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How to price/give support for needy market?

My "software" is a collection of VBA programmed MS Word templates that help professionals in a niche market create and format complex documents.

I have been selling customized versions to large organizations for a long time.  I offer them an annual support/updates for about 25% of licensing.  Once these organizations are settled in, most are pretty low maintenance. 

SO - there are a lot of individual and partnership practices springing up in this market who desperately need my type of software.  I am working to perfect a generic copy of it that I can sell them and they can use it as is, make some customizations themselves, or pay me to customize it.

I have set pricing for the software at $400, so I set annual support at $100.  I have not started actively marketing it yet, but some have been finding me on the internet and wanting to buy it.  But .....

They are so needy and ignorant compared to the large companies.  OH MY GOD.  So far it's usually about an hour per user to get them going smoothly, but I just had one client who consumed HOURS of my time.  And she kept sending me emails saying "I need this NOW" and "This CANNOT wait" when I told her BEFORE she bought that I was booked solid for the next 3 weeks.  SORRY, I digress.  I'm much better at suggesting others ignore people like that than I am at ignoring them myself.  She SERIOUSLY stressed me out.  ANYHOW...

They also think they won't want the templates customized before they buy, then get them and want them customized.  (My pricing for customization is higher and support once customized SUPPOSED to be an additional $300 a year as I now have to individually put new features in their software.  But many simply don't understand this despite my pre-sale explanations.  And once they've bought the software they are stunned to learn that, yeah, if they want me to change the way the templates are formatted, that's customization. 

So far Not only are they much more needy than my larger clients, they are more likely to have unanticipated system setups that don't match my minimum system requirements and are oblivious to this despite my efforts to be clear. 

So they need 10X more but pay 1/10 of my other clients.  But I think they're worth pursuing because there are potentially a LOT more of them and no one else seems to be going after this market (gee I wonder why....).

MY QUESTION:
How would you price support?  Am I thinking too small with 25 - 30% of licensing?  Should I be charging more or just switch to hourly?  Should I not take phone calls?  So far, most of these people can't articulate their issues/requests in email, but I don't have hours to do web meetings with lots of them. 

Do any of you have low price software that generates a lot of support requests?  How do you afford to handle it?

CHARGE HOURLY?
If I charge hourly or per incident, what do I do when I spend 20 minutes finding out they don't have a compatible version of Word/Windows/Whatever?  From their perspective, they got nothing.  But my time is gone nonetheless.

RAISE PRICE?
I'm considering increasing the price of the software, but $400 already seems like a lot to me for an individual to pay.  Though so far they are not objecting and the software can save them hours of time weekly.  A price increase  might weed out the more demanding ones. 

Any suggestions are appreciated.
Emily Jones Send private email
Monday, February 16, 2015
 
 
Went through a big price raise once. Got more revenue from less sales (hence less support). Your mileage will vary.

One way to think about support is treat it like insurance. As long as the premiums you collect from all clients cover the costs of those few hard support cases, you are fine and everyone is happy. On rare occasions, we may spend literally person-weeks on a single support case, whereas many customers never turn to support, yet keep paying for it.

If, however, such hard cases are rather common, you should definitely raise your prices. Perhaps you could at the same time offer a cheaper "lite" version without customization, hand-holding or anything else that may eat into your limited time resources?
Dmitry Leskov Send private email
Tuesday, February 17, 2015
 
 
Have you considered hiring someone part time to help you with the on-boarding of the new clients?
Jason Send private email
Tuesday, February 17, 2015
 
 
How I dealt with this was working tons of hours to provide answers, and then convert all the answers that had a generic component into elaborate detailed step by step tutorials with exhaustive explanations of each step. Then, the next time the same question comes in, the customer is referred to the tutorial, AND that support can be handled by the support staff rather than me. I have to do the first one though.

There are thousands of these tutorials now and it took about a decade to get to the point where most inquiries could be handled with them.

There's a big problem though that when I change the appearance or UI of the app, these sorts of customers will often become paralyzed with confusion when they see a screen shot that has a different color button.
Scott Send private email
Tuesday, February 17, 2015
 
 
Also, it's important to understand a lot of these people are not dumb and should not be talked down to. There are plenty of people out there who are very successful, even might have a PhD, and they have used computers for decades, but they still don't know what a file is, what a directory is, or where anything is other than what they can see on the desktop. Someone else has been taking care of that for them, or they just try to never have more files than will fit on the desktop, and extra files are tossed in the trash to make way for new ones on the desktop, the trash having several thousand items now.
Scott Send private email
Tuesday, February 17, 2015
 
 
"If, however, such hard cases are rather common, you should definitely raise your prices."

