Yesterday, there was an interesting thread going on in the tech blogosphere about a move by 37Signals, the company behind such amazing services as Basecamp, Highrise, etc.. From the discussion, I found a valuable lesson for the SaaS providers and I thought I will highlight it in this post.
BTW, what is the story behind all the noise?
Recently, 37Signals seems to have made some repositioning where they dropped a low end plan from the signup page they were showing to the customers. Some of their customers (or potential customers) appeared to be upset about this change by 37Signals.
Even though the PR speak of 37Signals claim that they are experimenting with different combinations of their plans so that their potential customers are presented with a limited set of plans aimed towards avoiding any confusion (see Jason’s comment here), it is clear that 37Signals is adopting the time tested sales tactics to lure customers to their higher value plans. Such tactics are in use ever since the term free market became part of our vocabulary. 37Signals is not the first company to try this strategy. In fact, there are some people who might see this as a willful misrepresentation by 37Signals, I just see it as an attempt by them to get more customers into their higher value plans.
So, what is the big deal about it?
Nothing much about the story itself. As soon as 37Signals attempted this strategy, some of their competitors tried to take advantage of this situation by trying to grab 37Signals’ customers into their own services. Again, under the free market ideals, there is nothing wrong with the competitors’ strategy either. In this era of all pervasive social tools, vendors will definitely try to use this situation for their advantage. Jason Fried of 37Signals realized this and he was taking time to clarify their position on blogs and Twitter.
In the discussion that followed on Social Media sites, Ben Kepes (former fellow CloudAve author) made a statement that got me thinking about it and I started wondering if it will fit in today’s SaaS era. Ben tweeted,
If people have a problem with #BaseCamp #37Signals pricing they have two options, shut up or move on. No big deal cc/ @jasonfried
Many of us are familiar with this kind of argument. Especially, folks in US often hear this statement when they are critical of a vendor/provider for what they consider as an unjust move. Even some of the vendors used this as a way to shut up people critical of them. Ben appears to have made this statement as an user and fan of 37Signals. From this perspective of Ben, it is a perfectly valid statement. But this post is not about Ben or his tweet but it is about whether a SaaS vendor can afford to make similar statements in today’s world.
Can they?
Even though such tactics were employed by vendors in the past, without having adverse impact on their business, a SaaS vendor cannot afford to do it today. There are two reasons for this change.
- Buyers are smart these days. They expect the SaaS vendor to support data portability without any penalty. Many times, they expect a programatic access to their data. As a part of my buyer side advocacy, I have argued that every customer should ask about the ownership of data and how easily one can export their data out of a service. In fact, I have also highlighted the same point in a whitepaper I did, coincidentally, with Ben. Today’s smart customers expect these set of features to be a standard in all SaaS offerings
- Almost every SaaS vendor offers an easy way to import data from competing services and/or the data available in one of the open formats. If the data format is a bit complicated requiring some customizations, today’s SaaS vendors even offer free services to help import the data
In short, the cost of moving data from one service to another is negligible to the users. Under such a scenario, SaaS vendors cannot take their customers for granted. They usually go out of the way to keep customers satisfied with the service.
Conclusion
Clearly, we are in a different era from what we are used to in the past. The cost of shifting providers is almost zero for the customers and this puts additional pressure on the providers to go the extra length to keep them happy. With social media turning out to be the megaphone for the customers, vendors are expected to be more alert and responsive. In this Cluetrain era where markets are conversations, the vendors are expected to be more open about their strategies. Even though 37Signals didn’t do anything wrong, they could have avoided this whole discussion by being much more open about their strategy. It is time for SaaS startups to embrace openness and use an aggressive customer friendly approach than the traditional business playbook. What do you think? Feel free to jump into the discussion.
