Pricing: How does it work for you?

[lauriewayne1]

In the global gathering today (or yesterday depending on where you live), we realized that lots of people/instances are figuring out pricing. As far as I can tell, there is no strict requirement that instances charge (or not), or how much, or using what mechanism, and no built-in structures to manage/track user payment. I thought we could share some of our thoughts on it. I’ll start.

Among the things an instance has to consider when determining pricing:
1. Why are we asking for money?
For us, there is no expectation that user fees will pay all operating expenses, including paying for people, as well as a contribution to the global pot - not for a long time, anyway. Instead, the rationale for us was:

• Covering our personal out of pocket expenses
• Engaging users as active participants in the platform, rather than passive, unresponsive consumers of what they considered to be “free” and apparently delivered to them as a result of magic or unspecified benevolence from George Soros or something
• Building in a little headroom financially to help us cover emergencies. We have way too many single points of failure now, and looming expenses like trademarking
• Allowing us to start contributing to the global pot
• Establishing ourselves in the marketplace as a player similar to venture-funded and other competitors, hopefully creating the perception of value that unfortunately is often directly associated with cost
• Having tangible evidence of user support for people like impact investors, people who give grants, and foundations to see that we are relevant to and supported by our users - this one is one of the most important, because it opens doors to funding at a level that actually does cover operations and let us contribute significantly to the global pot (and allows us to keep supporting our user base affordably). This kind of funding also allows us to compensate people who don’t have the class-based luxury to volunteer significant amounts of time, so it’s really important in terms of equity.

We wanted to be sure to keep our values centered even while asking for people to give us money for something they had been getting for “free” (mostly because we did not have the logistical capacity or organizational maturity to do billing). The US instance has had a path that one might almost refer to as “the drunkard’s walk” and it has taken us way too long to get to this point - your path will likely be straighter.

2. How much money should we ask for? How will we ask for money?
The choice we made was to adopt a model based on Canada’s well-considered one, and we looked at some different pricing strategies used by other instances, as well as brainstorming with others. We looked at what people’s other options in the US market were, what they cost, and what they got, and we looked at how much money was going through OFN - last year that number was about $720,000 and the donations we received from users was about 2 tenths of one percent of that, or $1500 or so. Some other instances shoot for about 2% (in fact this is in some user-facing documents), which for us last year would have been $14,000-ish. We put all that together, put it on a web page, and checked in with a few users and our board. We used Transifex to change the text in the emails that new enterprises get, to set the expectation that they would be asked for money, and then announced it (with a 30-day buffer) in our newslettter to users and on Social Media. People either ignored it or pushed back right away (see below). We announced the pricing today and about 36% of the 550 enterprises we wrote to opened the email. No one has contributed yet.

3. What will we do with the money we get? How will we track it, and how does it fit into our entity type (NGO, coop, etc)?
We are a nonprofit corporation, waiting on Joe Biden to (personally) give us our tax exemption. Til then, we have a fiscal sponsor, the Social Good Fund, who provides us with a platform for collecting money (they take 8%). All money we get counts as a donation, not a fee for service, but that’s a tricky line to walk. In order to collect information about the users and enterprises who were paying (and sneak in some demographic questions), we link from our web site to a google form, which then links to the payment platform. It’s pretty ugly right now. We really don’t know how much money we will end up getting, but we know we have several “buckets” it needs to go in: to get more money, to contribute to the global pot, to start paying people, especially from communities of color and other historically excluded communities, to cover basic operating expenses, to grow and strengthen the organization (including things like trademarks), and for emergencies. We don’t fool ourselves that this will be a short process to solvency and stability, and we have a lot of catching up to do in every area, really.

