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  1. Hi Lincoln,

    We’re considering raising the prices of our SaaS. We’ll be grandfathering in old accounts, so unless they let their accounts lapse they won’t have to pay the new prices. You say that how price increases are announced and communication is crucial – how do you suggest announcing new prices to existing users who won’t actually be affected by it?

    My inclination was to just go with short & sweet reassurance that they won’t have to pay these new prices (unless they close their account or let it lapse – and we might throw in some lapse forgiveness later), but some articles have made me wonder if we should really go into more detail about the reasons for our increase (need more staff to support broader user base, new features we haven’t increased prices for previously, and we’re now targeting bigger customers anyway), etc. Is this still necessary for people who won’t be affected by pricing changes?

    • Think of your existing customers as members of a club. As a member of a club, you’d like to know things that are going on before everyone else, right? If you think of it that way, you can also see why not hearing things first can have a super-negative impact on your members.

      So that’s one HUGE reason to tell your current customers – your members – first.

      The other reason is we don’t ever want them to think that the new pricing will affect them. Even if their pricing never changes, they might see the new pricing and wonder… and we don’t want them to do that.

      So tell ’em first. It’s just that simple. Give them 1 or 2 days notice ahead of the public pricing change and you’ll be fine. You won’t spoil the news release… seriously, it can only hurt when you try to save the PR and end up alienating your current customers.

      Tell ’em they’re grandfathered in, so they’re good, but if they ever cancel and come back, they’ll have to pay whatever the regular price is at that point.

      Ideally you can be creative and offer incentives now and over time to move the grandfathered folks to a new pricing level so that you end up with no grandfathered customers. But that’s a tactic for another day.

      Now, the question of how transparent you want (or need) to be with your customers about why you’re increasing the price is directly tied to how transparent you’ve been (or would like to start being) with them in the past. If you’ve never let them in on anything before, and that seems to be just fine, don’t worry about it. Just move on.

      But, if some of them are interested in your journey as a startup… then maybe let them in on it.

      Otherwise, I’d keep it short and sweet. Make the announcement to the existing customers behind-the-scenes via email and/or in-app, and then just change the pricing on the public site.

      Also make sure you don’t “feel bad” or aren’t otherwise trying to justify the price hike in your own mind and that’s why you feel compelled to explain it to them. You don’t owe anyone an explanation… remember that.

      1. Tell your existing customers
      2. Grandfather your existing customers in
      3. A couple days later change the public pricing page and your billing system
      4. Profit

      It’s a simple process, but a lot of people mess it up… don’t mess it up and you’ll be just fine.

      Good luck!

Trackbacks

  1. SaaS Pricing Strategy: Is Raising Prices Key Your to Success? | OpenView Labs says:

    […] a post on his blog last August, SaaS Growth Strategies’ Lincoln Murphy wrote about how a 10-times increase in prices helped […]

  2. […] SaaS Pricing Model: How a 10x Price Increase Lead to Happier Customers SaaS strategist Lincoln Murphy describes how one company adjusted their SaaS pricing model by raising prices 10x — and is getting not only a boost in revenue, but happier customers in the process. […]

  3. […] a post on his blog last August, SaaS Growth Strategies’ Lincoln Murphy wrote about how a 10-times increase in prices helped […]

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