Per Seat Pricing Sucks

When we started billing for Flipper Cloud, we did what everyone else in the space was doing – per seat pricing. $20 per seat each month felt like plenty.

As time has passed this choice has increasingly bothered me. The past few months I've been thinking about what type of billing I like.

What software do I love and enjoy paying for? And what leaves me with a bad taste in my business owner mouth?

What I Like

I thought about what I've chosen for Box Out and Flipper Cloud – Crisp, Ghost, Honeybadger, Imgproxy, etc. The bills I pay the fastest (and look forward to paying the most) are fixed per month or year.

Pick a plan and peel out. As a business owner, I especially love $1-3k/year.

Repeatedly though, I noticed that software billed per seat or by value-based usage (or worse some combination of both – looking at you New Relic) were my least favorite (and the most likely candidates for replacement) even if the tool got the job done.

For per seat, every time I went to add a teammate, I had to decide if they really needed access to the tool or if I should even keep using this tool at all.

Or, perhaps I had to work a bit to get usage under control (for usage based).

Am I cheap? No. But since I'm a business owner and profit eventually makes its way back to me, I am more price aware than the average employee. I'm happy to pay for software (and prefer that to free) but SaaS pricing is getting out of hand.

There’s plenty of stuff wasting space in our heads. We don’t want Flipper’s pricing to be one of those things. Use your brainpower to build things – not to navigate pricing for a tool.

All Seats are Not Equal

Let's get concrete. Flipper Cloud uses Help Scout for support (at the time of writing, will be Crisp once I have time to swap). They charge $22/seat per month. I'm the primary line of defense for support. Others jump in on occasion, but I'm probably the only one worth $22/mo. Everyone else on the team is added in Help Scout, but might not even respond to a support request in a given month.

All seats are not equal. But there is no reflection of that in nearly all per seat pricing. Slack is one example that kind of gets this right (though I have other issues with their pricing). I believe they only charge for seats that are actually active in a given month (or something akin to that).

Price Ceilings Provide Peace of Mind

Crisp takes the opposite approach. We use crisp at Box Out and their pricing is super straightforward. $25 or $99 per month (we use the latter). Sure, they charge more if you have a ton of contacts (which we do) or users, but I'm sure a large number of their customers fit within their per month plans without any overages.

This approach is more of a "look, it's fine for the most part. You get tools to do customer support and we get paid enough its worthwhile to provide the service. If you get huge and that causes our costs to increase, then yours will too."

It's fair. And it's a blend of fixed pricing plus per seat (once you expand from small business size), which is great. As companies grow past reasonable limits, their pricing becomes usage based.

Large companies (think enterprise) actually enjoy per seat pricing, as it fits nicely with their budgeting because it’s a rounding error for them. But for everyone else, it just adds hassle. The rest of us prefer simple, predictable pricing.

Perhaps this is the best of both worlds?

The Crux

At the heart of it, businesses strive to extract the maximum amount of revenue possible from every customer. Customers, on the other hand, want to pay as little as possible for as much value as possible.

In theory, this tension helps find the precise point at which both sides feel the exchange is fair.

But in practice, per seat pricing feels equal parts clumsy and greedy.

What Are We Doing

I covered a bit of why I (we) don't like per seat pricing (seat equality, maximum extraction, difficulty of yearly plans, etc.). But what are we going to do about it?

We currently charge per seat and we don't like it. That leaves us with cost plus, value-based usage or fixed tiers (with limits).

Cost Plus

For cost plus, our costs would correlate to how often you poll for updates (bandwidth), submit telemetry data (database size) and the number of feature flags/gates (server performance) a customer has.

But our customers don't think in terms of bandwidth, server performance and database size. They think about feature flags, functionality and projects, so cost plus doesn't really make sense.

I want customers to pay us and be excited about it! I don't want them to be confused or spending time thinking about how to reduce their bandwidth or feature flags.

Value-based Usage

We could charge based on feature flags and gate data. If you have more feature flags or more gate configuration for those flags, you pay more.

But we absolutely don't want to people to hesitate when creating feature flags or limit how they use them. Moreover, teams often setup flags prior to using them, so even though they exist, they aren't really costing us anything.

Again, I want to avoid a situation where someone has to think should I add a feature flag or should I add another developer. My goal is not customers who begrudgingly give us their money. I want them to see the power of Flipper and go wild!

Fixed Tiers

And that's how we ended up with three new fixed price plans with reasonable limits – informatively named Bronze, Silver and Gold. It's likely that the recent Olympics in Paris inspired this naming.

There may be slight changes based on initial feedback (of course the pricing change is feature flagged 😉) but here's what we are starting with:

• Bronze - $49/mo, $499/yr. Up to 10 seats.
• Silver - $149/mo, $1,499/yr. Up to 25 seats.
• Gold - $299/mo, $2,999/yr. Up to 50 seats.

Custom environments, permissions and retention of audit history and analytics will also factor into which tier you choose, but you get the idea.

We tried really hard to think about the various companies using Flipper – their team size + functionality needed. And we believe this pricing is going to be better for them long term and good enough for us to build a sustaining business.

We're not VC funded or PE backed. We're a small team making a great product and genuinely want people to be stoked to pay us. Long term, I think this pricing reflects that and will result in more (and happier) customers. Time will tell.

What would we want?

We're experienced. We can find ways to improve bandwidth, reduce database size and keep our servers snappy. Assuming that's true, we asked ourselves what pricing we would want and the above is what we came up with.

To be fair, asking myself this question was easy, because I own other businesses that use (and pay) for Flipper. As I mentioned before, as a business owner I love $1k - $3k yearly. And as a young business, cash up front is worth more than cash over time. So I wanted to encourage picking the yearly plans.

More than a Couple Months Free

Now that pricing is fixed tiers, offering yearly plans was very easy. As expected, all yearly plans include a couple months free, but they also come with higher retention limits. Want the retention limits of Gold at the Silver price? Pay yearly instead of monthly.

We're pretty excited about this change. For many of our current customers, they'll get a dramatically smaller bill each month if they opt in. We'll take the hit with a smile because we believe this pricing is more fair.

To summarize:

• We wanted pricing to be more fair.
• We don't like per seat or value-based usage pricing.
• We like fixed tiers as they easier to budget for, reason about and lead to fewer decisions.
• We wanted to make yearly more attractive by increasing limits and retention of data (compared to monthly). Yearly is good for us because cash up front. Yearly is good for customers because of cost reduction and limit/retention increases.
• The new pricing will go into effect for new customers but existing customers can stay with per seat as long as they like (though they'll likely save money on the new fixed tiers).
• You can read about how we implemented version based pricing over on Garrett's blog.