Ian Landsman is Starting From Scratch, May 29, 2007:
HelpSpot Pricing Considerations
If you're in the market for a powerful and user friendly Help Desk solution, please take a look at my company's flagship product HelpSpot.
With version 2 of HelpSpot almost ready I’ve been turning a few extra mental cycles to pricing. For the last year and a half (that’s all it’s been?) since HelpSpot launched the price has been steady at $179 per user and $49 per year per user for support and upgrades after the first year (which is free). I’m thinking of raising it, but at the same time I really like how sales are growing and I don’t want to damper that. We don’t get a lot of complaints on pricing and I agree with Eric Sink that that may be a sign of the price being too low. At the same time broadening the customer base is very important, especially with how advertising goes in the help desk world. It’s simply too expensive to do any real advertising (think $30 per click), so a broad customer base increases our word of mouth sales and secondarily can help our search engine rank via portals which leave the “powered by” links as well as customers with blogs.
One area we do hear some complaints on is support costs. Percentage wise they are high at around 27% of the license costs, most software is around 20-25%. However, most other software require you to purchase major version upgrades where we include them. So far our conversion on customers renewing support has been very good, so it might not be a huge issue. If the license price was raised though and the support price was left the same then the percentage would decrease. So for some potential customers the price may actually appear more appealing even though it’s in fact more expensive.
My main hangup is that v2 delivers a whole bunch more value. There are some highly requested and very powerful new features in there and so a price increase in conjunction with v2 makes a lot of sense to me. On the other hand, I couldn’t be happier with sales and a part of me doesn’t want to mess with anything 
Right now I’m leaning towards no change, but it’s something I’m going to be giving a lot of consideration to. Especially over vacation while sipping on some margaritas
Discussion
It's interesting to hear your thought process behind the pricing.
I don't think I would have bothered to try/buy HelpSpot if it was somewhere in the $300-$400 range. I think that comes down to the fact that as a programmer, I'd be much more likely to try to struggle through with one of the many free/open source help desk systems, even though they're not as easy to use as HelpSpot. Knowing what I know now, that would've been the wrong decision, but it's one I would've made. The alternative to buying HelpSpot wouldn't have been one of the "enterprise" systems that would've cost me thousands of dollars. $179 just sounded like a nice price point where I didn't buy blindly, but felt like it was a fair price.
You mentioned some powerful new features in v2 ... I think (for me) your ability to charge more for those really depends on what that new functionality replaces. If you're adding great improvements to functionality that's already within HelpSpot I really wouldn't expect to pay more (not saying that I wouldn't anyway). If you're essentially adding a new product, such as adding functionality to handle billing customers, then that may be something I could see increasing the price for.
Speaking of which, have you thought about increasing the price by selling add-ons separately? e.g. core system = $179, KB +$25, forums + $25?
Created by Ade on 05.30.2007 12:35 am
Good points Ade. I think there's 2 different perspectives though which are at odds to some degree. You have existing customers like yourself who know the price was $179 and you have new customers who will simply be asking if the value provided is worth X having never known the old price. I think there's some interesting psychology there. In general I think customers are usually not happy when the price is raised (I know I'm not!), but if you're still providing good value they'll stay with you.
I have thought of add-ons, but I don't really like that model. It makes it hard to figure out what the pricing is and it also makes trialing the software tricky. Which modules should I download, I tried with this one, but I need that one, etc.
What I have thought about though is having an "enterprise" version, which will contain some new modules that are less relevant for standard installations. So one example would be that we get a fair number of requests for a survey tool from more formal help desks who want to survey their customers regularly. Something like that would make sense in an enterprise edition.
The enterprise edition would also allow for a higher price point for customers requiring those advanced features, it would allow the standard edition to stay lean and not be packed with unnecessary features which aren't used and would also provide a nice upgrade path.
It would be a ton of work though, so I'm not sure it's the best thing to spend my time on in the near term.
Created by Ian on 05.30.2007 7:52 am
Ian
Currently, what you offer is a 'one size fits all', which is probably losing you some lower-end customers (you wont hear them complain about your prices - they just won't buy, and probably wont even look at your demo if they know they wont spend the money you charge), and losing you money from some higher-end customers that would spend more.
