Today, we’re proud to announce that we’ve designed our pricing structure to be ‘stage appropriate’. We’ve lowered the monthly fee on our lowest tier by 40%, an added variable pricing – based on your transaction volume – so that our smaller customers will enjoy lower monthly fees as their business scales. Our largest customers with high transaction volumes will pay higher monthly fees (for managing large amounts of users) but lower transaction fees.

Please review the details of our new pricing plans

We also responded to your strong feedback about feature-based pricing, and have made all Recurly features accessible to all levels of plans. Independent of your stage of growth, all of our customers can now take advantage of advanced features without paying a premium.

As promised, our customers who were live before July 1 may choose to be ‘grandfathered’ into the previous pricing if they choose. There is no action required to do so.

Thanks again for all of the fantastic input through this entire process. We’ve gotten to know many of our customers and have been pleased to hear more about your successful subscription businesses.

We look forward to hearing your comments. If you would like to speak with us directly, please send a note to pricing@recurly.com.

-Sincerely
The Recurly Team

As we seek more customer feedback, we have some important messages we believe you’ll like:

Effective immediately – Recurly will be FREE during our promotional period. (see details)

After the promotional period, we will ‘grandfather’ our early customers.

That’s right. If you have already implemented Recurly, or do so during the promotional period, you will have the option to either lock-in to our earlier pricing packages, OR elect to move to our upcoming pricing. (There’s no trick here, you will be able to review the new pricing before making your decision!) Our intent is to take great care of our earliest customers, and to make sure that any subsequent changes are not the least bit disruptive to your ongoing success with us.

Most importantly, we’d like to hear from you during this process. Please participate by filling out this simple survey on pricing. We’ll take your feedback into consideration as we form our upcoming pricing plans.

We continue to be dedicated to helping you launch and scale successful subscription businesses.

Sincerely,
Isaac

Recurly, CEO

Push Notifications

We heard from a lot of developers that you depend on the push notifications today to find out about subscription changes. There are ways to find out about these changes without push notifications, but they’re not as ideal for lots of you. As a result, we are including the basic push notifications in the Bootstrap plan for $99/mo. These notifications will alert you to new/closed accounts, and new/upgraded/canceled/expired subscriptions. To receive notifications about individual payments and renewal periods (coming soon), you will still need to subscribe to the Early Stage plan.

Trial Periods

The other updates will be to the trial periods. Developers are willing to trade a 30-day trial period for more time to do the implementation and testing. We want people to try our product and compare it to building it themselves and the competition. We want that transparency. The 30-day trial accomplished the testing phase, but reducing the risk around when you choose to go live is more important to our customers. So, this weekend, we will be updating our signup flow so our service is free to try indefinitely — you can go live on your own schedule and only pay when you’re ready to roll us into production.

Beta Customers

We love all the customers that took a chance on us early on. For the customers that signed up with us before our updated pricing, we will offer you a month of free service after you’re ready to go live. Drop us an email at pricing@recurly.com if you still have concerns about our pricing and we will give you an extra month of free service.

Thanks again for all of your feedback — you all are critical for shaping this company. Please look for the above changes this weekend. We will be updating the application and signup process shortly.

As always, please feel free to share your thoughts. I will be working thru the weekend to reply to your feedback to date.

Thanks,
Isaac

As an entrepreneur, I love the ideas of the lean startup movement. It is responsible for a new wave of startups that watch their cash flow carefully and are capable of explosive growth once they find the right product/market fit. Love it. However, it is important to remember that being a lean startup is not synonymous with being cheap. Being a lean startup means spending money where it counts.

I believe that our pricing should be very attractive as you build your business. Yes, you’re paying more upfront (especially if you have no revenue today), just as you’re already paying for your merchant account and payment gateway. At the same time, you’re getting a guarantee that our prices are not going to increase as your revenue grows. You’re likely paying the payment gateway and merchant account about $80-100/mo because they are necessary costs to collect revenue. Recurly can save you months of development time, offer you lots of flexibility around your pricing strategy, give you options with your payment gateways, and guarantee that we’re not going to increase our fees when you become successful. That’s a strong value proposition for just $99/mo (for most companies). Our pricing tops out at $199/mo — previously it would scale up to $2,650/mo.

If your revenue stream today is less than $150/mo, I am sympathetic that you’re losing money on your billing expenses (payment gateway, merchant account, billing system). It’s tough being an entrepreneur. My advice would be to find out how you can create a valuable product before you implement the billing piece. Otherwise, you’re losing time & money on a product that no one is using. Get some early adopters, find a good market fit for your product, and then you’re primed to turn on subscriptions. Recurly started paying about $200/mo back in November 2009 because we have three different production payment gateways and a merchant account. Yesterday, we finally started charging. I could have saved my company $900 had I waited to acquire the production payment gateways until we were ready to charge. (Of course, our scenario is slightly different because we used these gateways to make sure our service worked for you. But the point is still the same.) I think it’s a pretty common situation because it happened with my last startup as well.

