CheddarGetter has long been a proponent of bootstrapped startups. In every single planning meeting, we talk about our core customer base as being the startup. This has caused some degree of trouble for us when talking to larger customers, as they don’t understand how a company like ours can grow and sustain itself by catering to what they see as a fickle, unprofessional group. In our experience, professionalism, talent, and potential have little or nothing to do with a company’s age. It has everything to do with a team’s integrity and standards.
In our search for balance between catering to startups with a low-cost offering, and servicing larger businesses with a powerful and flexible offering, we have made some pricing decisions that have negatively affected our ability to service either.
We currently charge our merchants for any transaction that results in a movement of money from the end customer to the merchant (you, perhaps). That works great if all end customers pay the merchant monthly. In that case, we collect $0.20/customer/month and that covers all of the expenses we incur to service that account over that month plus a little. Unfortunately in many cases, that’s not what happens.
Our current model does not accommodate for other hard costs or high levels of non-revenue generating activity. In other words, other types of services including web hooks and API calls cost money and our current model doesn’t cover for those costs when usage of those services exceeds the norm.
As such, we’re writing this post to start a discussion about pricing for a few valuable services.
In most cases, API calls to CheddarGetter occur fairly infrequently. Businesses who correctly integrate with our API, and use it as it was meant to be used, present a reasonable load on our server, and cause no problems. The cost of providing an API is just a cost of doing business, and we have no desire to charge any more than what is necessary to cover those costs. Most will never pay us directly for a single API call but in the case where a merchant’s usage of the API is significantly disproportionate to the amount of revenue we receive from that customer, we need to do something about it.
With API calls, there may be an additional charge for exceeding a set velocity or exceeding a set total number of API calls in a month. In each case, the limits will be set relative to, say, the number of revenue transactions in a month. We’re not yet doing this but plan to soon. First, we will begin tracking API call quantities and velocities to get a baseline measurement. Based on that data, we will determine what’s normal, then decide at what level to start charging. Our goal here is only to charge for usage well above the average so the vast majority of our customers will not be charged for API calls. Only those with an abnormally high usage will be charged. The fees, if any, will be nominal.
As with API calls, CheddarGetter handles your web hooks with ease in most cases. However when your services hits a snag (something hangs), our service retries that hook multiple times, for multiple seconds each time. This, of course, is a good thing because it makes the hook system tolerant of failure of the listener to process the hook. This can cause significantly elevated usage of resources by our background processes, which can delay other customers’ webhooks if there’s a backlog. This is bad juju, and we feel that good users should not bear the weight of those who are causing the problems.
Similar to API calls, we’re looking at setting some velocity and total limits as well as total time waited for listeners to respond. We’re not doing this yet but plan to soon. Again, only those with abnormally high usage of hooks will be affected.
As you know, transaction charges are a part of life. Some processors charge percentage fees, some charge flat rates, others charge both. We’ve always felt that a flat fee is the most fair method to cover these costs, because it puts a standard value on the process of transacting, rather than sliding number up or down to capture a larger piece of your higher-dollar transactions. In real terms, paying 3% of $100 is a lot harder to swallow than paying $0.20, compared to the difference between paying $0.20 on a $10 transaction vs $0.03. This varies of course depending on your pricing model, but in the end we determined that it was the most equitable model for our customer base.
Transactions are a hard cost for us as well. In the past, we have charged only for Approved (Successful) and Refunded transactions. These are $0.20 for the Blowing Up plan, and $0.25 for the Paypal Only plan. What you haven’t seen are the costs for other transaction types, like Declined, Failed, Authorization (Auth), and Voided. Approved and Refunded transactions are pretty straightforward but the others are not. I’ll explain.
Declined transactions may seem innocuous but these amount to a significant cost to for us. They occur more often than you might think. First, consider repeated failed signups, some are even attempts to fraudulently use one or more stolen cards. Second, consider dunning retries. CG by default continues to attempt to charge the customer 4 more times over 8 days before giving up. You can configure your dunning retry schedule here: https://cheddargetter.com/admin/configuration
Failed is a special transaction that occurs when a transaction is first approved, then later found to be declined. This is typical of ACH (aka echeck) transactions. This mostly occurs when a PayPal payment is backed by a bank draft instead of a credit card. The transaction is initially approved but PayPal then later informs us that the money could not be taken from the PayPal account holder’s bank account.
Authorizations and Voids apply only to those merchants using a validation transaction on signup or payment method change events. When a validation transaction is configured, CG issues a small authorization transaction which tests the card all the way to the issuer including CVV verification (if applicable) and AVS checks (if applicable). This is extremely valuable for those who accept payment methods with a delayed initial bill and for payment method changes mid billing cycle. Without them, you have to trust the customer to enter all of their information properly without validation other than basic format checks. If the payment information is wrong at bill time, it will be declined. That’s a hassle for everyone.
Voids are related to the Authorization. When an Authorization is successful, we need to issue a Void to indicate that we never intend to capture that small Authorization. If this isn’t done, the Authorization will remain on the cardholder’s card statement for several weeks. Hanging Authorizations are a no-no for that reason but also because the banks consider them to be a liability when there’s a large quantity of hanging auths.
In order to continue providing a great service, we felt that it was necessary and fair to pass these costs to the people who are using them.
For most of our customers, these costs will amount to a very small increase on their monthly bill.
For CheddarGetter, the sum of these costs across our entire customer base accounts for a very significant expense each month. That is money that we could and should be using to shore up our service, provide higher availability, and generally make our system stronger and better.
We know that this is a touchy subject.
We know that people don’t like to pay for something that they didn’t realize they were getting for free.
We also know that our competitors already charge for these things, and it is possible that some of our customers made the decision to use CheddarGetter because we did not.
So…
To alleviate potential future discomfort for all involved, here is our plan.
As of yesterday, we turned on the charge system for these “other” transactions (Auths, Voids, Declines, and Failures) on the PayPal Only and Blowing Up plans (legacy plans are not affected). Everyone is able to see these pending transaction charges, if any, on the Billing page: https://cheddargetter.com/admin/billing.
As promised, we are giving all of you the option to tell us you don’t want to pay for them. If you are on a super-tight budget and simply cannot afford the extra charges, we understand. Or maybe you don’t think that these charges should be passed on to customers on principle. Either way, let us know and we will adjust your account so you will not be charged for those transactions.
API Calls
Now: No change
Soon: Plan to charge for extreme usage / Costs TBD but will be minimal
Take action: This topic is open for discussion here (http://support.cheddargetter.com/discussions/questions/5850-api-and-webhooks-overage-pricing).
Web Hooks
Now: No change
Soon: Plan to charge for extreme usage / Costs TBD but will be minimal
Take action: This topic is open for discussion here (http://support.cheddargetter.com/discussions/questions/5850-api-and-webhooks-overage-pricing).
Transactions
Now: Charge for all transaction types on current plans (legacy plans, Basic, Advanced, Premium, etc, are not affected)
Soon: No further changes
Take action: Review your charges as they accrue here: https://cheddargetter.com/admin/billing. Evaluate how they affect your budget in relation to the benefits to the health of CheddarGetter’s system. If acceptable, no action needed. If you choose to opt out, let us know here (team@cheddargetter.com).