4. What’s the process for collecting money, tracking payments, and what’s the policy for users who can’t or just don’t want to pay?
This step is our opportunity to tell our story, and to help users connect their ethical practices with our ethical practices, rather than being stuck on “getting a good deal”. We do not have a good process for tracking who has paid and not. I am assuming we will come up with a spreadsheet or airtable to help us with that until we can get something that resembles a good CRM and a good accounting setup (and they are linked to each other and both linked to OFN - it might be a minute). This is an important question that we really have yet to tackle completely, and we will definitely be working on streamlining this part of the instance management process. This seems like a great opportunity for collaboration between instances.
We are just getting started, but we mention lots of times that we are happy to talk to users about different ways to contribute/participate/pay that really are helping us out - this is alternative payment, really, not charity. Sometimes these are things people are already doing and should be recognized for, and some of these things represent an invitation to grab an oar and start rowing. The email response when people ask about alternative payment is basically in the form of

1. Welcoming and encouragement: we get it
2. Explanation of the need to get some money, followed by acknowledgement that we only exist because we want to support strong local food systems, which are made up of creative, caring human beings
3. Suggestions for ways people can engage beyond the “waaah you are charging us for it and it used to be freeeeeee why isn’t it freeeee”/“if you don’t pay we will pull the plug on you you freeloader” type of transaction. The suggestions we make, asking if any of them would work are:

• Help us be more responsive and stay alive by helping to advise us on product direction (that means every 4-6 weeks we would ask you 10 questions or so about your experience) and reaching people who could benefit from OFN.
• Pitch in your knowledge and experience locally, and help others do that too by sharing the best ways to reach people about OFN on our discourse forum, by sharing on our weekly call, or make a little Youtube that could help others be successful and avoid any pitfalls that you have run into.
• Support OFN with a contribution that fits your business - [pay what you you think is fair here] (The Open Food Network - Open Food Network USA). (this is a link to our funding platform)
• Something else that contributes to the OFN community - graphic design? grant writing? coding?

After that, really, if someone chooses not to engage with any of the above or pay our very-reasonable prices, I think we say “goodbye, we wish you well, if you like you can have a profile for free” and not worry about it.

Phew! I am realizing that this question is really a nontrivial part of our job! It touches money (so power, scarcity, fear, and thus trust), culture, psychology, our ability to engage and inspire, marketing, systems integrations that make sense, financial due diligence, and market intelligence.

I would love to learn about how other instances are taking this on (or thinking of it)!

Yeesh, another long post from Laurie, huh?

[NickWeir]

Hi Laurie
Thanks for opening this conversation
OFN UK started with a ‘pay as you feel’ system that did not work at all - most people paid very little
We then moved to this system which is working well.
We are now thinking of increasing these fees - this doc starts with a brainstorm session and lower down is a draft of an email we are about to send to all our users after we have increased our user fees for new users. We have not yet decided on the level of the increase

[lauriewayne1]

Thanks @NickWeir ! It sounds like people have a choice of paying a nominal amount, a percentage of sales, a fee+a smaller percentage of sales, or a set fee, depending on the features they want and how much business they do. I think it is super-smart to consider changing the fees for just new users, which is like a loyalty reward for existing users and also you don’t have the change-management turmoil that we had when we went from free to really cheap.
Some nuts-and-bolts questions for how the UK maintains this on the back end, process-wise:

1. What mechanism do you use for billing, like how do you know to send a bill (and what does the bill look like? An email?) and how do you collect money? Do you have an OFN shop to do it all? If so, do you have a “standing order” for the monthly fee (this would only work if they weren’t in a plan that had a percentage I guess)?
2. Is it a problem to get people to pay, and how do you remind them if they don’t, and what do you do if they fail to pay?
3. Can people put their shops “on hold” like not paying in the off season? If so, how do you keep track of that?
4. How do the integrations you offer (with Mailchimp and Accounting) work? Are they pre-written Zaps that you customize?
5. Standing orders (subscriptions) aren’t really something you turn on or off for an enterprise (are they?), so technically anyone can use them, but it sounds like there is more/better support for them at the higher paid plans?
6. Do you use Vtiger or something else to know what kind of a plan a person has when they contact support, and do they get treated differently (or have access to different information)?
7. I see you use Donorbox for your donations. Is this different from the fees people pay to use the platform Do you like Donorbox?
8. How do you report user fees, for tax purposes? Are they a donation, a fee for service, or something else?
9. How does it work to be a voting member of the platform cooperative? This probably should be its own post for instances that use this model (in the US we would love to get there as soon as possible so seeing how you do it would be really inspiring).

