[Lutger]

Maybe this is a really crazy idea, but businesses could compete on the free market, winning customers with superior products and services? And use revenue to grow?

The initial investment to start a company, especially a tech company, isn't all that big anymore.

[jakelazaroff]

Is that not what Canva is doing? They’re raising prices because they think their product is superior. If they’re wrong, their customers will just switch to another product!

[Lutger]

I'm referring to the 'capture customers and unreasonably hike the prices' business model, which intends to make profit of exactly the cases where a customer is NOT a rational agent, just like scams do. I'm not saying that's all there is to Canva, just making a general remark about these kinds of business models.

Because yes, in theory a customer can 'just' switch to another product. In reality though, there are various reasons why it isn't so easy. Customers get invested with their time, build skills, have projects, or just plain inertia. It takes some mental load to compare alternative products and make the switch. People are busy.

We don't think of bait-and-switch business models as scams, but once you see them as basically scams-light it becomes clear it is at least an open-question if their existence furthers the glory of the free market, or hinders it. We don't have a problem seeing scams or criminality as basically obstructing a free-market.

Eventually Canva will perish if they make the deal bad enough, unless they somehow achieve a monopoly or sales stranglehold (my term), but not before they squeeze a good few bucks out of frustrated users. If they are successful enough at it, it hollows out the market.

[jakelazaroff]

I don’t think the point of this price hike is to profit off of non-rational customers. I think it’s likelier that they expect and maybe even hope that they’ll lose customers.

Let’s say a full 50% of Canva’s customers eventually churn because of this. They’re raising prices 3x, so they’d still make 1.5x their previous revenue. And they’d make even more profit, because their customer support costs have been cut roughly in half.

Meanwhile, the 50% of customers who dropped are now on the market for a new design tool — and a big hole has just opened in the low end of the market. So it’s good for competition, too!

Of course, if 80% of Canva’s customers leave, that’s bad for them. It’s a gamble! But in general, increasing prices by Nx in hopes that you’ll retain at least (1/N)x customers is a totally reasonable strategy.

[barrell]

How much are you lowering the satisfaction of those users though? Sure you may end up with more cashflow, but a much smaller, less eager group of users to be promoters.

The point of this is imho likely to boost the numbers as much as possible prior to IPO at the expense of the UX, brand, and by extension product

[jakelazaroff]

Sure, that’s part of the gamble. But for what it’s worth, I‘m pretty skeptical that raising the price like this will lower the satisfaction of existing users, especially if the remaining ones are mostly businesses.