SmugMug, a photo sharing/storage/commerce site, announced to its customers via email on the Friday prior to Labor Day weekend its new pricing structure, particularly the pro accounts. According to some customers, prior to the announcement the packages were Basic, Power, and Pro. Pro was ~$150/year (customer of ten years even enjoyed the ~$99/year rate). Now, Pro is split into “Portfolio” and “Business” accounts with $150 and $300 per year respectively.
The backlash was immediate and we are sure the management at SmugMug will issue some kind of damage control ala PR crisis communiqué Tuesday morning to placate the growing dissent amongst its user community; many of them previously loyal for almost a decade. As of this morning, we saw over 320 pages of comments on SmugMug’s official blog regarding its price increase.
Granted, this pricing structure compared to their competitors is actually not that bad. So what went horribly wrong?
Messaging: Yes, it’s been “over seven years” since they raised the price for their members but their members are not going to empathize with that. SmugMug distinctly stated the price increase will help them invest in new development. Their customers are not going to empathize with that either.
Value: To their customers, SmugMug has not profoundly increased its services to justify the approx. 100% increase for same service offerings. They will essentially pay around 100% more for the same service they enjoyed for so long.
Timing: Not only was the announcement made prior to a holiday weekend, it seems the new pricing structure will take effect all at once (on anniversary renewal date) versus tiered over time.
Message Control: Twitter, Facebook, and blogs are rapidly fanning the fire from irate customers who feel the increase is drastic enough to motivate them to search for a competing provider. Who’s there to openly share with the customers all of the (supposed) benefits they will be enjoying with the new pricing structure, worded in a way understandable and empathetic to their customer base?
If you’re feeling curious, here’s the 320+ pages filled with comments from SmugMug’s blog.
So now that you pissed off your customers and they’re threatening to jump ship in drones. Are you going to reverse gears like Netflix, Bank of America, and Verizon?
SmugMug, your communication, marketing, account management, sales, customer service, and management teams all need to communicate the same essence. What kind of cool stuff your new and improved Pro account will entail for the $150? As it is stated it seems people who are already paying $150 today are getting less features under your new service packages.
In tandem, features that they once enjoyed are now bundled into a new package called “Business” which is $300 or 100% more than what they used to pay. Yes, you added a few new features like setting prices and earning profits, but is that enough to your customer base to warrant a 100% increase?
It seems SmugMug would have been better off with allowing its packages to remain as-is for a 20% increase, while introducing a brand new package with new features for the $300 price point. They could even allow their customers to pick whether they pay the $300 per year flat fee for this new package of new features, or pay a X% to SmugMug on their transactions. Numerous options to still achieve fiscal goals while being empathetic and giving consumers options to upgrade.
So the moral of the story is businesses need to realize is their customers are not going to roll over. They are fighting back and their friends are learning about it, thanks to social media. Businesses should understand that weathering an economic storm is something businesses and people are subject. One segment is not entitled to be made whole at the expense of the other. Businesses and industries should be rewarded for their innovation and creativity, for better goods and services- not for figuring ways to increase their bottom line by biting the hand that feeds them.
Disclaimer: We personally feel $300/year for SmugMug’s unlimited service is not bad at all. This post is not intended to challenge the pricing structure of this business, but more of raise some issues with how it’s handled and communicated.