May 13, 2019

How to increase pricing?

Philip Imperato @philipimperato

I'm at the point where I am attempting to increase pricing. It's not a flat increase, but a model shift (flat to per user) where most of my current clients will end up paying more.

Do I grandfather my previous clients and only apply the new pricing model to new business? Or do I retroactively apply the model? Some clients signed up 2-3 weeks ago and I gave them no indication that I was increasing pricing.

Maybe send out a prelim email explaining changes in 3-4 months from now?

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    I think grandfathering is not only safe, suitable for marketing (you can use that to build up trust and brand strength), but also the right thing to do. If someone put his trust in you, invested in your brand in the early days and allowed you to grow, you should return the favor by grandfathering them.

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    For context, I head growth at a late stage venture. We had onboarded numerous early customers at $0 if they had displayed a 'powered by ___' badge on their site. As our services grew, so did our losses on this segment. Until we either had to charge or stop servicing them. But these were also early adopters who had crossed the chasm with us, so we wanted to do right by them. We used a combination of practicality (we'll be unable to keep the lights on) and gratitude (thank you for taking a flyer on us) to raise their rate at a preference to list price.

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      Can you share some details on how did it go?

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        Some purchased and others left, but none were angry.

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    Multiple approaches here:

    1. Grandfather old one, charge new ones...
    2. Same as "point 1" but don't give 'em new feature developed henceforth but don't ask 'em to upgrade either. If they reach out to you asking about the new feature, tell 'em about new plans and offer a one-time discount (if possible.)
    3. Upgrade all existing users to new plan immediately (or after 6 months for existing ones.) This will lead to churn as a good number of users might move to alternatives (looking for the cheaper provider) but you will have fewer support tickets to handle and who stays really value your offering/more revenue.

    Let me know if you have more questions or discuss it over skype/zoom.

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    A safe way is to grandfather existing customers. You then can push your customers to a new plan by limiting the functionality of the old one (which is extra work from development and QA standpoint) or you can send an email to existing customers telling how valuable they are and offer a discount for a year, so they end up paying the same as now. I think the second option is a win-win for everyone.

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    If it is merely a change in pricing: Yes grandfather them in.
    If you add functionality and increase the price: Offer current users a very special deal to upgrade.
    if you can't continue giving the product at the price they are paying: Be extremely clear why and how and when they will be affected.

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    I would learn from ZenDesk's mistakes: https://techcrunch.com/2010/05/18/zendesk-pricing/

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      Hey, thanks for the share. The thing is, the complaints might have come from outliers. I am wondering if overall, they increased in value.

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