WooCommerce pricing and scaling revenue for WordPress plugin shops have been a common problem for years in our industry. A couple days ago WP Tavern published an article titled “WooCommerce Drops 50% Renewal Discount on Subscriptions“. Jeff Chandler investigated the case which was not announced publicly by contacting Automattic and receiving the following response:
All customers receive notification of their upcoming renewal 7 or 15 days before a charge. If anyone received an incorrect price, please contact us immediately and we will make it right. As always, we are committed to making sure WooCommerce is affordable to the widest range of people while maintaining our high level of service and support.
WP Mayor followed up soon thereafter with a story labeled “The Biggest Opportunity in WordPress History“. Donnacha’s essay touches on the disappointment of the users and their poor experience with WooCommerce support:
Many license holders angrily responded that they had hardly ever used support, that the reputation of WooCommerce was, in any case, piss-poor, and that any support was likely to occur early in the life of the license, that someone who had been using a particular extension for more than a few months was unlikely to need any further support. WooCommerce explained that this reality was acknowledged in the fact that annual renewals were only 50% of the original cost of the extension – your subsequent years would cost half as much as your first year.
I can relate with the backlash yet the hundreds of comments seem to focus far too much on the aspect of unfair pricing.
(Not) Announcing The New WooCommerce Regulations
The lack of a public announcement with regards to doubling the renewal price is indeed worrying.
Whatever you sign up for, changing terms mid-process is unfair and extremely annoying.
I haven’t read the original Terms of Service prior to the new change, but I find it hard to believe that there was an explicit clause stating that changes can be announced at all times without any upfront notice.
Essentially, this could have been handled gracefully.
It’s probably an oversight given the complexity of transferring an 8-figure business along with the staff and onboarding it within an entirely separate organization. There could be alternative agendas in play but I’d rather not go into conspiracy theories right now.
With that in mind, I’ll rather focus on the pricing aspect, how is WooCommerce perceived and how freelancers and customers see the WordPress ecosystem as a whole.
50% Renewal Fees
The 50% renewal rate became a “de facto standard” among a good percentage of the WordPress plugin shops and businesses selling plugins and extensions. Some shops and developers still kept charging the full price, others don’t bill for renewals at all, and there are various cases of 30-70% charged on an annual basis.
This can be justified if we consider that a buyer does not receive a completely new solution every single year. Paying half the fee makes sense as you’ve already paid the full price for the product and you probably won’t receive some groundbreaking features introduced in the coming versions.
On the other hand, that’s not the case in SaaS businesses. That doesn’t work with bank loans, home rentals, electricity and phone bills, or anything else. Granted, those are priced differently and include costs that can be explained to the average consumer – with governmental taxes, network equipment, the cost of transferring data, the rental of power factories.
Vova has explained some of the essentials of renewal pricing in his wonderful post on WooCommerce and WordPress renewal discounts:
Once you have got subscriptions in place, ask yourself the following questions:
- Is your product usually used for a long or a short term period?
- Does your product bring more value over time, like a good aging wine?
- Is it harder to switch to a competing product as time goes by?
Both models seem feasible and somewhat reasonable in different scenarios. But they do depend on the total price for purchasing a product.
The Cost of WordPress Plugins
WordPress is notoriously known for its “race to the bottom”. It’s absolutely apparent for years to anyone who’s spent at least a year observing the WordPress ecosystem.
The WordPress themes industry has probably been lost already. Over 80% of all theme sales (if not 90%) worldwide are processed to Envato’s ThemeForest and there have been numerous conversations regarding the licensing issues with dual licensing for themes and the lack of GPL option for CodeCanyon plugins hosted on their network.
I’ve done some internal research and it seems that customers on Envato’s network are less inclined to purchase 100% GPL themes as compared to standard themes following the dual license. I find that extremely odd and there’s probably a lot of room for education and internal advocacy toward the GPL license adherence.
Regardless, WordPress plugins are extremely cheap. Yet, plenty of freelancers, small agencies, and business owners find it hard to justify the expense for a plugin complimenting their existing stack that they’ve received for free.
