November 21, 2019

Software Pricing Gotchas: The Hidden Costs, Limited Deals, and Onboarding Fees to Avoid

On buying an app and checking it twice

by @maguay

Founding editor @capiche. Writer. Amateur photographer. Information architect. Older work: @zapier, @AppStorm. Personal blog: @techinch.
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Grab coffee at the same café every week, and you’ll rarely think about the order or price. Switch up your routine, though, and you’ll stumble over the order and fumble for additional change. Travel to a new country for a cognitive overload not only in language, sights, and smells, but also in the most mundane of purchases where you have to adjust to local costs and convert currency in your head.

And so it goes with software. What once was predictable, a $99 software in a box with every-other-year upgrades or a $0.99 download on the App Store, has turned into a detailed decision. You’re not buying a widget. You’re subscribing to something that needs to justify its price each month or year.

Even then it’s rarely a single cost. How many people will use it, which plan do you need, what other costs will be involved?

Much like the add-ons that slowly take a new car’s price far over the advertised starting price, there are a lot of things to watch out for in today’s software pricing. And some defy planning.

How to avoid the software buying journey’s pitfalls.

For the moment, at least, console games are one of the last holdouts of traditional software pricing. You hear about a game, check reviews perhaps, then either buy a disk or download it. Either way, you pay once and get the game, forever.

Mobile casual games, though, were one of the first areas where software pricing got murky. In-app purchases for coins you’d use up in play, subscriptions for unlimited play, and design choices geared to encourage spending all make them a minefield. Worst of all are mobile apps that offer a free trial, followed by weekly subscription that adds up to hundreds of dollars a year.

Business software’s not quite as bad. It’s professional tools for work, after all. But similar pitfalls remain.

From the hundreds of pricing stories shared on Capiche, these unsurprised charges and easy-to-miss tricks came up most often.

Read the trial fine print.

Your team needs a new tool, someone recommends an app, so you check its site and see 3 plans. There’s a free trial—though it suspiciously offers you all of the product’s features, when your team may only need the basic options. Then it asks for your credit card, only to simplify billing after the trial ends in two weeks, it says.

Weeks go by and suddenly there’s a new expense on your company card, for software your team might have not even fully tested.

That scenario could happen all too easily without vigilance. When you sign up for trials, don’t jump in too quickly. Be sure to check:

  • Which plan are you trialing? Will you get all the features in this trial once you start paying?
  • Is there a free plan? Some apps have different signup flows for their free and paid plans, and it’s easy to select the free trial instead.
  • If payment info is required, when will they charge? Add an event to your calendar to decide if you want this software the day before the charge should go through, when there’s still time to cancel.
  • If payment info isn’t required, what happens after the trial? Make sure to subscribe in time to not lose access to your account, if you do want to use it.
  • Is there a startup discount available? If so, you may want to request it before paying for an account.

Renewal, but at what price?

QuickBooks limited time discount

Sign up for QuickBooks, and you’ll be offered price that may be as much as 70% off the list price—that is, for the first three months. “At the end of your offer term, your subscription will be automatically renewed at the standard subscription rate,” says Adobe in the fine print under their Black Friday sale. You can subscribe for a discount today—but next year, it’s back to their standard pricing.

Few discounts are forever. The best software discounts for startups often last only the first year. Student discounts used to be a cheap way to acquire software you could use for years later. Today, they’re discounts on subscriptions that expire post-graduation. The price post-discount can be surprising if you don’t plan for it.

One team, for instance, used Intercom’s $49/month startup plan. “We were asked to upgrade to $700 for all products after startup pricing ended,” they related—and in the end were able to negotiate a discount to $200 for the next year, still 4x more than they’d spent before.

Or, the costs to upgrade to better plans can be far steeper than the original subscription would suggest. Jira, for instance, charges $10/month for your first 10 users—then charges around $5-7/month per user once you have 11 or more people on your team. 20% of teams that shared their Jira pricing on Capiche keep 10 or less people on their Jira account to stay at their base $10/month plan. As one team said, “We made sure we never pass the 10 active users, so $10 month. $60/month for 1 extra user has been keeping us at that threshold.”

Even listed prices can change. Many software companies “grandfather” in early users on older plans, raising prices for new users while keeping existing customers on their original plans. That can change, though, and you might have non-discounted subscriptions go up over time. Netflix often emails in advance of price changes, something all apps should do, but it’s worth checking your receipt emails every so often to see if the price is still the same.

Watch for onboarding, setup, and implementation fees.

HubSpot Onboarding

Perhaps you’re a DIY person, someone who builds Ikea furniture for fun and Googles how-tos when things go wrong. You’d expect to set up any new software you buy. That’s how you always do it.

Except it’s not always so easy. Many business tools, and especially their higher-priced enterprise plans, require onboarding, setup, and implementation fees. These one-time costs can increase your software cost significantly. And they’re often hidden behind “Starts at $X per month” banners on pricing pages, only to show up like checked luggage as an extra cost when you go to pay.

Implementation fees can be hefty. Netsuite included “a fixed bid implementation billed at $50,000 with a $25,000 discount,” shared a team paying $17k a year for Netsuite after other discounts. Pendo.io offered another team “a startup package of $12K year 1 plus $1500 implementation (they refused to waive that).” And SalesLoft costs around $40-$125/month per user, plus “a one-time onboarding fee of $3000-$3500 that they don't really mention until late in the process,” shared a user.