I'd recommend also reviewing the program's usability and built in support. A lot of support requests are often an indicator usability needs work.
Scott Send private email
Tuesday, February 17, 2015
 
 
I have a background in service industries and see support as a really bad business to be in. Your main product is software which is a really great business to be in because next week you could sell 10 million units and there is nothing to stop you from doing so (I mean software costs little to copy and distribute and has relatively high value). Support on the other hand is limited by time - the number of hours in the week - if you double the number of support requests you can't increase your productivity much or increase the number of hours in a day, the only option is to hire expensive employees to meet the demand. It doesnt scale very well and dealing with people is diffucult.

For that reason you have the same problem enjoyed by other service industries such as lawyers and accountants: "how do we avoid wasting our time on poor legal-aid clients and make money from the more lucrative clients". But also "we need to keep the poor clients happy so we dont get a bad reputation and they may have lucrative work in the future or have friends who can give us lucrative work". "we can make SOME money from legal aid clients and they are worth having".

I think you should solve this problem in exactly the same way as  lawyers, accountants etc do. Support must be charged as a function of time. The more of your minutes the clients take, the more they must pay. You break each hour into blocks of 6 minutes (10 units per hour), when a client starts a support call you mark that unit of time, and continue marking units of time up to and including the end of the call  as being billable to that client.

Also like lawyers and accountants, you must charge a decent amount of money to answer support requests - like maybe $100 per hour. The best thing to get rid of those annoying time-wasting clients is to make them deposit money in your account ("a retainer") up-front as a downpayment on your support services - you can imagine the conversation: "yes we can fix those problems easily, all you need to do is deposit $1000 into our account towards your first Y hours of support and we can get started right away, we will refund any moneys not used ". <-- not for all customers, but to make difficult ones go away only.

You can also price your support service to modify your client's behaviour, for example a call may be charged at a higher rate (because its immediate and demands more on your limited time resource) whereas e-mail support requests may be charged at a much lower rate because they can be answered in batches at quiet times by less skilled employees. This might improve the rate at which clients can explain their problems by e-mail which you say is low.

There is no reason why the above can't also be balanced with the needs of the clients and make them happy and give you a reputation for excellent service and support - this happens with lawyers and accountants as well. I mean you could charge them $100 for say 2 hours of telephone support and 4 support e-mails but after that have a schedule of fees. It is very important that once the basic hours are used, you make the clients deposit money in your bank account BEFORE you give them the support. This is because they need you at this point, after you render the service it is much more difficult to get the money from the customers.

From my experience some customers will be happy to pay for support and will see it as delivering value to them, and will be extra happy because you can attend to them right away because your support system isnt clogged up with time-wasters.

I guess the thing to remember is that you are experiencing a common problem which has been solved well in other industries and there is no reason why you can't do the same thing, make good money, deliver excellent customer service and keep 99% of your customers happy
Billy Thorpe Send private email
Tuesday, February 17, 2015
 
 
>>They also think they won't want the templates customized before they buy, then get them and want them customized.  (My pricing for customization is higher and support once customized SUPPOSED to be an additional $300 a year as I now have to individually put new features in their software.  But many simply don't understand this despite my pre-sale explanations.  And once they've bought the software they are stunned to learn that, yeah, if they want me to change the way the templates are formatted, that's customization. 

If this is common, then you need to raise the price and include customization in the price.  Refund if unused, perhaps.  This sets up the expectation that customization will probably be needed and they won't feel like they paid $X but the real price was $X + $Y.  Like Billy says, get their money up front.
Dora Send private email
Tuesday, February 17, 2015
 
 
Do you let your customers "evaluate" your product before they decide to buy? If not (or it doesn't work) then you probably need to raise your prices to cover the "evaluation" phase you will be going through with new users. Otherwise it will be a killer, especially if you can't say clearly what kind of support your software comes with.

I have a very similar situation with large companies where many users may start asking funny question without even reading the manual. So, the manual is the very first way to deflect. If that doesn't work - improve the manual.

Sometimes I have users requesting a conference call or consulting session about a setup, administration, etc. I flatly reject this because this kind of activity is not covered by the price listed. Instead, there is a responsive email support for 90 days. Which means that the person on the other side should be competent enough to ask reasonable questions. So, in most cases, even with very large corporations, the whole process takes couple of weeks, sometimes even couple of days. But if product passes the evaluation, I almost never hear from the user unless there is a bug report or a feature request.

