Ben Chestnut, CEO of MailChimp, described in the last post how the freemium model has dramatically increased business for his company. Below, Ben describes his pricing model and the types of customers his company prefers.
Curt-I reviewed your company’s pricing structure and think it’s really smart how you have tailored your pricing for each buyer persona, such as the customer with high volatility in the number of emails he’s going to send or the customer with a huge volume of subscribers. We have a similar pricing structure for the customers at my company. For example, we personalize our product for staffing firms that have a fluctuating employee base: they may have a thousand employees this month and only a hundred next month. Since they don’t like the traditional pricing structure used by most of our competitors, we have a particular integration for them where we count how many users actually entered time last month and charge based on that amount. Staffing firms love this because they can’t get that pricing anywhere else.
Ben-When the company was launched, we only had the page for high volatility customers which were charged on a pay-as-you-go basis. All of our competitors had monthly plans and it wasn’t until about 2007 that we launched monthly plans, too. We have a pretty strong following from pay-as-you-go, so I really appreciate the no-commitment customers. It keeps us on our toes.
Curt-What makes the paid version of your product different from the free version?
Ben-We actually try to keep them the same. We only limit a few features, making some exclusive for paying customers. Even then, it’s mostly to prevent abuse, not so much to convert customers to paying. One is the auto-responder feature that automates your email. Additionally, some testing features are only for paying customers, such as having a screenshot of your email in Outlook, Yahoo, Hotmail and Gmail. Users that are pay-as-you-go or using the free version do have the option to buy features a la carte.
Curt-Do you have any customers that you’re particularly proud of?
Ben-Angry Birds is a fun one!
Curt-That probably has a very large list!
Curt-What do you do when an enterprise customer approaches you and requests customizations?
Ben-We politely tell them to take a hike.
Curt-Have you lost many customers that way?
Ben-Yes, we’ve lost potential customers, but we try to ignore people who feel they need special treatment. One example is a big company that came in under the radar. Our IT team set them up. MailChimp was absolutely perfect for them: we fit all of their needs. But then they started to get official and got their legal teams involved who wanted us to isolate the developers working on their code, moving them into their own cubicles or into offices away from the rest of our company. They wanted all this special treatment, so the deal came crumbling down. Usually we don’t contact those types of companies.
Curt-Lawyers are the reason that business stops happening. They’re like customs agents. The purpose of the customs agent is to keep things from going across the border. The purpose of a lawyer is to keep a contract from getting signed.
Ben-A contract is bad news for our company. It usually means that a customer wants special treatment when we really just want to make things easier and scalable.
Curt-Do you have any salespeople?
Curt-Customers just go to your web site, provide their credit card information and they’re done?
Curt-So who does contracts?
This concludes my interview with MailChimp. What was your favorite part? Let me know in the comments below!