How to Raise Prices for a SaaS Product

Raising prices is a critical but emotionally difficult task. A well-executed price increase can accelerate growth, while a poorly handled one can damage your brand and cause unnecessary churn.

Tactical Approaches to Raising Prices:

Increase Prices for New Customers Only: This is the simplest and safest method. You change the prices on your public pricing page. Existing customers are "grandfathered" in at their original price.
Decrease the Value Metric: Keep the dollar price the same, but reduce the usage limits for each tier (e.g., the $49 plan now includes 2,500 contacts instead of 3,000). This effectively raises the price as customers will need to upgrade sooner.
Hide the Lowest Tier: Remove your cheapest plan from the pricing page, forcing new customers to choose from higher-priced options.
Go Upmarket: Make a strategic decision to dramatically increase prices (e.g., 10x) and pivot your product to serve a more premium segment of the market. This is a high-risk, high-reward strategy that requires significant product changes.

To Grandfather or Not to Grandfather?

When raising prices for new customers, you must decide what to do with your existing customer base.

Grandfathering: Allowing existing customers to keep their old pricing.
Raising Prices for Everyone: Migrating all existing customers to the new, higher pricing.

Rob's Rule of 10: Only consider raising prices on existing customers if it will increase your total MRR by at least 10%. If the revenue gain is less than that, the potential headache, support load, and brand damage is rarely worth the effort.

Never promise to grandfather customers for life. This can tie your hands in the future or create problems if the company is acquired.

How to Communicate a Price Increase to Existing Customers:

If you decide to raise prices for everyone, communication is key.

Give Ample Notice: Provide 2-4 months of lead time between the announcement and the effective date. This gives customers time to adjust and doesn't make them feel trapped.
Be Direct and Justify the Change: Use a clear, empathetic tone.
- Start by reinforcing the value you provide.
- State clearly that you are changing prices.
- Explain why (e.g., you've added significant value, your costs have increased, you're investing in new features).
- Be specific about who is impacted and when the change will occur.
- Invite questions and feedback.
Consider a Discount: To soften the blow, you can offer existing customers a perpetual discount on the new pricing.

A well-communicated price increase that is justified by the value you provide will often be met with understanding from your best customers.

Tags: #SaaS #pricing #strategy #communication #grandfathering #monetization