What is a Fair Price in the Digital Age?
The great paradox: it’s easier than ever to find potential customers online, yet it’s harder than ever to get paid for digital products. Consumer expectation is that software and apps should be free, even when it doesn’t make sense for the service provided. This is a challenge we’re navigating at BlueLight and we’re going to keep iterating until we get it right.
If you don’t know what BlueLight is, it’s a safety toolkit designed for your smartphone. People use it when walking home at night or when in an unsafe area, and, if they need help in an emergency, calls routed through our network get you help faster than dialing 911.
Providing our service requires serious investment: servers in multiple parts of the country, a talented team, and the same reliability as 911. We have servers in seven different parts of the country across multiple cloud providers. If AWS goes down, BlueLight will stay up. If the city of Dallas disappears, BlueLight customers will be unaffected. If you lose data connectivity, we’ll fall back to a regular 911 call — there is nowhere in the USA that using BlueLight is worse than making a regular 911 call, and it’s way better in most cases.
This type of performance has real costs, and this level of performance is needed because we’re routing emergency calls every day where people depend on us! Revenue is needed to keep the lights on.
So we’ve started charging, and it’s going, well, okay. For some people, we are too expensive. For others, we’re not charging enough.
We get emails like this:
Or comments like this:
We understand that more than ever people expect software to be free. According to eMarketer, only 1/3 of mobile customers in the USA are expected to pay for apps at all in 2015. It also hurts our case that most people don’t know that we each, as citizens, pay between $.50-$4.00/month on our cell phone bills towards 911 fees — so it isn’t free.
You know what though? We’re going to keep getting better. We’ll keep increasing the value of our service, setting the standard of what’s possible, and listening to our customers. We’ll keep experimenting with how we make money so that customers are paying a fair price.
A price that enables us to recoup our costs and continue to invest in the future, while still being a price that gives millions of people access to our anxiety-mitigating and life-saving service.
The expectation of “Free”
Google and Facebook have created a world where consumers expect software to be free. If it’s not, the maker better have a solid reason and make peace with the fact that they will be “niche”.
The most popular digital services in the world, Google, YouTube, and Facebook, cost nothing to use. This isn’t charity though — it’s prudent business strategy (Facebook made $4.5B this last quarter).
If they charged, it would reduce the amount of people using their services and thus the amount of attention they could aggregate. Our aggregated attention is what they sell, along with very specific targeting, so advertisers can create more sales for their products.
Additionally, their services get more valuable with the more people using them, so charging would actually make their services less valuable. So, we’ve become accustomed to great digital products being available for free. The trade off though is that while we get universal access to their services, their advertisers get universal access to us.
Why not advertising for BlueLight?
The reason to charge directly is simple — advertising is never going to work in BlueLight. The service is used for brief and highly anxious periods. The information people provide us with is deeply personal. Including invasive advertising could undermine someone’s sense of privacy so they lose trust in us, or, worse, slow down how quickly someone gets help in an emergency.
We’re currently experimenting with an annual subscription after a 30-day free trial. However, there are other models that could be effective such as paying what you want, monthly pricing, paying a one-time fee, or even having your insurer reimburse you for setting it up. We‘re going to keep iterating on our revenue model so that we can provide our service.
The sad example of Evernote
Companies that have neglected this either go out of business or become something else. Evernote is a sad example of this. They created a brilliant piece of personal note taking software that has been used by more than 150M+ people.
However, since they haven’t figured out how to be equitably paid, they’ve slowly degraded the experience by tossing in all sorts of conflicted offerings behind their ‘Plus’ plan: work chat (it’s supposed to be for personal organization!), image recognition, searching pdfs, offline access, and others. Every time I open Evernote to use it, I’m prompted to upgrade to a new tier — with no compelling reason on why I should.
The way that they capture value (upgraded plans with new features) is so out of alignment with how they provide value (cloud-synced note-taking and tagging) that they are now degrading my experience. Work Chat is the perfect example of this. Because they aren’t being paid, they don’t know who their customer is anymore, and it’s showing in the product.
There is a simple answer: start charging me after I’ve made 100 notes. At that point, you know you’re providing me value.
It’s scary to change how you charge
It’s considered an obvious best practice to change your product to better serve customers. On the other hand, changing pricing — or worse, starting to charge — is terrifying.
Netflix lost 2M subscribers in a quarter and their stock fell 75% within six months of the pricing changes.
One reason is because everyone remembers Netflix’s debacle in 2011. As a refresher, they decided to break out streaming as a separate plan and started charging for it — while also raising prices 60%. In turn, Netflix lost 2M subscribers in a quarter and their stock fell 75% within six months of the pricing changes. They were the scourge of the media for months, and the CEO had to issue a public apology.
Ultimately though, 4 years later, their stock is up 200% compared to when they made the change. Streaming dominates and they’ve created additional value for customers by producing their own original content. They have such cultural relevance that ‘Netflix and Chill’ is now a part of our popular lingo (and it has nothing to do with watching shows). They just increased prices again earlier this year.
Another reason why changing how we charge is scary: whether or not someone pays is a brutally honest form of feedback. What we spend on is what we value. When we change how we charge or increase our price, some people will drop off and abandon our service. That hurts at a gut level because it’s every product company’s dream to see their product used by as many people as possible.
But the really brutal truth is that we don’t have a choice. If we can’t earn revenue, we won’t survive to serve the customers who do truly value our service.
We’re going to keep iterating on how we charge so that it keeps our interests aligned with our customers. What happens when we nail it? We save thousands of lives, mitigate anxiety for millions of people, and successfully bring 911 into the digital age.
Count me in.
I’m Preet Anand, the CEO and Founder of BlueLight — the safety toolkit for the digital age. We’re bringing personal safety into the digital age.