Open Source is Hard to Gauge
While browsing different WordPress communities online (Google+, LinkedIn, Facebook), clients are cautious and try to dodge purchasing stuff as much as possible. Many take it to an extreme by asking others willing to group for a license and use it together or asking for warez themes without understanding the implications of that (let alone the moral aspect and violating the terms of the authors).
With that in mind, there’s some merit when you think about the bigger picture. Consider how much WordPress does behind the scenes for free. Then think of a plugin and how much more “extra” would it add to the platform while asking for $100 or so.
Clients can’t seem to understand the added benefit of 1% or 2% on top of their existing features that they have received for free.
Especially when there is a comparable set of features somewhere on WordPress.org or GitHub that resemble the premium functionality.
This is not a problem of WordPress itself, nor is an issue with authors. But it’s an important problem that we all have to keep into account when discussing plugin costs.
I love the approach that my friends at Tyche Softwares have implemented for their plugins. For example, the Booking & Appointment extension for WooCommerce has the following statement on its sales page:
Seem a little pricey at $119? Some quick math… say you charge $40 per hour. Then 3 hours of your time is worth $120. So, this plugin only needs to save you 3 hours to pay for a Single Store License!
Now, that’s a different story. Not only is the plugin extremely complex and feature-rich, but there is a distinctive comparison between what you get for $119 and how long would it take you to build the feature set yourself, even if you were a programmer. I know the folks at Tyche myself and I know first-hand that they have spent thousands on hours in refining features and constantly incrementing the number of awesome features available in their plugin.
WooCommerce and Extension Costs
With that in mind, WooCommerce extensions, plugins, or add-ons are still dirt cheap. I know that people love mentioning Shopify or other relevant platforms.
But Shopify also includes extra transaction charges. And that’s something that you won’t get asked for when purchasing a WooCommerce extension and hosting your website in-house.
According to their pricing page, you can go for $29/month and allocate 2.9% + $0.30 from each transaction you process, or $299/month with 2.4% + $0.30 for each sale.
Not only does Shopify take a cut on your sales, but you still have to pay $348/year for the cheap plan or $3,588/year with the advanced plan they offer if we account for the monthly payments.
Oh, by the way, you don’t receive a 50% discount annually, either. It’s a SaaS – you don’t host it yourself but you also don’t have control over your own data and can’t implement every other feature that you may wish for (such as a training platform for your VIP customers, a membership toolkit, a forum, a social network where customers can interact, a random marketing automation toolkit, an AI-driven relevant product service that you’ve purchased and so on).
Shopify provides a number of add-ons that you can leverage and some are indeed powerful. But if you want your shop to grow with time and introduce additional features as a fully-fledged eCommerce platform, that won’t suffice.
IBM sells an eCommerce platform called WebSphere Commerce for a while now. It targets larger enterprises but also smaller businesses that don’t generate as many sales.
The pricing terms aren’t quite transparent but here’s a review by cpcstrategy that mentions some numbers:
For the Express package, you’re looking at $5,030 cost for the user license and subscription fee. In addition to that, you’ll need to pay $327 per PVU. Let’s say you have an IBM Power Systems core with a Linux operating system, which clocks in at 70 PVUS. In this scenario, your PVU fees would come in at a total cost of $22,890. Add that to the licensing fee, and you’re at just around $28,000 (for 1 year).
Again, that’s uncommon and probably a massive overhead for small businesses. But if you want your eCommerce store to grow, you can not settle for less than a hundred bucks a year or even a few grand since your platform has to scale with your growth.
You get some added charges on Amazon or AliExpress as well and comparing that to a self-hosted solution is certainly something that customers keep into account when picking their own platform.
The eCommerce and WooCommerce Business
When I discuss pricing with customers, I hear the standard objections and comparisons with low-cost alternatives on the market. Magento is one of the popular alternatives. But Magento is an extremely complex platform to modify and the cost for adding custom features and integrations that don’t exist is often 5-10 times more expensive as compared to an WooCommerce provider specializing in custom extensions.
