Another Foolish Price Increase – This Time It’s Evernote

The_note-taking_space_for_your_life’s_work___Evernote

I just received an email from Evernote that my annual subscription price is going up.  What a mistake.  The email is attached below.  My prediction – this will not go well for Evernote.

First, they did do one thing very well.  In the email they say they are charging more for new subscribers than the loyal subscribers new price, at least for a year.  This follows one important lesson when raising prices on current customers, try to do something nice for them.  This is nice.

However, here is the big fail.  When companies who have recurring revenue raise prices, they invite their customers to rethink their original decision.  Prior to a price increase, most users just use the product and automatically pay their bills.  They don’t question their original decision.  However, a price increase prompts that questioning.

A few weeks ago I wrote about Netflix and how they did their latest price increase MUCH better than the one earlier.  Since then though I’ve read that even they have lost more subscribers than they expected.  Even with a good implementation, they are losing subscribers.  Mind you, their profits increased because the higher price more than made up for the lost subscribers, but their stock price suffered because investors are looking for subscriber growth from them.

Back to Evernote.  I’m not a power user.  In fact, I’m kind of on the fence whether I should have a paid subscription or not.  I haven’t decided if I’m going to renew or not. The point it, the price increase is making me think about it again.  How many other people are like me?  How many use Evernote even less than I do but still pay for it?

As always, Evernote has more data than I do.  They understand their goals better too.  So it’s possible they already considered the techniques I’m about to present and they may have used data to rule against them.  Or, maybe they did implement these and we just can’t tell.  After all, I only see one data point.  Regardless, here is some advice for Evernote and for you if you are thinking about raising prices on your current subscribers.

  1.  You don’t have to raise prices on your current customers.  You could easily raise prices on new subscribers while leaving the current subscribers prices alone.  This implements a price increase without impacting current customers at all.  Think through how many subscribers you expect to have 5 years from now relative to how many you have now.  If the answer is many times more, then why risk losing subscribers today?
  2. You could stop adding new features to your current premium product and create a super-premium product that power users could upgrade to at a higher price.  Creating versions of your product is a great way to segment based on willingness to pay.
  3. You could analyze the usage data of your users and only increase prices on those who use it the most.  Usage is most likely correlated with willingness to pay so you would have a smaller unsubscribe rate.

If you are making your revenue on a subscription basis, please be very careful when you raise prices.  Consider the three suggestions above before simply implementing an across the board price increase.

===== The Email =====

Changes to Evernote’s pricing plans
Thank you for being a longtime Evernote Premium subscriber. We want to let you know about an important change and how it affects you.

We are adjusting the prices for Plus and Premium accounts in order to invest more heavily in refining and improving our apps and service. As one of our most valued subscribers, your new price for Evernote Premium will be 59.99 USD/year, a substantial discount from the new list price of 69.99 USD/year.

This special price applies only to your current subscription. Changes will take effect on your first subscription renewal after August 24, 2016, and you will receive this discounted price for one year.

Continue to capture your thoughts, develop your ideas, and be your most productive with Evernote.  For more information why we are making this change, see our blog post.