extension and then as the business grew I went back on purchased more. I’ve now purchased 10 different extensions. Their cost adds up but as my business grew so did my ability to afford them. And because they’re not subscription based I’m done. I never have to pay for these features again no matter how often I use them.

    There are Pros and reasons to love the subscription model as well. I have several annual subscriptions myself. They make sense for what they are for. That’s what makes comparing pricing models almost impossible. There are just too many variables at play.

  • http://www.ZenOfWP.com Greg Turner

    I do not entirely buy the airline analogy. The difference is and the reason why buying an airline ticket can be so infuriating is because the airlines are now charging extra for things that used to be part of the base price.

    • http://chrislema.com chrislema

      I agree that it can be frustrating – but you can’t argue with the facts. The growth of Ryanair into one of Europe’s largest airlines while working on a pricing model that is menu/option based demonstrates two things:

      1. Most people want cheap.
      2. Others will pay more for the things they want.

      That’s a model that can work – because it lets customers manage their own differentiation.

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  • http://gravatar.com/carlhancock Carl Hancock

    Gravity Forms hasn’t gone to the pay per Add-On or Extension model because we aren’t in the business of selling Add-Ons or Extensions. We are in the business of selling Gravity Forms. Add-Ons aren’t our core business. They are a supplement to our core product: Gravity Forms.

    If you give away your core product and charge your customers for features that should be standard, that’s what I refer to nickel and diming your customers. Not only that but I feel it de-values your core product.

    But WordPress is free you ask? Different situation. It’s an open source project. It’s not a closed source product. So i’ll stop anyone trying to make the comparison right there because it’s apple’s to oranges.

    Case in point. A competing product is free. Want multi-page forms? That’ll be a $39 extension. Yes, $39. Gravity Forms does multi-page forms out of the box and costs $39 for a Personal License. Want conditional logic? That’ll be an additional $29 extension. That comes standard in Gravity Forms also. Ability to create posts? Another $39 extension. Yet another built in Gravity Forms feature. Ability to upload files? Yep, another $39 extension. All standard features available in Gravity Forms which you can get it for $39. What is “free” quickly because quite opposite when you add features that should be core to any feature rich form solution.

    Gravity Forms for $39 comes with multi-page form capabilities, conditional logic, file uploads, the ability to create WordPress posts and so much more and it’s $39.

    The competitor is “free” but if you want multi-page form capabilities, conditional logic, file uploads and the ability to create WordPress posts and so much more… well that “free” just because $185.

    Now you could argue “yea but they don’t limit it to 1 year of support and updates”… well you’d have to pay to renew that Gravity Forms Personal License for 5 years plus the initial first year to reach that $185 point that “free” solution cost you plus you would have benefited from the features and enhancements added over the course of those 6 years.

    Our product is Gravity Forms. Not our Add-Ons. Some of our Add-Ons are applications in their own right and you’ll see more of that from us in the future where our Add-Ons will be much broader in scope. You’ll see surprising things come to fruition when it comes to advanced Gravity Forms Add-Ons later this year.

    I’ve seen the sales numbers published of some “freemium” plugin products and I know what our sales numbers are and let’s just say any notion of providing a free version of Gravity Forms was squashed when the reality of what those sales numbers looked like and the sheer disparity that existed. It just isn’t worth it. We don’t need the supposed boost that “freemium” supposedly provides.

    There are exceptions. WooCommerce being the primary one. But even they now sell (highly priced and rightfully so) support packages around the WooCommerce product. Their business isn’t entirely Extension based. It’s rapidly being based around their support packages. Plus they already had the highly successful WooThemes brand backing it which helped insure that it would be a financial success.

    Now this post isn’t meant to start a war. So to the competitor, who will quickly deduce who they are based on my example scenario above, don’t take it as that. It’s merely a comparison to illustrate the differences between business models.

    It was to debunk the marketing tactic of using “free” as a hook and show how “free” isn’t always free. It also explains why we choose the business model we went with and a business model that we’ve built a multi-million dollar per year business on top of.