Regarding our feature set, I would like to point out that we give you robust set of payment gateway flexibility. At any time, you can switch between payment gateways without any consequences. And, we do not require Authorize.NET’s CIM (unlike one of our competitors) so we can save you an additional $20/mo. We also offer the best hosted payment page experience — this feature is complete and there are some new features around this that will be documented this weekend. Recurly works wonderfully internationally since we have an understanding of the fraud controls required to maximize transaction acceptance rates internationally, support multiple gateways and currencies. Our developers are also hard at work at some very exciting new features.

Our new pricing model allows us to build a sustainable company and continue innovating with all the feature requests that are pouring in. We want to be your partner as you grow your business. That means that we need to position ourselves for the long term.

Speaking to our beta customers, I realize our pricing announcement may have been abrupt for some of you. We truly want to see you succeed. If your began integrating with Recurly before our pricing announcement, we are happy to extend your trial period up to 3 months while your revenue is below $5,000/mo. If at the end of the trial period, you still want to leave, we will return your subscription data to you so you can securely migrate to another solution. If you’d like to continue, please subscribe to a plan before April 24th and send us an email at pricing@recurly.com so we can increase your trial period.

Either way, we encourage you to send us your feedback privately or publicly. Please feel free to comment publicly — we will not censor our blog. You may tweet to us @recurly. Or, email us at pricing@recurly.com if you’d like to leave private feedback and I promise to read your comments. I look forward to hearing from you.

Sincerely,
Isaac Hall

Recurly, CEO

In the next several weeks, the TechTalk video should become available. Until then, let me share a few of the key points with you.

The Basics: How a Payment is Routed

The credit card network is a crazy network in and of itself — lots of banks, credit card networks, and payment gateways & they all need to talk to eachother.  That’s where your payment gateway comes in; your site communicates with the gateway and the gateway routes the credit card transaction to the right credit card company (who in turn routes it to the customer’s bank).  In the end, there’s about 5-6 hops before an authorization is made — see our article How many companies does it take to process a credit card? for more information.

In addition to a payment gateway, you will need a merchant account.  The merchant account is best described as a special checking account for your business.  This is where all the money you collect from your subscribers will be deposited.  The payment gateway, through the credit card interchange network, coordinates withdrawing money from the customers bank account and deposits these funds in your merchant account.

Getting a Merchant Account

I think of merchant accounts as special checking accounts because they really are special.  Special as in time consuming to open and full of headaches.  When you collect money via credit cards, the transaction doesn’t end when the money is deposited in your account.  You can be liable for that money for months after the transaction is over because the credit cards want to protect the consumer. For example, if you sell $1 million of goods but then go out of business before you deliver those goods those consumers will ask the credit cards for their money back and all of a sudden you better have $1 million still in your merchant account.

If you’re working a side project, or your business is going to scale up slowly, then I don’t want you to waste much time on opening up a merchant account.  Instead, you should look at using a service like PayPal Website Payments Pro — it combines a merchant account and payment gateway in one, and is easier to apply for.  But if you’re incorporated and this is your revenue stream, you should open a merchant account with a proper bank.  And, you should budget about a month for the full process of opening a merchant account and getting the credit card agreements in place.

For internet start-ups in the San Francisco area, we strongly recommend Silicon Valley Bank for merchant accounts.  They understand start-ups like nobody else.  Recurly spent a month trying to open a merchant account with Bank of America.  Ultimately, B of A denied us because they don’t understand e-commerce.  This is pretty common among traditional brick-and-mortar banks.

Payment Gateways

Not every bank (merchant account) will work with every payment gateway.  If there’s a gateway you really want to use, make sure it works with your bank first.  Along those same lines, not all integration is equal.  Some banks have first class integration with some payment gateways.  When a bank has a strong integration, you’ll get access to your money faster, possibly better transaction rates, and better error messages.

One word of advice, be careful signing up for your payment gateway through your bank’s reseller program.  When your bank resells a payment gateway account, you cannot keep your gateway and switch merchant accounts!  This is so incredibly important.  If you store your credit cards with your payment gateway and your bank decides to close your account for any number of reasons, you no longer have access to your credit card information.  It’s totally not worth the $200 savings off the payment gateway setup fee.  Seriously, this happened to me and nearly killed the company’s revenue.