Speaking of which, WooCommerce performance often comes on top of WordPress and what you can get from a managed WordPress host or even a plugin like W3 Total Cache or WP Super Cache for free. Here’s what you can purchase for caching from Magento’s marketplace:
Sure – there are various free solutions or cheaper extensions. But case in point is being the amount of flexibility and the feature set that you get from WordPress without even considering the options available for other platforms such as Magento (for $799.99 in this case).
Another thing that I also consider is the fact that an WooCommerce store is directly selling thanks to the underlying platform. While a 5-page business website may be there simply to provide contact details or a brief description of a company (something that you can place on a Facebook page now), an eCommerce store is designed to sell.
Which means that the better and more powerful it is, the higher conversions you will get and the more profit you’ll yield out of your platform.
I certainly understand the frustration for the non-transparent license fee update. But I can’t relate with the expectations for receiving a powerful eCommerce platform at little to no cost and expecting to earn a fortune off it.
As Devin has said on the Tavern comments in the thread above:
However, I applaud the change to remove renewal discounts. WordPress products for too long have been price too low and undervalued. Think about it. When is the last time you got a renewal discount for anything outside WordPress? Netflix no, HelpScout no, GitHub no. So why should WordPress products be any different?
Support for eCommerce Shops
Both WooCommerce and Easy Digital Downloads host marketplaces on their websites and sell extensions built by their core teams and 3rd party developers. We sell a few Easy Digital Downloads extensions so we’re familiar with the pricing structure of the shop. Currently, EDD charges 50% of all sales processed through their marketplace (exclusively) and handle first-tier support.
Pippin has increased the prices for EDD lately which has yield better results for them and their team. He has elaborated on the price increase by reflecting on the positive impact and the better processing times handled in-house.
Granted, as a service provider, we’ve also seen some support issues for some of our clients. It takes a lot of time and back and forth. The core EDD team can’t analyze the code base of each and every 3rd party extension out there so a good chunk of the support goes back to vendors who have to figure it all out.
But things are better now where the price jump has filtered some customers and let to some room for improvement in the support department.
As plenty of respondents on WP Tavern and WP Mayor have enumerated support issues with WooCommerce, a possible option would be selling support separately. Vendors such as WPML have compiled a list of 3rd party vendors specializing in maintenance and support. One of our brands is listed in both their WPML and Toolset lists and we receive at least one inquiry monthly for product improvements and adjustments that appear to be “out of scope”.
Clients are completely satisfied with their policy and don’t hesitate to reach out and pay for updates. Sure, core plugin issues are still handled by the core teams, but anything else is considered to be scope creep and there are vendors who specialized in similar activities.
On top of that, the basic Toolset version costs $69/year and most of our inquiries are for $300-$1,000 with some exceeding the $1K mark.
Core Platform Improvement and Overhead
Support is definitely a challenging activity for all service providers. More often than not, maintaining our extensions or even analyzing a problem that happens to be a conflict with a premium theme costs more than our own sales for the month.
I am curious what percentage of the costs and time spent by the core WooCommerce and Easy Digital Downloads teams is spent on support. I won’t be surprised if the support overhead is not worth it at all even with the 50% sales cut. I can also foresee tons of innovation, performance and security improvements, and new features introduced if support was not provided within the price at all.
Core plugin bugs on a clean WordPress install is one thing. Incompatibility with a random theme or a dozen plugins downloaded from anywhere is what makes the process so clumsy, time-consuming, and expensive.
As a customer, I rarely ask for support for any of the plugins or extensions we’ve purchased. Most companies maintain detailed documentations for their products, FAQ pages, and open support forums discussing the most common problems or incompatibilities.
The fact that the presales process is cut short is not necessarily a problem of the vendor. But expecting rockstar support within less than a hundred bucks a year questions the viability of the business model at that cost – especially when considering the expected improvements and innovation on a year-to-year basis.
Our community should work together on solving these problems and finding the best working model that suits best both starting customers, and businesses that aim to sell products through WooCommerce or other WordPress-driven platforms for a living. Fixating into a single extreme would not let WooCommerce scale further and provide a diverse set of features suitable for startups, and enterprise-grade shops.
The post WooCommerce Pricing Updates and Community Backlash appeared first on Mario Peshev.