Even support can cost. Canvas LMS bills per user, “plus 30% support in addition to an upfront implementation cost,” shared an educational institution. Another team decided to use Outreach, and “tried to get onboarding support, but the only option for this was $800 for a 4 hour video call.” Amazon’s AWS services are often cheaper than running your own servers, but much like budget airlines, everything costs something. One team mentioned “signing up for the business support ($100 per month),” which is actually the least you can expect to spend on AWS support. Beyond that, AWS charges from 10% of your first $10k in AWS spend for support, easily adding thousands of dollars to large AWS deployments.

Perhaps the saving factor is that onboarding fees are something that may be negotiable. HubSpot lists onboarding fees when you build a plan, though one team that pays around $62k annually for HubSpot Sales Enterprise, Marketing Hub, emails, and more got HubSpot to “knock off 70% for a 90 day ‘implementation specialist’ that was pretty helpful.” Similarly, another team that was rolling out Carta said a “salesperson attempted to charge an upfront $500 ‘implementation/onboarding’ fee but we asked to get it waived for signing up within the month.”

Whether it’s for help in getting started, or support your team will eventually need, check what’s included. Even free support isn’t a given today.

Check the features list carefully.

feature list

Want to use Salesforce’s API to automate your team’s work? “What most people don't realize until later,” shared one Capiche member, “is that Salesforce Professional does not have API capabilities (integration-ready); the user seats are $75/user/mo base, but with an API add-on, they end up being about $115/user/mo (the API add-on needs to be rolled out for all user seats, it cannot be enabled for just a single admin or something).”

Asana’s new automation features only come with its Business plans. Zapier’s custom logic paths require its Professional or higher plans. Typeform’s hidden fields require Professional or better. And almost every app puts single sign-on, audit logs, and more advanced team features into Enterprise tiers with custom pricing.

It’s common to offer fewer features for less. That can be a great way to save, if you only need the core tool. But check carefully. It’s common to unlock all the features during the trial, leaving you to pick a higher plan than you expected or to need to upgrade later when an expected option isn’t there.

If you go will there be trouble?

fine print Adobe

Adobe Creative Cloud at $9-$52/month is a relative bargain compared to the hundreds of dollars Creative Suite cost before—that is, unless you decide to cancel. You’ll owe 50% of the remainder of your subscription to cancel early, as all Creative Cloud plans are annual contracts, even while billed monthly. That could leave you with an over $150 bill per user if you canceled a Creative Cloud plan halfway through the year.

Salesforce, as is far more common, lists its pricing per month but bills once a year. But if you want to cancel, there’s no single button to click. Instead, you need to contact support or your account representative a month before the end of your subscription to make sure your account gets closed in time.

Far more software includes a cancelation button, typically somewhere inside your billing settings, that after a few clicks lets you quit using the product. But what happens next? Can you export your data, resume using the app later if you come back, or get a refund or credit for unused time? Many apps offer credit when you leave; “GoToMeeting charges upfront annually, but they'll refund credits for accounts you terminate early,” shared one team, something similar to what Zapier’s annual plans offer. Others may offer a cash refund, or nothing at all.

Every app is different, and you should check early on. Even if you plan to use the app forever, it’s worth knowing what to expect if you don’t.

Would a more expensive plan be cheaper?

Hit the form entry limit in Wufoo, and that’s it. No more data until next month.

Add more contacts to MailChimp than your plan allows, though, and you’ll get upgraded. Next month’s bill switches to a more expensive plan with enough contacts to cover your full list.

Others simply bill for extra. Much like cell phone plans where you get billed if you use more data than your plan includes. Mixpanel plans let you track a number of users, then charges overages for extras. Customer.io does the same—though if the next plan would be cheaper, they simply upgrade you to the next plan.

That’s the ideal route, but is not always how it works out. When apps are billed based on usage, watch out for how many of the metered items your plan includes, and what happens next. Does the app stop working? Can it bill you for overage and keep working? If so, can you set a cap if things go crazy? Run the numbers; if your team goes over your plan every month, it might make sense to upgrade to the next plan if that includes more metered items for less than you’re paying now with overages.

Or it might not work out better. If you’re on an older, grandfathered plan, it might be cheaper to pay overages than to upgrade your plan. As one team said about their Mixpanel plan that costs half or less than today’s standard billing: “We’re grandfathered on an old billing plan where we get 10m events per year for $2k and then we pay overage pricing.” Be sure to double-check, then select the plan that makes sense for your needs today—and check again routinely as you use the app more.

And it might turn out that the opposite is true. You might have leftover items every month, and a cheaper plan could be a better fit instead.

Check it twice.

The day you pay for a software subscription is far from the last time you need to think about it. It’s something you should come back to regularly, worth putting on your to-do list as a recurring task every year around renewal time.

Are you still using this software? Is everyone you’re paying for using the software? How much are do overages cost? Are you on the best plan for your needs?

It might not save as much as negotiating your price lower, but it’s your surest way to avoid surprised and paying for things you don’t need.

Capiche on Software Pricing

Learn more from our detailed research into software pricing and the insights we’ve gleaned from analyzing a decade of SaaS pricing changes and over a thousand real team’s software pricing stories:

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