    Yes. You heard me correct. Gravity Forms is a multi-million dollar per year business and it is currently our only product, although a few more are in the works. I’d say we picked the right business model both from a pricing standpoint as well as how we handle Add-Ons, update and support.

    Freemium? Nickel and dome? No thanks. Our product has an extremely bright and long future ahead of it with some amazing Add-Ons in the pipeline precisely because of the financial success that not being freemium has afforded us.

    • http://wpninjas.com James Laws

      Carl, you’ve have made it abundantly clear that you don’t like our pricing model both here and on Twitter and I’m not going to get into fight over it with you. The model works for our customers, the many developers who are starting to work with us, and very much so for us.

      I find it very strange that you spend so much time speaking out on this model and us specifically. No one is leading a mob to force you to change your payement model. In fact many have said that you could/should raise your price. And the masses aren’t trying to make you adopt an add-on model. We all get it. Gravity Forms is your product. And those who use it love it. Why is that not good enough for you? Why the need to attack how we are conducting business by belittling us.

      All around the WordPress community so many developers say what a great guy you are but every-time I bring up Twitter or blog like this I wonder who they are referring too. We are also a part of the WordPress community and all you’ve been is nasty about us. When people bring up the differences between our two plugins we don’t go into a multi-tweet rant about why we think ours is better than yours. We simply answer their actual question and let them decide.

      You have no faith in our model and you certainly don’t think anything we are doing could compare to your product or be a threat to your business so why can’t we stop the jabs and be nice to each other.

      We are competitors, yes, but do we also have to be enemies. I think this community is better than that.

      • http://gravatar.com/carlhancock Carl Hancock

        James,

        It’s hard for me not to compare our business models in a discussion about business models when the only other major commercial form plugin outside of ours and yours uses a model more similar to our own. They do have a free version, but they monetize via a Pro version and don’t sell extensions individually.

        Your business is the only competitor that uses the freemium model that gives away the core and monetizes the extensions. So how am I supposed to discuss and compare business models of similar products using different models without doing just that? Comparing and discussing them.

        The fact that I don’t like the freemium business model of giving away the core and selling the extensions has absolutely no bearing whatsoever on my opinion on your product as a whole or you as an individual.

        If someone asks me my opinion on something related to WordPress business models, be it on a blog or on Twitter, i’m going to give it. If you don’t like my opinion, or disagree with it i’m not going to get bent out of shape over it. But if someone asks it, i’m still going to give it.

        This is a discussion about WordPress plugins and pricing models. Am I not allowed to discuss it for fear of offending someone who may not like my opinions on the matter?

        I don’t know you from Adam. We’ve never talked. We’ve never met. My opinions on your business model are nothing personal. They are purely opinions on the various business models that are and can be used to market commercial WordPress products.

        If you can separate that and view it as some sort of personal attack than that is your problem, not mine.

        • http://wpninjas.com James Laws

          Carl, you are certainly entitled to your opinion. But yes you can compare the business models and philosophies without comparing companies specifically. Subscription vs. “Freemium” does not have to be Gravity Forms vs. Ninja Forms or any to products. That’s why they are called models.

          You state you aren’t trying to start a war but you comment and follow it with this tweet: https://twitter.com/carlhancock/status/340274443190415360. Sounds like a battle cry to me. Add that to the fact that you don’t really come against the model but our implementation of it and it can’t help but feel a little personal. But you’re right, that’s my problem.

          I can honestly say that I’m glad that you have had and continue to have great success with Gravity Forms. Many of us developers owe a great deal to the road that you paved in the premium plugin market. Ninja Forms is only becoming so successful because Gravity Forms exists in the first place. Perhaps that”s why it saddens me the way you refer to us, as if we’re doing something underhanded or inherently evil.

          I’ll exit with this which was my point of commenting on this post in the first place. I have both bought and sold under both models. The best model for the seller is based on many factors like exposure, competition, reputation, etc. The best option for the customer also depends on many factors such as type of business, financial strength, specific needs, etc. One size does not fit all. I like the fact people have a choice. Gravity Forms or Ninja Forms, Subscription or “Freemium”. Everyone wins.

