Increasing rates for existing customers
Whether its hourly contract work, monthly maintenance fees, or a SaaS product...
Have you ever made the bold move of increasing your rates for an existing customer or client?
Is it a bad idea to do so?
If not, what's the best way to go about it without losing your customers or hurting your relationships with them?
I think this is a really difficult subject to get right.
Especially when it comes to contract work, your clients probably have a hard upper-limit of what they can afford. It's fine to say that you are producing $X value and want to be paid $Y/hour for doing so - but the hard truth may be that your client is happy with ${0.5X} value and can't justify more than ${0.5Y}/hour for it.
That's not to say you shouldn't increase your prices. Just don't expect your current clients to stay with you and pay them. Find new clients who are willing to pay your increased rates first. Then go back to current clients and see if any of them are willing to stay on board at your new, higher rates. Make sure to give them space/time to find an alternative if not though.
For SaaS products, I prefer to grandfather in old customers. If you have expanded on the scope of the product significantly since the original customers signed up, this may be an argument to increase the pricing.
Patio11 writes very well about this topic. Check out his blog posts on the subject.
Good luck!
Second the suggestion to find new clients willing to pay the higher rates first and then worry about the discussion with older clients. Your ability to slowly phase out older clients not willing to pay the increased rate becomes much easier if you have others already valuing your work at the higher rate.
It's a hard problem, no doubt.
But, here is something to think about: Thought process will be different for different cases.
Hope this helps.
Thank you for your insight Natwar!
I would love to hear more details about your experience doing that with SaaS :)
You are most welcome.
Yes, for SAAS, we built more features and let "grandfathered" customers use them to certain level / amount / time. And then ask them to upgrade if they want to keep using them.
I understand building all these limitations for customers and different plans can be challenging extra work that a lot of people don't want to do. You have to pick and choose your battles here :)
Hope this helps.
Natwar
Bad idea. No matter what you'll piss off your existing customers, and they may get vocal. Your best bet is to a. grandfather them into their current pricing and raise prices for future customers or b. launch a higher-priced product with more features and "discontinue" the subscription they're currently paying for, with the option to upgrade to the new one at a discounted, but still higher rate.
Option A is superior unless you're losing a lot of money on your customers.