Marketing for SaaS and Web Apps / Freemium / Pricing

Ning, the Social Network company, dropped Freemium like a bad habit and never looked back!

Ning is an example of a company that is well funded (>US$100M), can spend heavily on marketing and user acquisition, and certainly seemed to have an addressable market size that made Freemium look like a good idea. But it wasn't. 

Unfortunately, one of the biggest problems we see with companies using Freemium, and it appears that Ning was no different, is that they attract the wrong crowd. That base of free users that you look to as a group of hot prospects just waiting to give you their money; not so much. This isn't always the case, but with Ning that was certainly in play.

So Ning pivoted; they changed focus at the business level and killed Freemium. No more free networks. And on May 4, 2010 they announced their new pricing. So lets take a look at the pricing page they put up and see if they really understand this whole "premium" SaaS business. 

This review is done knowing fully that Ning's pricing page will likely change between now and the go-live date in July. Their actual pricing might change, too. We'll revisit this when they launch their premium-only service to see what changed and if they took our advice. This review is also only looking at their current pricing and comparing it with their competitors, rather than the past Ning pricing. Looking back at the history of pricing page designs is a topic for another day, but it is not recommended!

We'll just pick a couple of the elements from our Express Compare™ service and walk through these for the Ning pricing page as it was published on May 4, 2010 at 3pm Central Time.

Overall Page Design

The page is sleak and clean and the mass of information that is there is nicely laid-out, but overall it lacks any real Call to Action, The page also lacks any real Trust Factors like a phone number or security badges, and it is way too long. There are some ways that much of the redundent information could be re-worked or shifted around to make more efficient use of this page, with some information possibly offloaded to individual bundle landing pages. There is also no call to action below the fold, which, ironically, is where the meat of the information required to make an informed decision between the bundles is located. 

Contrast this with their competitor Grouply, who has a pricing page with many elements below the fold, but who at least puts buttons down there so you don't have to scroll back up to sign-up. Grouply still has a lot of other issues with their pricing page, but that was one thing they did right. Ning should learn from that.

While Ning could learn something from Grouply on the placement of below-the-fold sign-up buttons, apparently Grouply did not learn anything from Ning's Freemium debacle. On Grouply's home page they have a banner welcoming with open arms the Ning refugees who have already shown they won't pay even $2.95 a month - and Grouply's lowest price is $4.95. Can Grouply, with 1/50th of Ning's funding, do a better job of converting their free users than Ning? Is it just a publicity stunt?

Bundle Names

This one is something that almost everyone gets wrong, and Ning is no exception: The bundle names don't mean anything. Really? Does this make that big of a difference? Remember, its all marketing and we know that marketing that speaks the language of the customers works. So how do Mini, Plus, and Pro align the pricing to the consumer? If I sign-up for the Plus tier does that mean I am not a professional? This is marketing people; and those bundle names are way off.

The thing that doesn't make sense about Ning's bundle names and ultimately market alignment is that they obviously have a target market segment in mind for each pricing tier. They even spell out who could benefit in the paragraphs below the bundle names. Unfortunately, the value prop directed at those market segments is lost everywhere else on the page.

Value-Based vs. Commodity-Based Pricing

One of the mantras of Sixteen Ventures has always been Pricing is Marketing. If you understand that, then you realize that everything you do with pricing has an effect on the perception by the market; or your market position. If you have a low price, you might be seen as cheap or poor quality or if you have a high price, you could be seen a luxurious and fine quality. You could also be seen as disruptive or overpriced, respectively, if the rest of your marketing and product / service execution isn't aligned.

It certainly does not help convey high-value to your market if you continue to put the focus on commodity items in your pricing. Unless you're selling storage, get rid of the gigabytes! And frankly, if you are selling storage, file transfer services, etc. if you can put the focus on something else (reliability, security, etc.) then you can change your market position and value perception and maybe charge more. 

But, it looks like Ning seeks to differentiate its pricing tiers on storage and bandwidth. This could be a continuation of legacy pricing for them or even a knee-jerk reaction to the major costs associated with their free users; storage and bandwidth. Remember, nobody cares what it costs you to run your business; not the amounts and not the metrics. 

What Ning needs to ask themselves is "what does a Gigabyte mean to the small non-profit or family looking to setup a social network?" They do a call-out with the "?" but it should be more clear - perhaps putting how many pictures or videos and then a "?" to say this equates to x GB.

I was going to write how one of Ning's competitors, KickApps, did a better job on their inclusion of commodity metrics in their pricing page. KickApps actually listed in the bundles what the commodity metric was equivalent to; number of videos, photos, etc. Good stuff (though in itself meaningless; like saying an iPod can hold x number of songs... some songs are longer, different bit rate, etc.)

original, snapped on 5/4/2010

But when I went back today to check, it looks like KickApps changed their pricing page. Now they are using market segmentation to drive Enterprise customers and SMB customers to separate pricing pages. This is a really good idea as its difficult to have one pricing page that is all things to everybody, but for KickApps its probably too late in the sales funnel for that step.

Overall, it looks like KickApps took a huge step back in their pricing page design. Their new pricing grid might be cute, but its below the fold, the names still don't mean anything, and now, the one good thing from their previous pricing page is missing; the real-world-to-commodity metric bridge.

Pricing

Its funny, but 90% of the conversations about "pricing" end up being about "value" or the communication of that value. This is the main reason we do a Pricing Page Tune-Up™ for SaaS & Web App companies... in many cases, no matter how spot-on your pricing is, if everything else around it is terrible, it won't much matter. Sometimes a bad pricing page is indicative of a poorly designed Pricing Strategy; often it is not.

For Ning, their pricing page does little to convey the value that they offer. A pricing page should not be your only marketing, but it should be a continuation of your marketing. Don't lose momentum by having a pricing page that is more informational than marketing. For Ning, this will be an issue as moving from Free to $2.95 is quite a jump and they will likely run into penny-gap issues with their existing free users. 

But it seems that the penny-gap here is intentional. Ning wants to put up a barrier to keep the freeloaders out, but otherwise keep the service accessible. This has, and will continue to, irritate their existing user base, but them's the breaks, kid. This is business and Ning ultimately has to turn a profit. The price of $2.95 looks like a number that could be equivalent to or just above what Ning has determined the cost to provide service for (hosting, bandwidth, operations, support, etc.) a fully-loaded network. That is just speculation, of course.