I had an interesting discussion with one of Sendy‘s customer recently. Like many others, he questioned why I would offer Sendy at a one off fee of $59 when there are opportunities to tie a recurring fee to it. Sendy brings so much value to businesses and individuals who wants to send newsletters without having to spend exhorbitantly and yet I allow users to buy it at a one off fee? Isn’t that leaving money on the table?
Allow me to be direct: you do charge too low. ;-) No insinuation. Everyone thinks so.
Had I thought like everyone else, there would be no Sendy. We wouldn’t have been able to discontinue our web design business that has been wearing me out.
Sendy started in July 2012. Revenue did not grow steadily month after month, it grew exponentially.
When I launched Sendy, it immediately hit the front page of Hacker News just before I turned in. I made my first sale, then another. It did not stop.
I conducted a survey on my customer base asking them why they bought Sendy, the top answers are; it’s self hosted, one off fee and cheap. Now, why would I start introducing a monthly fee to bring Sendy down?
Hundreds of new startups launch everyday but most of them eventually fails. It can be due to many reasons. But the most important one is nothing more than being me too startups with almost the same feature set and pricing model. Why would anyone give these new startups a chance if there are already established ones? That is why it is difficult to get a SAAS product off its feet. Unless you have a crystal clear differentiator separating you from your competitors. This unique differentiation is the key to traction and success.
Sendy’s feature set does not match MailChimp’s at all, yet so many people switched to Sendy. Even from Aweber, Constant Contact, Campaign Monitor, Mad Mimi etc. The reason is clear, pay once and it’s yours, there is no need to pay again and again. Emails are sent with Amazon SES at a low ‘ten cents per thousand emails’, so deliverability is taken care of. At $59 one time fee, it’s cheap, so it’s easy to take a shot. For others that don’t find it cheap, they know it’s only a one off fee. Moreover, I do offer refunds if things don’t work out. When people start realizing how complex the application is and how valuable it is to their business, they begin to question why this isn’t $299 or $799 and why isn’t there a recurring fee tied to it? Why is it so cheap? Sendy’s pricing is wrong!
No matter how good a product is, it is useless if it does not catch anyone’s attention. Sendy successful caught people’s attention. Even the attention of Kevin Rose (Founder of Digg) and Christian Reber (CEO of 6Wunderkinder).
If Sendy’s pricing model starts with $19/month for instance, less people would give it attention and there will not be any traction. You may think $19/month is cheap, that is what I thought as well when I first started subernova.com and mockvault.com. The biggest mistake I made was being too over optimistic about adoption rates. I only learnt later that it is very difficult for people to make a commitment to shell out even just $5 a month – unless there is a damn good reason to. There is huge difference between paying “$5 a month” and “$5 only”.
So when you’re launching a new product, do not expect to succeed just by following blindly in the giant’s footsteps.
To add on, there are approximately 7,000,000,000 humans on earth at the time of writing. If your application caught people’s attention from the start, it will continue to do so, at least for a longer time than if it did not. The only question would be how to reach this vast amount of people who may be interested in your app.
The problem with most startups is that there is almost nothing for anyone to give a damn about. You can put it online for 5, 10, 20 years and you will never see it fly.
You can improve the odds by changing something, but without giving users a single compelling and selfish reason why they should consider giving your app their attention, your product is doomed to fail. At least that is what I have learnt. A very valuable lesson I will always use as a basis for anything.