How mindbody is holding their customers hostage and propping up their valuation ahead of its IPO

Six hundred dollars.

60% of the annual cost of their most popular monthly plan.

This is how much money mindbody charges their customers if they want to get their student credit card data. Data, mind you, that mindbody says their customers own, right on their pricing page.

  Be sure to ask the experts about credit card data portability!

 

Be sure to ask the experts about credit card data portability!

Telling people they own their data, but that they have to pay $600 for their credit card data, is like telling someone they own their yoga mat, but they have pay $100 to take it out of your studio.

It is flatly unethical.

When I did a live chat with a mindbody sales person, they didn't even know if there was a fee. They had to get in touch with the conversion department.

Credit card data is not just any data by the way. It is the most important data a small business can have. It allows them to charge their monthly members, which keeps cash-flow steady, and enables their customers to have a seamless payment experience. Most importantly, it creates a sense of loyalty between the customer and the business.

There is a reason Tim Cook talks about the number of credit cards the iTunes store has on file during Apple keynotes.

Today I am publicly calling on mindbody CEO, Rick Stollmeyer, to immediately join the data portability initiative started by the payments company Braintree. Learn more about this initiative at http://www.portabilitystandard.org.

From the very beginning, credit card portability was of the utmost importance to us, and it is one of the key reasons we chose to work with Stripe. And, it is why we integrated with Stripe in the way we did - having our customers get their own stripe accounts, and then authorizing us to conduct transactions, as opposed to all transactions flowing through our account.

We felt credit card data was so important, that the closer our customers were to the payments portion of our stack, the more ownership they had of the card data, the better.

Our customers are cage free and we’re very proud of this. 

Our Intention

One of the big ways yoga has influenced me, is that it causes me to think a lot more about my intention with things. Our intention with this campaign, is to make the entire industry better for people running small health and wellness businesses. Credit card portability has become standard in much of the tech world, with companies like StripeRecurlyBraintree and others leading the way.

We want to do the same in our industry.

Because mindbody is so big, we're calling on them publicly, but we hope everyone in this industry including FrontdeskZenPlannerBookerPunchPass and others will join us as well. This is an active campaign, and it will remain active until we achieve our goal - which is to get every software company that serves yoga studios to agree to credit card portability, and make it a standard.

Right vs. Wrong

To be clear, I’ve maintained from the very beginning of our launch, that the people at mindbody seem to be good people. They actually just bought a company owned by someone that Maile went to high school with. Small world, and I have no ill will to any of the humans over there.

It’s actually quite annoying. Rick Stollmeyer used to be an officer on Navy submarines, and the fact is that mindbody is one of the pioneers in the SaaS business. You don't become a Naval officer and build a company on it's way to being valued at a billion dollars without having some good qualities as a person. 

This isn’t personal, is my point, and it isn’t angry link bait either. 

What I have always maintained though, is that different constraints, and different people to please, leads to very different products and very different companies. This in turn, leads to a very different experience for customers.

When you have to maintain valuations and prepare a company for an IPO, when you have early investors that want their liquidation, when Morgan Stanley wants that $750 million dollar valuation, well those are some serious and significant constraints to deal with.

Slowly, but then suddenly, the needs of your customers - the people that should be the most important to you - become secondary.

The result of all this is that mindbody has been locking their customers in by holding their credit card data hostage since 2013, and I believe that this significantly and artificially props up their valuation.

Reducing churn through holding your customers hostage

Which brings us back to the credit card hostage situation. One of the things all SaaS companies have to deal with is churn. Churn is the number of customers that leave your product, and churn can happen for a number of reasons.

People can go out of business, they might find a product they like better, or they might decide to stop using software all together. But the point is, churn happens to everyone.

And the larger you get, the more your churn hurts.

When you have 40,000 customers, if you had a churn rate of 1%, that means you are losing 800 customers every month. (Which means you need to add 800 just to stay in place). 

Churn as a compass

Most people fear churn, but what I’ve learned is that by embracing it, you can use it as a compass. By understanding precisely why customers leave you, you can break it down into categories of ‘good churn’ and ‘bad churn’.

For us, good churn might be a martial arts studio that tries us out, but feels we’re not quite the right fit because we don’t have features that deal with belt colors. Bad churn would be a small yoga studio leaving us.

The way you end up with a product like mindbody’s, is you fear churn, you build features to please everybody, you become a sales driven organization and you lock in your customer’s most important data.

This can work for a while. And it might even get you to the public markets. But it’s not a recipe for long term, multi-decades long success. nor does it maximize customer happiness.

New entrants are too good, too nimble and have products that can out compete.

Questions to ask

The portability standard recommends asking these questions of any software company you might work with, and we couldn't agree more. No matter who you are considering for software, be sure to ask these questions:

  • Does your organization adhere to Credit Card Data Portability?
  • What is required of us to receive the sensitive data we process and/or store with you?
  • What is the process of receiving the data and how long does it take?
  • Are there fees associated with releasing the data to us?
  • What data will be released and is there a time limit?
  • Where can I get a copy of the terms?

By asking these questions, you'll be able to ensure that your business maintains control of the most important information you have, and that you'll never be held captive.

 

**UPDATE**

John Zimmerman, CEO of Front Desk, a competitor to both Tula Software and mindbody, has confirmed that there is no fee to move credit card data from one provider to another in the event a customer cancels.

Every movement needs a first follower, and we're grateful for the leadership that Front Desk has shown by publicly joining us.

You can read a post by John Zimmerman about his opinions regarding credit card portability on his blog post, and you can also read the Front Desk documents about portability in their FAQ section.

Tula is very heavily geared towards Yoga Studios, and we truly believe we're better for independent yoga studios than anyone else, including Front Desk. If you have a gym, martial arts studio or other fitness business and we're not quite right for you, you might want to check out Front Desk. If nothing else, you know they won't hold you hostage, and that's definitely not something that can be said of mindbody.