The separation into three 'editions' of the software makes the most sense to me (and maybe a perpetual FREE edition with an extremely limited feature set). You may divide it up like this (these are just examples of course)
1. Free
forum only, no support, no templating, hosted, 1 user only, only X tickets/month, etc etc - designed to get people using it so they eventually upgrade to a paid version.
2. Basic
maybe just helpdesk, no forum, no knowledgebooks
3. Professional
roughly what you offer now
4. Enterprise
extra enterprise-needed features (you know better than I what these are)
You can eliminate the free one of you want - I know that's a controversial thing. Each one would have a set of features targeted towards a specific type of customer (you would know better than I what represents each). Once you do this, you can position one of your editions at the same price point you have now (maybe the pro edition = what you have now), and then 'test' the other price points.
We are just thinking out loud, right?
Created by OneNerd on 05.30.2007 9:46 am
Yep, just kicking around ideas here Nerd nothing binding (including for me!).
The tiers are definitely a good and very common approach. I've thought a lot about a free version actually. My thought was really more on just giving away single user licenses with full features, but I'm worried about the support aspects of that. I know I can say no support, but honestly if someone emailed in I'd feel compelled to help them so it could really increase my support.
I really see the obvious lines of separation for a pro level and enterprise level. Basic gets fuzzier to me, because I'd need to pull a lot out to justify it and to be honest I'm not that interested in selling a crippled version of HelpSpot.
Enterprise though would be much more clear because there would be additional modules that are totally separate from the pro (normal) HelpSpot and it would be a clear distinction. I also like the simplicity of pricing between 2 options over 3.
On the other hand there's lots of software companies with only one option that do just fine. A quick one off the top of my head would be FogBugz which has only one price and feature level and they sell millions of dollars a year with that.
Created by Ian on 05.30.2007 12:00 pm
This is an interesting discussion to see out in the open. Normally, a new user wouldn't know that the price used to be $179, but if they see this thread they will 
If you've got logical places to break things up, market segmentation is a great way to get a fair price from the different kinds of users you have. If you're adding features that are largely useful only for bigger customers, it may be worth creating a next tier up that includes those features. (Figure out how much work it would take to offer another tier up and see if you think people would be willing to pay that.)
Also, you'd probably be able to raise the price to $199 without much complaint.
I tend to think that offering a la carte modules would make the purchase decision too difficult for people. If there is an "Enterprise" version that offers features that are truly only useful for enterprise users, that seems like a win.
Created by Kevin Dangoor on 05.30.2007 12:44 pm
We went thru a similar thinking process with for the pricing of our software (CRM/Service/Billing).
We ended up going with the modules pricing scheme.
The main license includes all the features most users needs, we did not artificially cut the functionality to modules but rather provided a large feature set for all our customers and optional add-on modules to the ones that need them and are willing to pay extra for them.
Our trial simply includes all available modules. Since there are add-ons by nature, it doesn't make the system more complex when the modules are there (actually this was one of the criteria to what can be defined as a module). If a trial user need a module, they use it, otherwise they ignore it (and it is easily ignored).
I also don't think it should be hard for your customers to understand this licensing model. You are selling to businesses / IT oriented users and unlike consumers, it should not be a barrier for them.
Re you current pricing. If you don't receive complaints about your prices then I think a 10% increase (i.e. < $200) will probably won't hurt sales, especially if you believe you also dramatically increase the value to users with version 2.0
Created by Maayan Porat on 05.30.2007 1:35 pm
I actually think raising the price to $199 would turn off buyers compared to $179. I think closer to $150 when I see $179, not $200, which is what I immediately think of when I see $199, since I tend to round numbers like that in my head. I'd call $199 "two hundred" and $179 "under two hundred" which is close, but still different. Also, that extra $20 is going to make a bigger difference once you start multiplying the cost times multiple users.