[thomaz]

This is so helpful @lauriewayne1 and @NickWeir, thank you so much for sharing. We’re about to close on our pricing scheme and I’m looking forward to share it with you as soon as it is done. Still many questions to answer though, specially regarding billing and collecting money.

[lauriewayne1]

@thomaz the good news is that we all have to figure this out, and I think the more people share, the more good ideas and wisdom we can learn from!

[NickWeir]

Here is the working doc we are using to plan the new pricing system for OFN UK

[NickWeir]

All good questions Laurie. Here are my replies:

1. @Oliver automates this process so that after their first free month of trading they receive an initial email which Oliver then follows up with another email with a link to set up a regular payment automatically calulated as a percentage of the user’s turnover. I think this uses Go Cardless. Oliver - please can you confirm and add any details that might be useful for other instances wanting to do something similar. Thanks
2. Mostly, once the regular payments are set up they keep going. If someone starts to miss payments, Oliver tells me and I start to lean on them. Ultimately we could stop their shopfront but it has never come to this and I don’t think we would use that threat
3. Because we are invoicing a percentage of shopfront turnover, payments automatically reduce then stop as turnover decreases.
4. Yes I think so - @Oliver can confirm
5. We are not using the OFN subscriptions functionality for this. Does this answer this question???
6. I don’t think there is any link between VT and this payment system. Oliver maintains a google doc spreadsheet that shows which payment plan users are on. No the support level does not change. If a user is taking up a lot of support time we would notice this and ask them to pay more or reduce their support requests
7. I think this is different and I think it is used very little - again I will ask @Oliver to confirm
8. They are a service - we are registered for VAT so we have to add 20% to the cost of the user fees and pay this in sales tax.
9. All users theoretically have a vote. In practice nothing (yet) is ever put to a vote

[Oliver]

Hi Nick and Laurie,

The way we invoice users has two stages to it. First we keep an eye on who starts trading and track their turnover. This is a manual process and if only very small amounts are involved, we go no further. If we do see a steady trading activity, we add that enterprise to our invoicing zaps. The zap checks the turnover each month, calculates the fee and sends an invoice to Quickbooks. From Quickbooks we invoice each hub and take payments by Direct Debit using GoCardless. Some still pay by bank transfer, which we try to avoid.

The integrations offered to hubs are also zaps and they are setup by OFN UK support for the enterprise.

It’s rare that we get donations as opposed to user contributions. I didn’t set up the donorbox for OFN but I’ve used it before for another non-profit and liked it.

[lauriewayne1]

Thank you so much @NickWeir and @Oliver! It really helps to understand the tools you use to manage this part of a user’s experience (and your own). Just one small question, @Oliver - do you keep an eye on turnover using the order cycle report, or do you use a query right to the database?

These are questions about implementation - pricing and business model strategy is a long-lived conversation - see: Search results for '"business model"' - Open Food Network Community and Economic model - OFN handbook which provide more information and context.

[Oliver]

It’s a database query, Laurie. I don’t do that part though. That’s done by Lynne.

[JessC]

Thanks for getting this convo going @lauriewayne1 , it’ll be great to hear how other instances are coming along with pricing. We’ve launched at least two versions of pricing here in Canada so I can only speak to the one I was a part of which was launched late 2020 (Canadian pricing page).

We opted for a tiered (based on sales turnover), upfront pricing structure which was still modeled roughly based on a “%” of sales (~1-3%) but responded to some of our users feedback for knowing the cost upfront and that was simple to keep track of (for both sides!). We’ve opted to keep profile accounts free forever and are using them to build out national directories. We are about to launch new pricing for zapier integrations which will recoup the cost of zaps & time spent to built them. (inspired by Australia!)

