Pricing Update: Smoother Averages, Greater Predictability

Guest Author

Today we’re releasing an update to the pricing of CM Commerce Premium, which will hopefully make your task easier in planning your monthly expenses.

Since our inception, it has been our goal to find a better, fairer way of charging our customers for CM Commerce. This has led us on a path of using monthly order volume as the way we tier our plans, instead of the number of subscribers/contacts/customers (the latter becoming entirely punitive and expensive, which we explained and illustrated here).

Until now, we’ve used your monthly order volume in the last 30-day billing cycle to determine your tier. What we’ve noticed though is that most of our customers experience some form of seasonality, which often means we’re changing their plans (up- and downgrading based on their order volume) quite often. The challenge with this is that there is less predictability in what you’ll be charged plus you need to deal with pro-rated charges if an up- or downgrade happened within a billing cycle.

So to simplify this, reduce the number of up- and downgrades and keep your pricing more consistent, we’ve started using a 12-month average to determine your tier.

An Example

Below is an example of how this would’ve affected one of our customers (I tried to pick a customer who best represents the same kind of seasonality that we see for most of our customers).

What you’ll see in the graph above is that the actual orders follow a seasonal trend with a nice spike in Q4 (Black Friday, Cyber Monday & Christmas), as well as a bit of a funk beginning of the year. The 12-month average though stays almost similar throughout the entire year.

Using our old method, this customer would’ve been charged:

  • “251 to 500 Orders Monthly” @ $89pm for January & February
  • “501 to 1000 Orders Monthly” @ $109pm for March through to September
  • “1001 to 2500 Orders Monthly” @ $139pm for Oct through December
  • Total cost for the year is thus $1358.

With the new method, this customer would’ve stayed on our “501 to 1000 Orders Monthly” plan through the year and paid us $1308 instead.

This means that the customer would’ve realised a cost saving ($1308 vs $1358) without all of the confusion and extra work required to reconcile different costs from month to month.

We Benefit Too

In the same breath, we don’t want to pretend that there is no benefit in this for us. Our customers’ considerations are our primary goal in this decision, and this was the impetus for this decision. In addition to that, there are some benefits to us:

  • We operate a recurring revenue business, so having higher predictability in our revenue (without seasonal super-highs and slumps) means we can do better forecasts. The direct benefit of this is that we can then safely accelerate the reinvestment of funds into growing the team and building the product (to improve customer experience and value ultimately).
  • It becomes easier for us to explain how our billing works and answer questions where our invoice may have been confusing to specific customers.
  • When we calculated what the impact of this change would’ve made to revenue in 2017 (assuming we implemented it in January last year), income might’ve been 2% higher. (This also means that for 99,9% of our current customers this change should not significantly alter the total cost of CM Commerce within a 12-month period.)

We believe that our societies are changing and the best way for us to build a healthy, profitable business is to align our interests as closely as possible with those of our customers. That is why we’ve always had the ambition to find a better, fairer way of pricing CM Commerce (where the common methodologies used by others would’ve made us more money in the short-term).

This too is why we’re releasing this update as we aim to simplify further the whole experience of using CM Commerce. Ultimately we want to save you money, save you time (to spend living your life) and help you build a healthy, profitable business.

(If you made it until the end of this article, you should also read “Capitalism is a snowball rolling down a steep hill” by a friend of ours, Paul Jarvis. Paul accurately captures some of our ideas and then finds the words to make this feel like an eloquent, rallying cry.)

Photo by Samuel Zeller on Unsplash