I don't have much experience in the helpdesk market; if you've read my blog (and I notice Ian has at least seen my post about HelpSpot you know I'm just evaluating helpdesks for the first time and have only tried a few. ManageEngine ServiceDesk, which is specifically an internal helpdesk that includes asset tracking and a lot of other similar, specialized functions, is free for one user/20 devices but goes up to $495 for two users, and $995 for 5 users (technicians). That is more than HelpSpot but not terribly much more. However, the HelpSpot user interface is, in my opinion, better, as much as I like the extra features. They have a non-IT helpdesk as well but I've ignored it so far
What about having an optional free or lower-cost version that was ad-supported like Spiceworks? They are 100% free to use but they have a deal with Google worked out to display Google ads on every page even though it's internally hosted and not publicly accessible. I don't know how much they make from this, but the ads aren't terribly annoying, and I know for me, working at a church, I can sell free-with-ads a lot easier than not-free, at least with our current budget. If the per-user cost got low enough (esp. free), I might even be able to sell the system for non-IT use, for other departments to handle requests (we have just under 10 pastors on staff plus administrative staff, so there's a lot going on here!).
I will also say I appreciate your non-profit discount!
--possible customer, running trial
Created by David Szpunar on 05.30.2007 1:42 pm
@Maayan, I don't know there's something I don't like about the module approach. I agree that most customers will be familiar with it, but I find it adds another layer of complexity. Especially if some modules are borderline for a customer. Modules they clearly do or don't need are easy decisions, but there's a lot of gray area in there.
Of course to some degree this is all symantics, if you make a good product people will buy it under any pricing structure. I guess us software dorks enjoy the analysis though
@David, Great to have you participating over here! I am familiar with Spiceworks and the ad supported model. They're pretty new though and I'm not sure that the model is proven yet in this context. I have thought of another ad supported route that.
The one I was thinking of was having a free version which put a footer at the bottom of each email advertising that the mail was sent using HelpSpot. This would be auto-appended to every outbound email. So people using HelpSpot free would be helping to spread the word to other organizations. I'm not sure though if that would be too intrusive (though yahoo has done it forever with their free email as have other companies). I'm not likely to go this route, but it's something I've considered.
I agree that $179 is a nice middle ground that makes it feel not too expensive even though it's only $20 short of $200. $199 certainly seems much more expensive than $179 and for price sensitive potential customers like yourself that can be a big factor.
Created by Ian on 05.30.2007 2:10 pm
Interesting thought about the email-ads. It's success would depend in part on customers using the solution for external support. I don't know what your customer base looks like, but I'd be using it for internal support, and it's unlikely anyone worth selling the software to would get the emails. However, I'd definitely be okay with using a version like this if I didn't have to pay for it! I'd probably implement it tomorrow (well, Friday, I'm at a different office tomorrow and stop looking.
I also like that your system isn't modular. I can foresee usefulness to both the KB and forums (KB more than forums) to us even as small as we are. The forums could actually become a pseudo-intranet in lieu of a real one if we decided to go that way. But I've played with the KB feature a bit as part of my trial and can see that it would be something useful built up over time, although it wouldn't start with much information in our case. However, these features are added benefits in favor of the product that we don't need enough to pay extra for, so if they weren't included we just wouldn't see them as a bonus feature that they are now. They manage to be very simple while remaining powerful however.
Created by David Szpunar on 05.30.2007 2:21 pm
The base is a mix of both external and internal support. As you say the internal support folks wouldn't really be contributing in this model.
That's a great point about the portal features. We have a lot of customers who purchase because of the request management and then find the portal features useful over time as they start working with them. In many cases they weren't even going to have a forum, but because it was available they used it and find value in it. If it were a separate module, they would not purchase it because it has no immediate benefit and would not be available to play around with later so they'd also be unlikely to add it in the future.
Created by Ian on 05.30.2007 2:38 pm
With the recent comments it sure looks like the Forum and Knowledge base shouldn't be separate modules but a part of the main application. It is aligned with what I think a module should be - if it can help most users - keep it in the standard license and dont ask more for it.
Now, when you think of the Standard and Enterprise edition model, you already mentioned a feature or two that you think can be part of this edition (like the survey tool mentioned above).
Let assume that the enterprise edition includes 5 additional new features (main features other than enhancements to existing features).
Let also assume that you've raised the license price of each enterprise license to $299 (all theoretically of course).
At this stage a potential customer wants to buy your system and also need just 1 of those 5 features included in the enterprise edition feature (the Survey tool for example).
This customer will need to pay $120 more for each license to use this one additional feature they need... I don't think they will be happy about it - here comes the module approach - price each feature that the enterprise version have for $20/each and make your customer pay only for the added feature they need rather make them pay for all the features they don't need... so, they will now pay $199 and be happy.
