As you may know, Impact Pricing was launched on Jan 1, 2019. We chose to use G Suite as an email server, mostly because Google has an amazing spam filter. For that privilege we pay $5 per account per month. On March 5, 2019, Google raised our price to $6. Really????
Yes, we will pay it. But how stupid is it to raise the rates on a brand new user? Very. This is the time they should be nurturing me, making sure I use as much of their product as possible. If you run a subscription business, please don’t raise rates on brand new subscribers.
Why did they do this? Probably because they don’t have the ERP systems that enable them to charge different customers different prices. They decided to raise prices on the program (which they say they hadn’t done for 10 years) and it just so happened my timing was bad.
Will this hurt them? Probably not. Realize they are getting a 20% revenue increase. Will they lose more than 20% of their customers? Highly unlikely. Maybe at the lowest end, where I am, only because there are probably many users who aren’t really using it and the price increase causes them to rethink the decision. Maybe some bigger users will remove some inactive accounts, prompted by the price increase. Overall, I’m sure it’s a profit enhancing decision.
Also Read: Q&A: Pricing Collateral for Sales Teams
One more thing they changed. Their annual program is now 12 times their monthly fee. No annual discount. For most subscription companies, this is a bad idea. You want to incentivize annual subscriptions for two big reasons. Annual subscription companies have lower churn and getting payment up front helps a lot with the cash flow problem many subscription companies face. Google does not have a cash flow problem, and they probably looked closely at their churn rate and decided there wasn’t much difference.
To summarize, if any “normal” company made these two decisions, it would probably not go so well. However, Google is likely making the right decisions for them. Don’t we all wish we were Google?
Tags: pricing strategy