If you’re looking for a gateway that understand technology well, take a look at Braintree Payment Solutions.

Maximizing Acceptance Rates

Address Verification

Address Verification (AVS) is old school.  Perhaps it works differently across different payment gateways but my experience with Authorize.Net’s AVS suggests that this is old school 1960′s string matching technology.  Zip code validation only works reliably inside the US — it almost always fails on alpha characters. So, if you accept international payments, make sure your AVS will succeed on street address matches OR zip code matches, if the customer’s bank supports AVS.  That setting will help you minimize fraud and maximize acceptance rates.

If you’re only conducting business in the US, you can turn up AVS more if you like.  This advice is critical if you want to accept international transactions and minimize headaches.

Expiration Dates

Here’s an industry secret – expiration dates usually don’t matter as long as they’re in the future.  Several years ago, the credit card companies and utility companies came to an understanding about expiration dates — it’s much easier to setup auto-pay for recurring payments if the expiration date doesn’t matter.  The banks understand that if your card is stolen, they can just change the number — there’s no point in having it stop working because of an expiration date.

If you store the expiration date with the credit card information in a payment gateway (e.g. Authorize’s CIM), that card will stop working after the expiration date.  You cannot move it forward unless you collect the user’s credit card number again.  But if your billing system is smart enough, perhaps it can try moving the current expiration date forward before asking the user to update their payment details when the card expires.

1 Cent Authorizations

If your payment gateway allows you to test a credit card with a 1 cent authorization, don’t use it.  Seriously.  It will fail 2-5% of the time.  Some banks can’t believe anyone would want a 1 cent payment so they will deny it for being too small.  Instead, either use a $1 authorization or authorize the transaction for the amount you want to collect in the future (if you know exactly how much that is).  And finally, void the authorization afterwards.  If you don’t, the credit card companies may hit you with a fine — this is becoming more common since an authorization effectively puts a hold on funds in the customer’s account and they want you to release it if you don’t intend to collect.

Keep Your Pricing Simple

If you have a great product, your customers will want to pay you.  But if your pricing is too complicated, three things happen:

• Your sales guy can’t explain pricing,
• Your programmers (you) will spend too much time figuring out how to bill your users, and
• Your customers will complain that they’re paying too much.

Simplify your pricing, perhaps replace overage fees with auto-upgrading tiers, and magic happens:

• Your sales guys can explain it in a minute,
• Your programmers (you) will spend less time on billing, and
• Your customers will be happy to pay.

Minimize Your Time Handling Billing Support

Billing support will overwhelm you if you’re not ready.  Make sure your users can self service their accounts the moment you start charging.  If you offer more than one billing cycle or pricing plan, allow your users to change their plan with minimal hassle — otherwise they’re going to write to your support and you’ll have to do it for them, and often.

Make it easy for your subscribers to cancel.  They should not have to contact you to stop paying you — in the end they’ll just be more likely to call their credit card company and dispute the charge (that’s a chargeback).  And if you collect enough chargebacks, say goodbye to your merchant account.

Finally, if you build your own subscription billing system, you’re going to spend disproportionate amounts of your time handling past-due accounts.  You’ll get up and running quickly with your payment gateway’s recurring billing API, but you’ll spend 10x more time trying to figure out how to handle an account when a payment fails.  That’s precisely why we created Recurly.

TechTalk Slides

Thanks to everyone who submitted feedback during our private beta.  And if you didn’t make it into our private beta, thanks for waiting–we’re ready for you now.

Pricing

During our private beta, we heard from all of you about our pricing.  Our percentage pricing works great for companies with lots of small transactions.  However, several companies with larger subscriptions fees and fewer accounts expressed concerns about the predictability of Recurly’s pricing.  So today we’re adding a new pricing option based on the number of your active subscribers.  At the end of the month, Recurly will calculate the percentage fee and the flat fee based on the number of active subscribers — you will only be charged the best price.  There’s no need for you to decide which tier or pricing scheme to use.  Please see our updated pricing page for more information.

Remember, our pricing is based on the number of active subscribers — not the number of accounts.  We want to know about all of your users so we can provide statistics about your free vs paid accounts.  And by tracking your free users in Recurly, you can easily service their accounts from our interface.

International Payment Gateway Support

Recurly supports 11 payment gateways today, and that list continues to grow.  With our broad gateway supports, Recurly works with companies across the globe.  If you’re curious if we support your preferred gateway, please see our full list of supported payment gateways.

Check out the Open Beta

We invite you to learn more about Recurly and join the beta today!  We’re excited to see how you’ll use Recurly.