Implementation and on-going tracking has been an experience! We are giving everyone who creates an account a free 2 week trial. During which time, they will receive an initial check in via mailchimp, then a personal check in from the team (offering a demo and some tips on setting up) before moving them into a free “profile” account for anyone who does not choose to continue on with a subscription. All this is managed via zapier integrations, airtable and some manual work. Subscriptions are purchased via our online store which we manage using OFN.

The on-going tracking of subscription customers requires a bit of manual cross-referencing of order cycles to our paid subscriptions list. We had an airtable to track this but realized it still requires regular review and follow-ups. I’m hopeful this is something we can automate more once we are in vtiger (but not sure, maybe this is wishful thinking…).

Last point I’ll share in that in implementing our new pricing structure - we created customized communication for each of our user groups because they were in different situations and we felt that an explanation of how this new pricing impacts them was needed. (We had some farmers market vendors who’s fees were paid through a gov grant the prior year, vendors who were on a free plan but will now need a subscription and vendors who were already paying a %age and now needed to pay upfront). Sharing our draft communications here.

Thanks for reading – hope this is helpful!

[Rachel]

thanks @lauriewayne1 for starting this post and thank you all for these info Super inpiring!

Here is in a nutshell what we do in FR regarding the pricing of the platform:

Our pricing model can be found here.

Generally, the news of our pricing table has been welcomed, we have communicated through Open Food France website, through newsletters and through social networks.

The first 3 months of selling through the platform are free of charge. Then users are asked to choose a pricing package:

• Accessibility package: each year, they give us an amount of their choice (but in that case they won’t have access to our support team, only user guide + community forum),
• Engaged/Ethics packages: they are billed with an amount equivalent to 1% of their turnover through the platform every trimester (this percentage gets lower after 200K sales a year if their initiative is building a sustainable model).

This first pricing table was created together with all the founders of the cooperative CoopCircuits (who are mainly users of the platform + contributors).

All users have the (optional) possibility to invest in the coop and become shareholders. In that case they can participate in defining this pricing.

At first, we were asking people on the accessibility package for their contribution every trimester as well, but this was too much work. Now we asked when they have past the 3 months threshold, and then again once a year. But it is a risk in terms of cashflow.

Our invoices are created on Vtiger manually for now. We check every 3 months who needs to pay thanks to an SQL query. This SQL query is run with Metabase…when Metabase works otherwise we need to find a developer to run it on the live database.

Also it was very important to our users that we calculate our fees on their turnover excluding VAT & taxes. It won’t be a problem for US/CA, but for us, it means currently manually calculating the turnover per shop thanks to the current OFN tax report

When they receive their invoice, users pay us via bank transfer, but we also get the occasional paper cheques… They are reminded by a manual email if they forget to pay. Users who are not paying get their profile change into “profile only”, so their shops gets suspended.

We will probably finish the year with this pricing model before revising it. Hope this helps and give ideas

[VPotvin]

Hello everyone,

Thanks for your previous answers. These are really helpful! Here is how pricing is done in Belgium (I maybe should say “how we want it to be done”).

Since the launching of OFN Belgium in +/- 2019, we have informed users that the first 6 months of selling through the plateform are free of charge. Then, we ask them to pay 2% (excluding VAT) of their turnover on the plateform per month with a maximum value of 100€. (This corresponds to 5000€ / month sales → other website could be more attractive beyond this level of expenses.)

As you may know, I ‘recently’ took OFN Be in charge so the first step was to introduce myself, inform entreprises that we were going to launch the payment process and, in some case, debate with users about this process.

I am now facing some issues:

1. How to get the right information about the amount entreprises trully get with OFN? I started looking on the reports but I think this is not a good way… e.g.: an entreprise can delete an order and the amount will not appear on the report
2. How the users can have a look on this amount in order to know in advance how much they will be charged ?
3. Is there a tool to calculate the amount of all orders from a shop filtred by VAT % ?
4. I don’t know how Zapier runs and how it can help me to send invoices. We do not have a lot of shop profiles yet so I think I can do it manually now but I’ll never refuse a piece of advice about the use of Zapier (or any other tool )

It would be a pleasure to talk about how it is done in other instances. This could help me to know what I have to do and which tool I must learn

See you on tuesday evening !