Wednesday, November 13, 2013

Xero price hikes face criticism

TOM PULLAR-STRECKER writes:   Sharemarket darling Xero is under fire from its usually loyal fanbase of customers and accounting partners after announcing new pricing for its online accounting software.


Spokesman Richard Wood said most of the negative feedback was from customers in Australia, which is Xero's fastest-growing market in dollar terms.
Some Australian customers who use Xero to manage their payrolls complained that they would need to pay A$11 (NZ$12.45) a month more to use Xero's software from December 9. That was because companies with more than one employee would be forced to use the higher-priced version of its software.
Wood said some other criticisms were the result of "misunderstandings" after Xero announced the changes in a blog on its website.
One partner posting on Xero's website said he was not looking forward to advising most of his clients that they would be charged $10 more a month.
Another described the changes as "really not cool".
Sydney-based bookkeeper and Xero certified adviser Scott Rhys Jones said the changes were "bitterly disappointing" and would change the accounting platforms he marketed to some of his smaller clients.
Others said Xero should have given much more notice of the price changes.
Xero chief revenue officer Stuart McLean said some Australian accounting partners who had to pay more would have their prices frozen until the end of the Australian financial year in June.
That was not in response to criticism but "was always part of the plan", he said.
Xero indicated on its website that all its customers would be limited to receiving no more than 1000 invoices a month, but Wood said that was not intended to be a "hard limit".
Xero had emailed more details of the price changes to its partners and would email its customers directly tomorrow, he said.
"Some of the complaints from partners were because they jumped on the blog before they got the email," McLean said.
Xero's prices varied from country to country and "90 per cent" of customers would be paying less or no more than $1 a month more to use its software, he said.
Wellington-based Xero already charges less for its software in the United States than in New Zealand, and the price differential will in some cases increase after the changes.
It has three versions of its software for New Zealand customers, which cost $29, $49 or $64 a month.
Its three US versions cost US$19, US$29 and US$39.
The price of Xero's entry-level product in the New Zealand market will fall by $4 from next month to $25, while its "medium" and "large" plans will increase by $1.
Xero will cut the price of its "starter" package in the US by US$10 to US$9 a month.
One post on Xero's website queried why the new pricing for Xero's "standard" product was $50 in New Zealand and US$30 in the US. "Either you need a better treasury team or you are ripping off your home market."
Chief executive Rod Drury defended the regional variation in Xero's pricing, saying its New Zealand product was more "mature" as Xero was still building out its product set in the US.
McLean said its New Zealand product was better for that reason, but people also needed to take into account "market conditions".
"In the US, we are trying to penetrate a massive market where there is an incumbent, Intuit, with 95 per cent market share," he said.
"You have to take into account market conditions when you price your product, and that goes for any product, whether it's a Ford motor car or a Mars bar."

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