Moment: Ditching unlimited pricing for a B2B SaaS (ep. 9)

pay you, and then you switch to usage based pricing, which I think the cloud providers actually think about going the other way because nobody just can understand usage based pricing of AWS, which has like, I don't know, a thousand SKUs, right? Whereas you went the other way. You talked in the podcast that it was sort of stressful. It wasn't quite clear. Can you talk about that story? And also when did it happen?

And so that seems like that was just the worst timing to shut somebody off when they actually need the tool the most. And so it's like, well, we're not going to do that. We're going to have unlimited. You know, we learned along the way that was bad. One reason is because we as a team, we had always like, if there was an error, we would hop on it and fix it. And then we discovered there were other teams that weren't quite like that. They would just send errors forever.

And so that was a learning for us. Over time, we figured out, okay, there is a certain class of company that they have some level of errors that is just noise, and they're just not going to get around to fixing because they got more important things to do. Makes total sense, but that was beyond our area of expertise. That was not our experience, but we understood after a while that's what how plenty of teams operate. And then we also just saw like there was this wide, wide spectrum.

We didn't really anticipate that we would have customers who would send us one error a month and then customers who would also be sending us millions of errors a month. And so it's like, Oh yeah, I guess there is a big spectrum of size of companies, you know? So again, that jumping into things, being a little naive when we were looking at our costs after a while, we're like, you know what? We have these whales.

On the platform who are just using way, way, way too many resources, and they're spending 19 bucks a month. We're actually losing money on them based on how much chocolate they're sending. Versus these other customers who are sending very little, and we're basically overcharging them. They're subsidizing the whales, basically. And we're like, that's just not right. You know, we got to figure this out. And so We spent months thinking about what kind of pricing makes sense.

We were very, very nervous about it because we had had this commitment to unlimited stuff. And how do our customers accept this? So we handled that by just allowing customers to stay on their old plans. When we launched a new pricing, when we did launch a new pricing, we made the mistake of actually announcing that we had new pricing. And because we allowed people to stay on their old plans, everyone looked at the new pricing and anybody who could benefit by downgrading.

Did, or I should say upgrading the new plant. They did. And anybody who would be paying more, they just stayed where they were. So revenue just like dropped. We were just holding on bare knuckles to our desk. Like, did we just ruin the business? Did we sink ourselves? I remember Starr was particularly nervous and I was just like, just hold on, just hold on, it's going to work out. But I wasn't sure. I was just hopeful. I just believed.

It did, it did work out after a few months, new signup started coming in at the new pricing and it started working out and then eventually we still had some customers who were like five or seven years later, still in that old pricing, still getting just way too much. And eventually I just, we had to reach out to them and say, Hey, this is not working. And I wrote this book of an email saying, you know, this is. When you signed up, this is when we launched this new pricing. This is why we did it.

This is how much you're sending, blah, blah, blah. Let us help you reduce your volume, blah, blah, blah. You know, anything to keep them around. And, uh, basically send that out to some of the biggest whales and get them on the new pricing. And, and everyone was cool with that. They understood like the value we provided and understood that they had a pretty good deal for a very long time and that it was unfortunately going away. We only had one customer actually leave us over that.

So, that's fine. We felt like that was a good thing, but it definitely changed the trajectory of the company. No doubt. Like, you can look at that moment in history on a revenue chart and you can see clearly when we made that decision.