How to successfully increase your SaaS prices

How to successfully increase your SaaS prices

Most SaaS founders want to increase their prices at one point or another but are afraid of customer backlash. If you are convinced that your product is underpriced, you need to find a way to act on that conviction.

All it takes is a little bit of planning and you’ll be able to execute the price increase without hiccups and turn it into an opportunity for growth.

When we decided to increase the prices for Close, we had three simple goals

  1. Keep current customers happy
  2. Keep current conversion rates high
  3. Turn the price increase into an opportunity to sell more seats

We accomplished all these goals. Here is how you can do the same.

When should the price increase come into effect?

Set a specific date several weeks or months in advance.

When and how do we announce and communicate the price increase?

  • Communicate to your customers early and let them know what’s coming.
  • Announce the upcoming price increase on your blog and in personalized emails.
  • Get to the point. Don’t dress your message up or sugarcoat it. No apologies about the price increase. No salesy explanations. No BS. Just give it to people straight: We’re increasing pricing. Here is what it will be. Here is how it will affect you. Let us know if you have questions. Thanks.

Here is how we announced the price increase on our blog. Below is the email template we used to ping our existing customers about the price increase:

How To Successfully Increase Your SaaS Prices

And here’s an example of what responses looked like:

How To Successfully Increase Your SaaS Prices

How does this affect current paying customers?

You need to decide whether you want to grandfather your existing customers or not. We decided to do so. They would keep the old pricing for life for the user seats they already signed up for.

How you decide on this will always depend on your specific business case. But be aware that raising prices on existing customers can piss off your customers. When Zendesk did this, an angry thread ensued on HackerNews, which made a guy called Girish Mathrubootham decide to start his own help desk software company. His company, Freshdesk, now employs 400 people, has more than 30,000 users (among them large enterprise clients like Cisco) and has raised more than $41M.

What special promotion can we offer customers and current trial accounts?

If existing customers and current trial accounts decided to add new user seats within the next 14 days, they would keep the old pricing for those as well. However, after 14 days they would have to pay the new (higher) prices. This led to a huge bump in sold seats for Close during the 14 day period.

What results did we get?

When we increased prices, our conversion rates stayed the same, our customers stayed happy, we had a huge bump in paid seats and our average customer lifetime value increased by over 10%. It’s impossible to predict what kind of results YOU will get. The only way to find out is to try.

But the one thing we can tell you is this: you probably haven’t found your perfect price point yet. And your perfect price point is likely higher than your current price.

So stop making excuses and start planning your successful price increase. Download our free book today, SaaS Sales for Startup Founders.