Nick Zadrozny

Today, Chargify rather abruptly announced a new pricing model for their (excellent) service. Notably, they are doing away with their free-until-50-users introductory plan.

The rest of the entrepreneurial internets have discussed extensively how poorly they think Chargify handled the transition, particularly with respect to grandfathering existing customers. But I won’t rehash here why I think this was a poor move. In fact, in some ways, I respect that they made a tough business decision.

What I want to look at is why their free plan was so magical. Because as a business owner myself, I think that they had a very clever trick up their sleeve that I have learned from, and I think others can too.

Chargify is popular among bootstrapping startups. In fact, popular is too mild a term. I would go so far as to say that Chargify’s free plan is a no-brainer, mandatory choice for any bootstrapping internet startup.

The obvious implication here is that it is cheap to get started. You can start signing up for customers on day one, and not have to worry about paying Chargify until you are bringing in real revenue and can afford it. With the value of the service they’re providing, you’d be silly not to use them.

But that’s not magic, that’s just good cost-benefit analysis for your average bootstrapping entrepreneur. The magical thing here is this:

Paying Chargify is a sign that you’ve made it. Your app has reached an incredible milestone: 50 paying customers! Now, not only is Chargify’s price easily affordable, paying them is actually a reminder of your own success, and a cause for celebration. Every month.

Instead of thinking, “I’m paying Foo Corp,” how much better for customers be thinking “I’m paying Foo Corp because I’M AWESOME!”

Today, Chargify opted for the former, and it’s just a little bit less magic. Instead of a pact of mutual awesomeness, we’re left with one more monthly bill.

Hopefully entrepreneurs can at least learn from Chargify, and find ways to reintroduce this kind of magic into the pricing of our own software and services.