          Much respect and well wishes.

        • http://gravatar.com/carlhancock Carl Hancock

          I’m replying to my own comment as nested comments don’t allow me to comment directly to James comment to my own.

          James,

          My original comment did not name Ninja Forms by name and singling you out isn’t my intention. I needed a real world example of an alternative to our own business model of a product that competes with our own to illustrate the differences.

          Because of the fact there are so few commercial WordPress plugins that are Gravity Forms competitors it’s difficult to do this without those knowledgeable enough to deduce who I was talking about.

          My comment regarding a grenade on Twitter was by no means directed at you, Ninja Forms or the WP Ninjas team. It was in reference to the fact there are major proponents of the freemium model within the WordPress community and therefore my comments could be considered incendiary by people who do indeed disagree with my viewpoint. It wasn’t meant to imply that I was throwing a grenade at you, not at all.

          I’m not a fan of monetizing extensions over monetizing the core product itself and I make no qualms about voicing that opinion. Nor do I have a problem explaining why I feel this way and back it up with real world examples that I feel illustrate why I feel the way I do.

          That being said, I don’t claim that the business model that our business chooses to use is the end all be all. My statements and comments regarding WordPress plugin business models are my opinion and are based on what has worked for me and my company.

          I don’t go around saying these things unsolicited. My statements and comments are within the context of the discussion at hand and are my opinions on what is being discussed. Other comments I may have made in the past were also within the context of what was being discussed at the time.

          My opinion on the business model doesn’t mean I hate any product that uses the freemium model or any developer that uses the freemium model.

          I could have just as easily pointed at Easy Digital Downloads. But it’s not a Gravity Forms competitor. But had it been a Gravity Forms competitor and I used it in my example, Pippin would know not to take it personally. I have nothing but love for Pippin and his work even if I disagree with the business model he has chosen.

          Pippin knows this. He also knows that even though i’m not a fan of the business model he chooses to use that i’m always available to him if he wants to ask my advice or bounce ideas off of me and he does from time to time.

          If you base your opinion of me on my views regarding freemium vs. non-freemium then it’s extremely shortsighted on your end, although I get it. Ninja Forms is your baby. You look at it as i’ve attacked your baby. But don’t look at it that way because it’s certainly not my intention. I was merely using a real world example to explain why I prefer one business model over another.

          Disagreements over issues or opinions such as this are not personal attacks and shouldn’t be taken as such. I can disagree vehemently with a person’s viewpoint on a particular subject matter related to WordPress and it has no bearing whatsoever on my opinion of that person as an individual or their business as a whole. It’s why I can disagree vocally with something Matt Mullenweg, or Andrew Nacin, or just about anyone in the WordPress community while at the same time discuss it calmly over beers the next time we see each other.

          I may disagree with your business model but that doesn’t mean I don’t still have respect for you or what you do.

          My preference and vocalness when it comes to business models has nothing to do with my opinion on Ninja Forms as a product, James Laws as an individual or developer or Kevin Stover as an individual or developer. So please, don’t take them as such because that is not my intention and I apologize if you felt that it was.

    • http://disenyo.net Peter Vandever

      WordPress is OPEN SOURCE but it is not free. So many think of open source as “it’s free.” Open Source means it is developed by the community.

      People come to me at Disenyo.net and ask why I charge between $10 and $100 a month for hosting when Godaddy and Hostgator are half the prices. I just point them to WP Engine and they come back “you are not as high as I thought.” :)

  • http://wptrainup.co.uk/ Andrew

    Sorry, TLDR… But I’d like to make a comment about the pricing of WordPress plugins. Chris, you mentioned the prices should be higher, because of *the value* that they offer the users. However, as a plugin developer I don’t feel comfortable charging over £100 for what is essentially just a couple of PHP files. You can buy some *serious* software for that money. Yes, the plugins I create are serious, but they are still just WordPress plugins, IMO they should not cost that much money. Translate this to mobile phone apps which are far more complex and cost 99p.

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