How we determined a new pricing model with our users
Last year we reached out to people using the Open Food Network software platform to discuss how the Open Food Network in Australia could become more financially sustainable. We had conversations with many of you, finding out how things were going and talking through how the software helps with your business and whether you would be willing to invest in it.
What we found was that, yes, you understand why there is a need to invest in the Open Food Network, and you’re willing to do so. Woo hoo!
If you’d like to know more about how we got to a pricing model, and what we considered – read on! If you’d just like to know what the pricing model we’re suggesting is, head to the Software pricingpage.
Finding a pricing model that worked for our community
We brought together your feedback and worked through all the different potential models we thought may be viable. All of our international Open Food Network partners charge for software, so we considered the pricing models other Open Food Networks around the world use, and looked at other ecommerce platform models.
In the end, we feel we’ve found an approach that won’t burden you, our customers, that focuses on shared growth, and that allows for potential new customers to try it out before they commit to paying.
There are still a few unknowns that may mean we tweak the model as we see how it works. But we feel it’s now ready for feedback, and hopefully implementation in May 2019. Transparency is a core value of ours, so we want to lay bare how we went about this.
Our model: community supported software
We see the Open Food Network as a partner within a community of local food enterprises, all working together to transform the food system.
The work we do in providing software is part of that, but we also provide events, resources, courses, mentoring, planning services, and more! We see the community coming together to invest in the software and help it grow, not just locally in Australia, but as part of a growing group of organisations all around the world. All of us contributing to its development by pooling resources to build something great!
This is the reason we believe this model works best. Because it’s through working together that we can effect change in our world.
Figuring out the best pricing approach
We considered how much it costs to maintain the Australian platform, and to contribute to the global development team for building new features. We thought about how much we should expect our current customer base to cover of this cost.
We asked our customers what they thought of a whole range of pricing models, such as subscriptions, percentages of sales, a fee-per-use model where you pay more if you’re selling more through the platform, and a fee per order option. We considered a co-operative or membership model, but most users preferred another model. We also looked at mixed approaches, for example a subscription plus a fee per order.
We asked our customers what they would be willing to pay for the software. Using the actual sales figures from our current customers, we calculated how much we would earn from each model, and cross-checked these amounts against the figures you told us you would be able to pay.
Finally, we considered the complexity of implementing each model and the amount of overhead it would create, because more admin time = more expense, and we try to keep everything as lean and cost effective as possible. We worked out the pros and cons of each option, and determined which we thought was the best of the bunch.
Our findings on the different pricing options
We’ve gone into reasonable detail here because some users preferred one of the options that we haven’t chosen, and we want people to be able to see the logic behind our choice. You can just scroll to the bottom of the list if you want to see what we’re suggesting is the best option.
These were the results:
❌Flat rate monthly/annual subscription – this doesn’t support the growth of customers, nor link our growth to theirs – we want it to be built in that we don’t succeed unless you’re succeeding.
❌Scaled model based on sales – we didn’t feel it was fair to enforce higher percentages on higher earning shops. But most of our users told us they felt it fair that shops earning less than $500 per month wouldn’t be charged.
❓Capped model based on sales – we may still introduce a cap, after implementing version 1 of the model and seeing at what price point it is required if at all.
❌Fee per order – the majority of customers we spoke to felt this model was unfair for producers and smaller shops who will always have small cart sizes.
❌Membership vs non-membership rates – we found this too time-consuming (which makes it too costly!) to administer, and we feel that anyone using the software is part of the community, so we introduced an optional additional percentage people can choose to give.
❌Blended models (e.g. x% + $y for z) – this just felt like overkill, added more complexity to administer.
❌Trial period – this didn’t seem necessary given the pricing doesn’t kick in until a shop earns more than $500 per month.
✅Percentage of sales – simple approach, and we don’t succeed if you don’t succeed
Read what we’re suggesting the new pricing approach should be, and how to give us feedback.
We want to make it clear that we’re not aiming to cover our costs from our existing software users. Implementing the pricing model that we are proposing will cover around 40% of our current costs, in a system that still relies on a huge number of volunteer hours from our team. We will continue to bring in funding from other sources to contribute towards providing the software in Australia, and we will keep bringing on new enterprises to join the community and contribute towards the network.
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