Why we raised our prices from $4 to $9 per month?

Recently, we got a lot of things done in Gaurilla based on the feedback we got from Early Bird users. And after four months into the public beta phase, we raised our prices from $4 per month to $9 per month.

Yes, we kind of came out as jerks to a lot of you but, there’s a reason that made it the best decision for our company and for our paying users.

NOTE: For those of you, who signed up when the price was $4, you’ll still be paying $4 only (if you subscribe to the paid plan post your trial period). Nothing evil with you, as promised. It is for our new users that this new prices will take effect.

Why did we do it?

Well, there are a few reasons.

Reason #1. It acts as a filter.

We used to have flocks of new users every week earlier. After the price raise, we saw a drop of around 20% in new sign-ups. But we are happy. We are a small company and supporting huge number of new customers with getting their accounts set up was a huge task for us. And often, we saw that a lot of people used their accounts actively only in the free trial period. When I contacted them to understand what made them not to switch to paid plan and if we could do anything about it, I often got something like this in response:

“Gaurilla is awesome. I mean, really awesome. I have recommended it to a lot of my friends too. But my requirements are not that large. If you could have a free plan with limited features, it would have been great.”

That’s what we didn’t want. Serving an app for free would have made us evil – we might have sold the data to some analytics company, we might have started showing ads, we have spilled “Gaurilla” branding over everything, we might have done some really ugly stuff that we never wanted to do.

Of course, we never had a free plan (only 30-day free trial), raising our prices made the filter work better by only attracting people who would find real value in the app. And as stated on the website, we give away discount coupons (ranging from 10% to 25% discount) to our active users through Twitter. Just ask for one.

Reason #2. Competing on price isn’t called competing.

You offer your product for 50% less than your competitors and people prefer you over them. Victory! Well, no.

Competing on price is never a good option. Your competition can offer a cheaper plan overnight and you’re screwed. Tightly. Anything that can be overpowered overnight isn’t an advantage. Or competition, so to speak.

We started with the cheaper price than most of our competitors but only because we were new. We wanted a lot of people to see our product, use it and give us feedback. We kept the price low to keep the barrier minimum during our first few months, until the product became more mature, which now it is.

Reason #3. Higher costs

With new features (like Basket) and the way Gaurilla is evolving, the running cost has gone up. And we are a bootstrapped company too (that is, no big guy with huge piles of cash behind us). We keep running the company by the money that our loyal customers pay us happily in exchange of the value they extract out from Gaurilla.

So, we had to raise our prices a little to make sure that we don’t run out of cash quickly and that we keep running to serve our customers for a long time. Nothing gives us more pleasure more than seeing our happy customers. Heaven!

Takeaway

We have came a long way since we started out to build an app that should be must-have for every small and medium business. We had our assumption in the beginning and we had our fair share of lessons.

The most important lesson that we learnt in our journey thus far is that competing on price is not a competition. Once the lesson was ingrained in our minds deeply, we shifted our focus from a-lot-of-users-paying-low-fees to if-not-a-lot-then-some-users-finding-the-app-very-valuable. This simple shift in the focus made us work toward increasing the value of the product (and not just by decreasing the prices).

Our early birdies will still be on our $4 plan but new prices apply to all the new users hence forward. New users can ping us on Twitter (@Owlgrin) to get some discount coupons, though. :)

As Founder & CEO of Owlgrin, I love building things, from scratch. I love writing about technology and startups. I also tweet about random tid-bits every now and then @mohitmamoria.

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