Dear SaaStr: How Do You Change the Price of Your SaaS Product Without Upsetting Existing Customers?

Dear SaaStr: How Do You Change the Price of Your SaaS Product Without Upsetting Existing Customers?

My vote: don’t raise prices for existing customers. At least, not usually. Because it won’t matter.  So it’s not worth the friction and internal efforts.

Think of a start-up growing quickly:

  • $100k in revenue Year 1
  • $1m in Year 2
  • $3m in Year 3
  • $5m in Year 4 …
  • etc.

When you go to raise prices for new customers, that’s impactful.

  • It will feel impactful to also raise prices on the base because you’ll get a quick bump to your MRR. But it’s just a small bump, and often, a one-time benefit. It won’t matter much in the long run. Because you’re adding so much new revenue and customers, any price increase from those early, grandfathered customers (e.g., $100k in Year 1 above) won’t be material ultimately.
  • But if you anger them, lose the referrals, lose the second-order revenue? That’s dangerous. All your hard work, your super high NPS and CSAT … can go right down the drain.

This isn’t to say don’t raise prices on existing customers, ever. But it is to suggest do it carefully, if at all. Treat them the way you’d like to be treated. At least with an extra grace period after everyone else has to pay more. Give them an extra 6 months or more, on the old pricing. To say thank you.

Yes, maybe by today’s standards, they are getting a great deal. But your earliest customers also took the biggest risk and bet on you. Take care of them, and make sure any price increases are material in the long run.

A bit more here:

5 Reasons Not To Raise Prices on Existing Customers. And 2 Better Ways to Do It Anyway.

(note: an updated SaaStr Classic answer)

leave me alone image from here

Published on April 12, 2022

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