Gumroad just went viral on Twitter...for all the wrong reasons...

Gumroad is a platform that helps creators to host and charge people for digital products.

They're motto for a decade has been centered around helping creators succeed by monetizing their knowledge.

By creators for creators, a noble cause...right?

Not so fast: they just pulled a 180 and announced they're raising their fees, in one of the least effective ways I've ever seen.

Gumroad's old "fee" structure was taking a small % of your sales, much like payment processers do, that scaled down as you scaled up.

Overnight, Gumroad has decided to charge a 10% flat fee, no matter how much you sell, not including payment processing.

If you're relying on the Stripe integration, that's 13% of revenue eaten up before it even hits your account.

That means their biggest creators are getting charged 300% more in fees 🤯

And in return, creators got zero added value, features, support, or promotion.

I've had a product on Gumroad for over a year. It's not something I heavily promote, but creates a chunk of 100% passive side-income for me (my copywriting playbook) — I haven't seen a single feature added in 12+ months that lead to any revenue increase.

Gumroad's claim is that their massive marketplace will drive buyers to your product, much like Amazon. But I've hardly seen that to be true. 99% of my sales don't come from Gumroad "discover."

Their selling point for me was ease of setup + low fees as you scale. Now that the fees are increased, no value-add features were added, and competitors offer to migrate you for free, Gumroad has lost their core differentiator.

I've personally sent countless price increase letters over the years at my SEO Firm, uSERP. And one thing remains true:

If you raise prices, no matter how much value you add, you'll lose some folks. Plain and simple. And that's okay.

You almost always make up that differential (and more) by the increase, regardless of churn.

However, it requires one fundamental thing: that you actually add value with that increase, and you communicate that value clearly, with empathy.

Price increases for the sake of it almost never work, unless you truly were undercharging and overdelivering. On the flip-side, price increases that match a new value add will succeed 99.99% of the time.

Take a look at Gumroad's price increase letter. Let's learn something:

Quick breakdown of key sections from Gumroad's Pricing Increase Letter:

• "We are updating our fee to be simpler and higher."

Hard to believe anyone was confused by their existing fee system. This is a very self-serving sentence that shows no real conversations were had with customers on what they care about: features, promotion, support.

• "This no longer includes credit card processing fees"

So 10% is the base now. Meaning any sale has 10% from Gumroad, then 3-5+% more depending on what integrated payment providers you use (Stripe, PayPal, etc). That is far higher than saying their fee is only 1% greater than it was previously for entry-level creators who haven't sold a product yet. This is confusing + potentially deceptive, and hits their biggest creators (who make them the most money) the most.

• "Hopefully you feel it's still a good deal."

This summarizes the tone of the email: in that there is no tone. It's tone-deaf and lacks any real empathy to their customers.

If Gumroad had sprung out of the gate with incredible new value-adds and free promos, a fee increase would seem negligble.

But just like nobody wants to pay $10 for the same milk they bought for $1.50 last week...you get the point.

The ultimate lesson is: in pricing increase situations, expect to lose some people. It's going to happen. Can't prevent it. What you can do is add new value that retains and emboldens your customers, making you both more money. And increase in price should deliver even more value. And if it doesn't, you should expect churn to outpace potential gains.

Always lead with what's in it for your customers, not you.

Cheers,

Jeremy