I constantly improve the manual, the software, and the web site to avoid silly questions and misunderstandings precisely to avoid funky support expenses. That takes years to accomplish, but it is so much better now than it was in the beginning.. So, patience is your friend :)
Dima Send private email
Tuesday, February 17, 2015
 
 
Thank you all so much!  You gave me some excellent ideas and better perspective of the situation.

I think ultimately saying "Pay X in advance for up to Y hours support and then going to time and billing after that is the way to go.  While building a "knowledge base" to hopefully head off questions.
Billy - Most of my clients actually are attorneys, so they are used to hourly billing.  I just had it in my head that I should have a package that covers tech support because I do that for my large clients - but as noted, this idea is not scaling well!

I can't realistically hire employees to give support where I am, but I may be able to enlist some contractor programmers and software trainers I work with who might like to respond to support tickets when they are available.  In that case, if I'm billing hourly for the support, in advance, I'll know it will be enough to pay them.

Dmitry - the "lite" version is kind of what I was trying to do, but I'm finding that most people can't envision what they will want until they use the software awhile.  I tried to come up with a list of "a la carte" pricing for common things people customize, but so far it hasn't alleviated much confusion. (Just a couple test cases though.)

I'm thinking up a way to rig the software so they can make basic edits to the templates w/out affecting my coding.  That seems to be a common expectation despite my saying "it doesn't work that way" in advance.

Scott - many great ideas and a lot to think about.  People seem to find the software very intuitive, but there really is no good internal help other than tool tips for buttons.  (Is that so wrong...?)  And No, they are definitely not *dumb* at all.  Most of them are very smart.  BUT many are very ignorant about how MS Word works, so they don't know what to ask and don't understand explanations until they use the software awhile.   

I do have some videos that seem to help but it seems many erroneous, preconceived notions come to light after they buy the software.

OK, thank you all again, any more ideas/comments I'd love to hear.
Emily Jones Send private email
Tuesday, February 17, 2015
 
 
HELP DESK SOFTWARE
PS regarding the idea of building up documentation for the support questions:  I am working to automate the sale of the software over a website and was looking for a good "help desk/support" software.

I am thinking of something that we can plug into our website (as opposed to having our web guys develop it).  Any suggestions? We've most recently been looking at FreshDesk.

I think the most important things will be:
- Support tickets (and I'd like to be able to have multiple techs be able to respond to them)
- Knowledge base/forum for  issues.
- Tutorial Videos
- remote support (nice but I have Screen Connect now, so I don't really need that)

PAYMENT QUESTION
A few suggested getting paid in advance.  I'm going to use FastSpring for the software download/payment.  If I'm taking software support payment in advance, how do you do that?  Would you just add that to FS somehow or use some other payment method?  FS looks to be awesome but I'm not sure I want to hand them 6% just to process a credit card payment.
Emily Jones Send private email
Tuesday, February 17, 2015
 
 
"Most of my clients actually are attorneys, so they are used to hourly billing."

What?

You really had to say that up front. Hourly billing at a good rate against a healthy retainer is the way to go.
Dmitry Leskov Send private email
Tuesday, February 17, 2015
 
 
Attorneys are actually pretty good at paying, because if they dont you can report them to their regulation body and have them de-barred. Even the small ones will have an accounts person or department who will be used to paying for back office support services at the end of each month, some of these such as access to journals will be significant costs.

So now the reason to get the initial retainer is to ensure that there is a formal agreement between you and the law firm for your support services and it's not just some lone gun in the back office who will use a bunch of your time which the law firm will dispute because they say that the purchase was not authorized.

So assuming you are from the USA, you could use fastspring to get Attorneys also from the USA to pay a nominal retainer (say $100) to get them started, then send them a bill at the end of each month for the support that they use. You will get paid in the same way as their other suppliers, whether it be by check, bank account deposit etc. and you will save the fastspring charges. Obviously you should write to them after you receive the money to thank them for and acknowlege the payment and state your charges, in a way that makes you blend in with the other back office service providers.

For ALL other kinds of customers (especially individuals) it is important to get the retainer up front while they need you otherwise you'll have a bunch of bad debts, even if it costs you 6% to do so at the beginning. That is one of the main differences between selling software and providing services.
Billy Thorpe Send private email
Wednesday, February 18, 2015
 
 
Short term: increase your prices to include X hours of support/X tickets/X customisations; with ongoing support at additional cost

Medium term: make more tutorials

Long term: implement support for user customisation
koan Send private email
Friday, February 20, 2015
 
 

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