How to raise your SaaS prices

Raising your SaaS prices is both an important and nerve-wracking practice. One that, due to the nature of SaaS, probably comes about more often than you’d like.

Your ongoing updates, upgrades, and fine-tuning make the value of your offering increase. So too, then, should your SaaS prices. When this doesn’t happen, you devalue your hard work.

But how do you raise your subscription prices, without upsetting your customers? Maybe you need to stop grandfathering your prices. Maybe this is the first time you’ve raised your costs. No matter the reason, here’s how to make sure your price-raise goes smoothly. 

Evaluate your value

Before anything else, you need to make sure that now is the right time to raise your SaaS prices. This means evaluating the value you’re offering your customers, and how it has changed. The key here is that you need to see the value from their point of view, not yours. More features won’t always mean more value for your older customers.

Do this by talking to your users or listening to their voluntary feedback. Sometimes, your loyal customers may tell you that you should charge more. (This is a usually a good sign that you need to raise your prices.) You could also compare your offering and prices to your competitors. Look at what are they charge, and what you offer that they don’t, and vice versa.

Does your current price reflect the value you’re providing?

Choose your strategy

Once you’ve determined it’s the right time to change your SaaS prices, you can decide how you want to reprice. There are a few common strategies to choose from. When deciding, it’s worth thinking about how you want to handle different customers. (Bigger, smaller, older, newer, etc.)

●         Restructure your pricing strategies

If you use tier-based pricing, one way to change your SaaS prices is to restructure your tiers. You could add or reduce user allowances, or move your feature offering around. This is a particularly good way to respond to the different types of customers you have. Bigger customers get bigger plans with bigger prices.

●         Straight price increase

You could opt for a straight price increase. This is where you keep your tiers, users and features as they are. The only change is how much you charge.

●         Raise prices in-line with an upgrade

Another way is to equate the price rise with the value of a new upgrade. This is a good way to help customers see the extra value you’re offering, and so not feel short-changed. But, you may find that some of your users will ask to keep their old pricing and not have the upgrade.

●         Make your current offering legacy

The last strategy is to offer older versions of your software as ‘legacy’, and grandfather the pricing for users bound to those less advanced editions. Long term, though, this isn’t sustainable for you or your customers. As such, it’s best used as a temporary step only for existing customers. Eventually, you’ll want to upsell them onto your new pricing tiers.  

Communicate and implement

No matter which strategy you go for, communication is key. A failure to communicate leads to a nasty surprise for your users. This results in ‘bait and switch’ feelings, hurting your relationship and customer trust.

So, let every user know well in advance of the change. Notify them in-app, email them, or even call them. Then, give reminders that the change is coming. Remind them of the raised value you offer. Also, make it as clear as possible why your SaaS prices need to change.

During this time, be as open and accessible as possible. Invite your customers to get in touch if they don’t understand the coming changes. Remind them of your good relationship with them.

When it comes to your older customers, you’ll likely have some teething pains. Regardless of the chosen strategy, it’s often beneficial to offer them a stepping-stone. It’s a great way to reward their loyalty and show your appreciation. You can do this by offering grace periods with temporary discounted periods. Then, raise their prices to the standard after.

Value and communication

Raising your SaaS prices is a disruptive time for your customers. But it’s also necessary for your continued growth and success.

Unfortunately, some customers may churn no matter how you handle it. But, by making the transition as clear and seamless as possible, you reduce the factors that traditionally cause upset.

So, whether you choose to make their software legacy, or simply raise their price, the key to it all is a combination of value and communication.

Useful links

SaaS pricing models explained

What’s the difference between a software upgrade and a software update?

Grandfathering in SaaS: the pros and cons