Unfair pricing models and the customers who leave them
EE and Shutterstock illustrate how to get pricing models hopelessly wrong.
As a customer, you care about a few crucial things. A service or product has to work, the user experience has to be as elegant, and the cost of the product has to reasonable.
But… That’s not the full story.
Above all, a customer has to be treated fairly, which means that the above statements aren’t universally true. A customer will probably tolerate a service failing or a product malfunctioning. They are likely to live with a less-than-perfect user experience. They’ll certainly be OK with paying slightly more than perhaps they ought to…. IF — and here’s the big if — they are treated fairly in the process. If you don’t get that bit right, realise that your customers have many other options — and being treated unfairly is the best motivator for looking for a new supplier.
In this article, we explore two examples where companies got it very wrong.
Case study 1
Shutterstock: Taking back what the customer already paid for
Shutterstock are a photography microstock agency that are doing pretty well; they’re one of the biggest, and for a long time were my go-to agency for licensing images. Not anymore.
Sure, they still have the best library of photos, and they’re affordable, but their pricing model is buggered.
The top (‘professional’) pricing model is clever: You can download up to 750 photos per month for a pretty hefty fee, but at least it’s easy to understand the model.
However, I don’t need 750 photos per month — not even nearly. So, instead, I buy 25 downloads for £139 ($220)— or around £5.50 ($8.50) per photo.
1. Don’t be a dick to your customers
The problem is with the ‘Up to one year’ bit. I have a few different Shutterstock accounts — personal, for work, etc — and it’s happened more than once that my credits have expired. In other words: I’ve paid for 25 images, but once the year runs out, I lose the credits I’ve paid for.
As you might expect, this is infuriating to a lot of people:
And it’s easy to understand why: it just isn’t fair. If you pay for X photos, you expect to get X photos: It’s not like the photos go stale or have a sell-by date.
2 simple solutions
- Don’t expire credits. This one is the simplest one. Basically: Don’t be a dick to your customers. There will be people who use the photos more slowly than others: Let them.
- Expire but refund. Maybe there’s a clause in Shutterstock’s contract with the photographers? Maybe Shutterstock wants the option of increasing the price per credit at a later date? Fine — but at least refund us on a pro-rata basis if you’re going to expire credits. If a customer paid £100 for 10 credits, and they have 3 credits expiring, give them a £30 refund. If, due to price increases, those £30 no longer buys 3 credits, that’s fair enough: At least the customer was treated fairly.
Case study 2
EE mixes two models, double-charging roaming customers in the process
EE (‘Everything, Everywhere’) is an UK mobile phone network.
When I’m in the UK, I do a lot of tethering (connecting my laptop to my mobile phone in order to use the internet), and I’m a heavy mobile data user, so I want the best possible network. EE has been good to me; very good network, ridiculously high speeds, and a decent fair use policy. In other words: everything I look for in a mobile network.
Unless you ever leave the UK, that is. Somehow, as soon as you step abroad, you’re fair game for some nasty tricks.
EE lets you buy a ‘bolt on’ internet connection, so for a chunk of cash, you buy a time-limited amount of data.
The problem is that there’s in effect a double trigger: If your time runs out, your data roaming gets switched off. If your data runs out, your data roaming gets switched off.
So, imagine the frustration in this situation: You’re usually a very heavy data user, and you never really pay attention to how much data you use. However, you now are charged by the megabyte, so you are very careful about how much data you use. As a result, you’re not consulting with your phone as much as you usually would; just using it for maps and iMessage. At the end of the 24 hour period, you find that you have more than half of your data allowance left Do’h, that’s a waste of money.
So, for the next 24 hours, you figure: “Well, I had tons of data left, so I may as well use Facebook and Twitter as well, it’ll be fine.” Next thing you know, your data runs out in only 8 hours, and you have to buy yet another bolt-on.
This is precisely what happened to me, and it was ridiculously frustrating — not least because there can’t be a good technical reason for not just doing one or the other.
If you limit it by time, let me use as much as I like. If you limit it by bandwidth, also cool, but let me keep the data forever, so when I’m back in the same country again a few weeks later, I can use the rest of my data allowance.
If you’re running a business, do you really want to create a situation where part of your business model is reliant on your customer’s apathy?
This very thing happened to me quite a few times, and it pissed me off every time. So today, I called EE, and cancelled my account (There’s a separate blog post in that travesty of a customer service experience), and had to pay another £48 for the privilege to close my account.
Let’s just say I won’t be recommending EE in a hurry.
Solution? Simple! Don’t sell something to customers, and then take it away from them
The above stories are from very different industries, but the core of the problem is the same: Both of these business models mean that you sell a specific number of units of something to your customer (photo credits or megabytes of data, respectively), but you expire them without offering a refund.
I understand the upside for these businesses: It must be lucrative to sell credits, then expire them: It’s free money. But is it worth it?
Broken business models
When you think about it, these business models rely on one of two things:
- The customer doesn’t notice. Entirely possible, in the case of the photography credits; these may be customers that never come back. Unlikely, in the case of the mobile data provider.
- The customer doesn’t feel it’s worth the time or aggravation to complain, because they’re lazy, too busy, or simply don’t think it’s worth it over a few quid’s worth of data.
If you’re running a business, do you really want to create a situation where part of your business model is reliant on your customer’s apathy? Wouldn’t it make a lot more sense to create a business where you default to treating your customers fairly?
Or, to put it differently…
You are literally making a bet that the customer who couldn’t be arsed to pick up the phone or send an e-mail over £30 worth of photography credits or £15 worth of expired data, also cannot be bothered to tell their friends about being shafted. If Twitter is anything to go by, that’s a losing bet:
