How to Break the Trust of Your Customers in Just One Day: Lessons Learned from a Major Mistake

As entrepreneurs and human beings, we make mistakes everyday in our business, but most of the time the mistakes are small enough so that it doesn’t land us in the press for all the wrong reasons. On Monday, October 11th, Chargify made a massive mistake in making the announcement about a change in pricing; as far as mistakes go, this one was pretty gargantuan. Plain and simple, we did a horrible job of communicating a change that wasn’t driven by greed or stupidity, but was part of our desire to better support our customers that are really trying to grow viable businesses.  I could sit here all day and try to convince you that our change in pricing really was part of a plan to provide better service, but really, does it matter? When it comes to matters like these, the intentions do not matter as much as perceptions, emotions and how we treated the community.

Having spent the last two days focused on what we did wrong, and responding to the numerous inquiries and complaints from customers, I’ve had a great opportunity to identify where we screwed up. If that reflection were not enough, I also watched as two (1,2) posts about the Chargify price change made it to the top of Hacker News with over 180 comments (mostly negative). Then, of course, there was the article on TechCrunch, and a blog post on Inc. pointing out our blunder, too.  To put it simply, the last twenty-four hours have sucked, and they should never have happened, but they did, and now we need to learn something and try to earn back our customers’ trust.

Communicate early and often
Just one of the huge mistakes we made was sending one email, without any warning, notifying all customers of a large price increase. This broke a trust that we had developed with our customers over a long period of time, and will take much to repair. We should have communicated our need and desire to remove free plans and provided more information about how this would happen, and over a period of time leading up to the change. Maybe this could have been as simple as starting the communication three months ago, or as difficult as calling every single customer and talking to them on the phone to notify them of the change. Bottom line is that we should’ve done it better. It just wasn’t right.

Perceptions matter, so be open with information
As a result of our horrible communication, the perception of the pricing change was that it was because we just wanted more money, but that wasn’t the case. We should have shared the data we collected for over a year that demonstrated quite clearly to us that only 0.9% of customers were paying us at all, and that there was a direct correlation between those that did not pay anything and a high volume of support requests. Even though this informed our decision to make a change in Chargify pricing, we didn’t bother to share that with you. Mistakes like these are important lessons and we learned that we should’ve told you a long time ago what we ourselves were finding in the data collected.

Free customers go out of business or never launch
Many of you have asked why we don’t just go back to offering some kind of free service. A year ago, we here at Chargify thought it made sense to offer a free plan—after all, wouldn’t it just allow more people to start and grow their business to the point where they’d be paying customers anyway? It’s a good idea, but as it turns out, that’s not what happens. In the past year, we discovered that those businesses that we thought would initially pay nothing and then grow into paying customers just never ever did; for the most part, launches never happened and they went out of business.  The hard truth is that many, many people try to turn hobbies into businesses and it just doesn’t work. While everyone deserves a shot to start a business, our theory that non-paying customers would eventually turn into paying ones just didn’t pass the test when it was put into practice. Although we should’ve shared this with you so that our decision didn’t seem out of the blue, we simply can’t support free accounts and provide the kind of service we want, plain and simple.

“What bleeds, leads”
Everyone knows this phrase from our media-obsessed culture, and it holds true for tech blogs and the related community when a company makes a gargantuan error. Chargify’s price change hit the top of Hacker News twice, garnered almost 200 comments, and then the icing on the cake for a shitty day were a couple of articles on TechCrunch and Inc.com. Like other web app startups, we had tried to get TechCrunch coverage for a long time, and although they loved covering one of our competitors, they never covered Chargify until it was time to report something negative. We can argue about the merits of even wanting to be on TechCrunch, as my friend Paras Chopra did in his post, “Demystifying the TechCrunch Effect,” but we did actually get the coverage we wanted, and had very high signup days. So, while we should issue a big thank you to TechCrunch for the press, we don’t plan to screw up as royally as this again, which means we probably won’t ever be covered by them in the future. That’s fine; we’d rather have happy customers instead.

Free customers have the time to complain
There is a big difference between bootstrapping a business, which I have done a number of times, and trying to test a hobby to see if it is viable as a business.
Over the past year, we discovered that the customer that never paid had the highest support load. Once we made the announcement about the price change, the same applied to complaining about Chargify across multiple public channels. Those customers that were working on a hobby business, or just something they were not investing in significantly, seemed to have the time to tweet all day long, post multiple negative comments on every possible channel available, and shout the loudest. This is not to say we did not get valid complaints from great customers—boy, did we ever—but their complaints were well considered, included real information and were mostly in private forums.

Freemium gets a lot of talk; thankfully few use it
Everyone’s always talking about freemium, but very few people actually use it, and we discovered this in looking at our customers for the past year. The reality was that less than 0.4% of customers had any sizeable number of free customers on their accounts. For the small amount who did, Chargify has taken care of them and will not charge them. We should have communicated why the pricing was simplified to include just customers with no distention and handled the few edge cases better. Freemium is a hot topic these days, but far less people are actually using it than is widely reported.

Stand firm, but listen
Making a big decision that may change the direction of a business is not easy and you must stand firm in that decision, but be open to listening to and engaging the community. We will not offer a totally free option as that is not good for our business or for our customers, but we did make a $39 plan available to those that supported us during our growth.  Should we have offered this option before our major announcement? Yes. Would we love to go back and do it over again? Yes, but the reality is that’s not happening, so we need to do the next best thing and support those who have supported us with a $39 plan.

Grandfathering
This is a huge and unsettled topic about which we are still getting feedback on each day. Maybe we should have offered a grandfathering option, maybe we should have given a grandfathering option to those that already integrated, maybe we will do all of this, but at this point we have not. The issue here is that it really depends on the business, the pricing change and how dramatic it is for each customer. Looking back, the best option would have been a grandfathering option which allowed the previous pricing but only included community support. Still an open topic.

After personally replying to more than one hundred tickets, tons of comments across multiple publications and on Twitter, threads on Hacker News and many other channels, it was important to look back on all of this feedback and see what went wrong so our team (and others) can learn from it. Regardless, we broke your  trust, trust that took a massive amounts of time to build, and now we may never get it back. I don’t have any neat solutions for you and I don’t want to feed you crap. All I can say is that we have learned more from this mistake than from anything before and will use that knowledge to change the way we think about everything related to Chargify. That might not seem like enough of a mea culpa from me, but our desire has always been to empower entrepreneurs to succeed with real tools and solutions for growing business, and that mission hasn’t changed.  That was the driving force behind this pricing change, and whether you believe that or not is your call; we will show you our commitment to you, our customers, with our actions now.

  1. mrktngblog reblogged this from davidhauser
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  4. erinbury reblogged this from davidhauser and added:
    Everyone makes mistakes - startup Chargify made a big one earlier this month when they switched from freemium to premium...
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  6. caterpillarcowboy reblogged this from davidhauser and added:
    read. Communicating...notoriously difficult
  7. davidhauser posted this