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Two thoughts, one direct and one indirect. First, let me tell you in my experience at least, raising prices on customers often angers them.  It's OK to do it indirectly, by adding more seats / users -- no problem.  Or upgrading to a site license.  But just asking someone paying $10k a year to pay $20k the next year for the same product = anger.  In my experience at least.  You turn your advocates into prisoners.  Don't do that.  You'll lose all the second-order revenues and elective upgrade opportunities.  Not worth it.

  • PL

    Pierre Lechelle

    over 3 years ago #

    Pricing and especially increasing pricing is a tough issue very-well tackled by Jason.

    What I'm wondering here is: How'd you go if the first price you came up with during traction happens to be unprofitable in post-PMF growth?

    Example: You launch your business, first tier pricing plan is $12. After scaling the acquisition, you realize that the LTV is way smaller than the CAC.

    Although this probably doesn't happen often, I think it's an interesting question because you can't keep working with the people who are willing to pay only $12 for your offerings (if you want to make money).

    But then, should you stop working with these people? Risking the fact that they might become Brand Detractors?

    • PZ

      peter zotto

      over 3 years ago #

      End of the day companies and to a greater extent product/product marketing needs to start asking themselves how they originally came up with that initial PMF price point. We are too often using gut or competitors to come up with price points and find ourselves in a low price/high expectations hole we can't get out of.

      As for where to draw the line on moving away from early adopters, this comes back to how the market perceives your value. For instance, if you are building a vehicle, and initially sell it's value based purely on utility (Toyota vs. BMW), only to find out later you have premium value, then product marketing needs to refocus the alignment of packaging and positioning. Do you sell the "ultimate driving machine" or do you sell the utilitarian grocery getter Camry. Future gains in LTV, ARPU, and MRR should completely outweigh initial brand detractors.

  • SE

    Sean Ellis

    over 3 years ago #

    I really enjoyed this article. Definitely agree that it makes sense to grandfather in existing users before increasing pricing on a specific plan. And that better way to introduce higher prices is with a new plan. We did both of these with Qualaroo and they helped us increase prices without much pushback.

  • PG

    Pushkar Gaikwad

    over 3 years ago #

    If you are dramatically increasing the price of your SaaS product, then you have to be transparent with customers and tell them why you are doing this. Being honest often works out.

    For example, in our product AeroLeads, we started with $37, then moved to $47 and currently are at $50. It was important to do it as at low pricing point, it was difficult to make profit.

    We always convey this to our users that the reason for price hike is -

    1. The product now is more polished,
    2. Tt can give you 100x return so $10/month increase shouldn't make significant difference
    3. We do have to make profit as a company.

    So far, this has worked out well for us.

    Do note that you shouldn't increase the pricing for existing users as that will surely make them cancel their accounts as they will cheated.

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