I think that the point is to define what an additional module is and what should be included in the standard license (like the Forums feature included in HelpSpot)...
Created by Maayan Porat on 05.30.2007 3:14 pm
True, but you still get into lots of explanation about what is what and what you get and what you don't and how much this costs with X users and that's in addition to the license costs, etc. Lots of companies do it and it can be done in a clear manner, but it's tricky IMHO. There's also additional testing burden when testing the system in every possible configuration (with module X but not Y, etc).
I think one aspect that's missing is the competition. It only seems unfair to charge $120 more per user if there's other options which are less. Many of the companies that would be interested in the enterprise version are also looking at tools like BMC Remedy or Footprints. These solutions will cost tens of thousands of dollars minimum without the often required customization and so on. So even if 5 licenses cost $1,500 that may be $8,000 cheaper than the alternatives which are being researched.
HelpSpot is sort of unique in that it's higher priced than some of the middle tier help desk solutions, but lower price than most of the upper tier, yet HelpSpot is often evaluated against upper tier solutions.
I do think modules could work, but I'm not sure that the extra work is worth it. Will I actually generate more sales by using that approach. I'm not sure.
Created by Ian on 05.30.2007 3:21 pm
@David above... here's something interesting when you take a couple of sentences together:
"I actually think raising the price to $199 would turn off buyers compared to $179."
"$995 for 5 users (technicians). That is more than HelpSpot but not terribly much more."
The second comment about $995 for 5 users (or $199 per user) not being "terribly much more" than HelpSpot would seem to imply that the $199 price is not actually bad. And, in fact, you have to buy 5 users worth to get that price.
I don't think that $20 will actually be the thing that makes or breaks the buying decision. As a prospective customer, you doubtless wouldn't want to pay the extra $20 per user...
By the way, one way to implement a price increase without hurting people that are currently trying out the software: run a limited time introductory price of $179 for HelpSpot 2.0.
Created by Kevin Dangoor on 05.30.2007 4:17 pm
@Kevin:
I completely agree with you that as a potential customer the cheaper the better--I already said a free, ad-supported version would win me over in a heartbeat However, the cost savings from the $995 price is one of the things that has me leaning towards HelpSpot, so if it cost the same that's one less advantage. But that's just one other system that I'm currently looking at, and I'm not tied to either yet.
I will say the other thing I like is that HelpSpot has per-use rather than packaged-user pricing. The other system has 1 user (free), 2 user for $495, and 5 user for $995, but what if I only need three users? Then HotSpot is cheaper, and would be even at $199/ea. Also, ManageEngine's cost is recurring, that's a yearly fee and you must pay it to continue to use the product. HelpSpot does have yearly support/upgrades, but they're not full price and are even easier to stomach, and are optional if we want to run an old version (I'm relying on memory here so I could be wrong). These are things that for me, with my tight budget right now, are helping a lot, although the inventory and asset control included in ManageEngine's offering is a very nice extra and I'm mainly evaluating whether the added cost and functions are worth the extra money at this point, plus balancing out that HelpSpot's interface is nicer.
I am curious to see HelpSpot 2.0 and what it brings!
Created by David Szpunar on 05.30.2007 4:44 pm
I'm definitely with you that the packaged pricing forcing you into N users is bad news. And that's remarkable that they charge you that *every year*! Wow.
I'd be shocked if Ian could make ends meet with an ad-supported version. Beyond that, if he's often competing against things like Remedy ($$$!) even having a free version might make HelpSpot look to those sorts of organizations as "cheaper" than it is.
Good luck with your evaluation of these tools!
Created by Kevin Dangoor on 05.31.2007 6:38 am
Huh, yeah I don't get the forced user pack pricing. Well I guess I get it, but I don't like it. Seems like a big negative to me.
You are correct David that you can let the support expire and still run the old version, though you will lose both upgrades and support. You can always renew your support even after expiration you just need to pay the back owed amount to bring yourself to current.
Version 2 preview page should be up Monday night or Tuesday, well that's the plan at least.
Good point Kevin, anything free could create a negative perception in those comparisons. There's actually a fortune 500 company evaluating us vs Remedy right now and I believe we're going to win that from my talk with them yesterday so I'm doing something right
Created by Ian on 05.31.2007 7:20 am