Increasing Prices in this Economy is Bad Customer Service

I have a competitor in my industry (Let’s call the company “Ashtray.”) who has just announced a January 1 price increase of 200% to 300% on most products. In an open letter to their customers, Ashtray also apologized for a recent software release that caused massive, repeatable data loss for many of their Service Providers, and announced that they were “pretty confident” that another new relerase should resolve at least 90% of the problems. I guess this means that they are also “pretty confident” that at least 10% of their users will still experience massive data loss.

The open letter (posted in their Forum, parts of which were forwarded to me by several of their readers) then goes on to explain why they raised prices. Here are their reasons.

• We’re being forced to do so.
• The price of gold and oil are up at least 3 to 4 times.
• Business expenses are up.
• Our competitors will raise prices. We want to be the first.

The letter goes on with a stern warning, “If you think dropping [Ashtray] and using another product is a “smart move”, I am sure that you will soon be forced to make another “smart move” from another product because none of us can escape the increase cost of running businesses worldwide, not even [Ashtray’s] competitors.”

I’ve had several phone calls from Ashtray’s customers asking if RBS were going to raise our prices. I said, “Why? Because we failed to properly plan for the recession? Because the price of gold and oil are up? Because we failed to change our business plan to account for current economic conditions? No. We are not going to raise prices.”

We reduced our expenses many months ago when this whole thing started just so we wouldn’t have to pass on the fruit of our lack of judgment and foresight to our customers. In fact, we were so successful in executing our plan that we can DECREASE prices after the first of the year while increasing support and development, and adding a lot of new features.

Borrowing a line from another competitors’ blog, “If you’re an Ashtray partner looking for better prospects, email me. And be sure to ask for the ex-Ashtray special.”

Rob Cosgrove, CEO
Remote Backup Systems
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The company and product names used in this article are Service Marks or Registered Trademarks of their respective owners.

Rob Cosgrove is the President of Remote Backup Systems and founder of the Online Backup Industry.