As the founder or CEO of a SaaS company, at some point you’ll inevitably find yourself ready to raise your prices. Maybe it’s because you discounted your prices back in the early days when your product was unproven and you were anxious to get some customers. Or maybe you’ve recently invested significantly in upgrading your solution and delivering enhanced value to customers and want a return on that investment. Whatever the case, conversations about price increases can be tricky and need to be handled with care.
The fact is that even though your customers expect price increases from time to time, you’ve still got to be thoughtful about how you approach them. Typically, that means wrapping them into a new product or value offering such as a new release or feature rollout. Beyond that, there are some important steps you can take to ensure that everything goes smoothly, so that you and your customers both feel satisfied with the outcome.
A quick guide to negotiating price increases
When it’s time to raise prices, you want to ensure that your client-facing team has a strategy in place so that they can approach the conversations they’ll need to have with confidence while reducing the risk of upsetting your most loyal customer base. Here’s how to approach it:
- Do your homework. Be up to date on all of the relevant details of the customers in question. This includes their current pricing, any discounts they might be benefiting from, the specific plan that they’re on, and the number of years they’ve been a customer. Make sure you also have a good understanding of how much they use your product and the impact that it’s having on their business.
- Formulate a proposal. Create a proposal of what you want to offer your customers, making sure to include the current list price as well as any promotions you can offer them for their loyalty to help make a price increase easier to accept. Document what product or plan they’ll be on at the new price and tie that product or plan back to the impact or value it will have on their business. In other words, help them understand the additional benefit they’ll be getting.
- Have a conversation. Set up a call with each customer, informing them that you want to understand the value they’ve received to date and agree to a pricing plan moving forward. You want to use the call to gather information while also reinforcing their perceptions of the impact you’re delivering to their organization. Here’s a basic framework to follow:
Remind customers of the purpose of the call.
“As discussed, our goal today is to agree on a pricing plan moving forward.”
Share relevant information that’s valuable to them.
“Over the past year we have rolled out these features which have had the following impact on your business. As well, let me demonstrate the newest functionality that we are rolling out and how that affects your goals.”
Help the customer understand the price increase.
“To continue being able to improve on the value we want to offer our customers, we do need to get you closer to our asking price for the products you are receiving. You’re currently paying X, and your new pricing will be Y.”
- Be prepared to trade. Offer the customer further value to create a win for everyone.
“However, if you agree to move forward by November 15 and commit for 2 years, I will offer you this new product at no additional charge for the next six months.”
Price increases where everyone wins
SaaS businesses raise their prices within their existing customer base from time to time. The key to doing so successfully is making sure that you’re aligning any increase in price to an increase in business impact. Understand how your customers use your product, talk to them about the value that they’re receiving, and come to an understanding about why a price increase is necessary to keep delivering superior service. If you can do that, you’ll be in a much better position to get the outcome that you’re looking for while ensuring that your customers remain satisfied.