Open Startup Report - May '24

Virtual card scams and SaaS pricing strategy

I can tell my customers are the wrong audience when they use virtual credit cards to get around paying for a trial account. I’d love to have customers who can’t wait to pay for my product and are happy (even glad) to hand over their card details to get the juicy goodness my product provides. There are a few reasons customers try and game the system:

They don’t know if the product can actually solve their problem.

PriceWell is marketed very broadly (Stripe your your no-code website) so we get lots of people with specific Stripe problems. We work on a freemium model (PLG if you like) where a basic pricing table is free (except a transaction percentage) and the rest of the app is paid. Customers create a free account and then are asked to pay when they click on any feature except the pricing table.

This is a frustrating experience and one I can definitely improve with better marketing and communication. The ideal customer would know from the website that we can solve their exact problem and be happy to enter their credit card to try out our solution to their very painful problem.

The closest we’ve come to this is with our Bubble integration. It’s well documented on the site and our help centre includes a full walkthrough on how to use it.

So, we really need to nail a few core use-cases and document them extensively on the website and help centre. Those are:

• Bubble integration ✅

• Gated content (paywall for no-code sites build in any tool)

• Pricing changes for non-technical founders (make pricing changes without bothering the dev team)

They can’t afford the service.

Another reason customers try to game the system is price sensitivity. This comes from being a solo-founder who has a business idea and no idea if it’s going to make any money. Unfortunately the target market (non-technical founders) is full of these people and as previously discussed in this newsletter going up-market leads us to businesses who can already afford a developer to do it for them. I actually removed the free trial from our paid plans recently in an attempt to focus on those people who have the budget (and feel the pain hard enough) to pay for the product. I can’t shake the feeling that I’m leaving money on the table here because potential customers can’t try before they buy (despite us having a money-back guarantee).

They want something for nothing.

This is the bracket a lot of software developers fall into. We’re so used to using things for free (open source code, VC funded products with generous free tiers) that paying for a tool that saves a bunch of time doesn’t seem worthwhile. Developers (myself included before PriceWell made money) will do anything to use a product for free. So the logic goes, sign up for the free trial with a virtual credit card, hope the developer didn’t put in code to lock you out when your payment fails. Use the product free forever, get all the benefit with none of the cost. This is just the reality of building a SaaS (and the reason all serious bootstrapped SaaS doesn’t have a free tier). If you can’t play nice, you can’t play at all.

Tools as marketing

I’ve been thinking of using free tools as marketing for a while. They’re a great way for developers to promote their products because they:

• Don’t require you to write a ton of content

• Don’t require actually talking to people

• You get to do some more coding and call it marketing

• Potential users actually get value from the tool

There are a bunch of tools I’ve created for PriceWell but currently they’re a bit hidden within the app itself.

• Free Stripe invoice generator

• Bulk Stripe coupon generator

• Metered billing reporter

My plan is to split these out into tools that can be used directly from the website (by connecting your Stripe account) and launch them on Product Hunt and promote them on Reddit, Twitter (X), Linkedin etc.