I am a sucker for business models that fly in the face of industry standards, but make so much sense.
It is why I like the book Moneyball so much…
Last year we finally switched the Scaling Up Coaches organization from Microsoft’s Yammer to Slack for our inter community communication platform. It was a major undertaking, but we really had enough of Yammer, and the complicated Microsoft login process, quirks, lack of support, and constant troubleshooting. Slack looked to be a little more expensive but worth it due to the improved experience.
In negotiating for Slack it was casually mentioned that they kept track of users and you only paid for your active users. Yeah whatever, I have heard that rhetoric before, but you have to figure out what constitutes active, users get missed, too much hassle to dispute, etc. so I didn’t pay much attention.
We just got our annual renewal bill for Slack. It came in about $4,000 UNDER budget. I was shocked! What happened? Oh, I was told, they keep detailed stats on usage and you really do only pay for what you use actively.
Huh? Say that again?!? They PROACTIVELY discounted our bill? Without 7 emails and groveling? Huh???
Slack discounted our contractually obligated bill rate without us asking…WOW!
Now why is this remarkable?
1. It’s an anomaly. Yes I am sure Slack isn’t the only one but we can all agree it is rare.
2. The goodwill, so powerful, I was moved to write this email about it!
3. The savings of attrition. WE leave companies when we get reminded we are not getting the value we are paying for. Slack does the opposite, and reminds us we ARE paying for only the value we receive. Brilliant.
4. AND the hidden one, but maybe the best of all. Imagine the reduction in billing complaints! When I owned Appletree, the call center company, 90% of our billing complaints were about overages and usage, and when we shifted our model to eliminate usage charges on the vast majority of customers, billing complaints dropped dramatically.
We can all have an opinion on Slack, and believe me I have plenty, and not all are good ones, but when it comes to this style of billing practice, I am a fan! And for anyone wondering whether the money they leave on the table is worth it…I believe.
It is always a better practice to make a customer feel cared for and well treated, than to extract every last cent out of their bank account.
And the hidden cost of customer churn in most companies is exorbitant. Software as a service billing companies have great margins and there is no incremental costs associated with us overestimating our customer census, so while they may leave some money on the table in the short run, they won’t be trying to replace us in a year from now because we overestimated a number of users and we realized we are stuck in a bad contract.
I strongly suggest, loudly, never remind your customers that you may not be worth quite as much to them as they initially thought, and mailboxes are full of those types of invoices every single day…something to think about.
Cheers,
John
Founder of the align5 Companies, CEO of Scaling Up Coaches, and Serial Entrepreneur
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