Under-pricing is the more common problem
Most businesses we work with are under-priced relative to the value they deliver, and have not raised prices in years because the conversation is uncomfortable.
Meanwhile costs rise and the product improves. The gap compounds quietly until a large correction is needed, which is far harder to land than a modest annual adjustment.
Test on new customers first
Introduce the new price for new business and watch conversion for a quarter. If it holds, the price is defensible. If it does not, you have learned cheaply and no existing customer was upset.
This sequence removes most of the risk. Businesses that raise prices for everyone simultaneously are running an experiment on their entire customer base at once.
Then migrate existing customers
- Notice well ahead of renewal — 60 to 90 days for annual contracts
- Explain what has changed since they signed: features, support, capacity
- Grandfather for a period, or phase the increase over two cycles
- Contact the largest accounts personally, before the general notice
- Have an answer ready for those who push back, decided in advance
Segment the increase
A uniform percentage across all customers is simple and frequently wrong. Customers on very old pricing, or consuming disproportionate support, may need a larger correction than recent ones.
Be able to justify each band. Customers talk to each other, and an increase that appears arbitrary generates more resentment than one that is larger but explicable.
Expect and accept some churn
A price increase with zero churn usually means the increase was too small. Some departures are healthy: customers who were only viable at the old price were probably consuming more than they contributed.
Model it: if you raise prices 15% and lose 5% of customers, you are ahead, and the remaining customers are better matched to what you deliver.
What not to do
- Raise prices quietly and hope nobody notices — they do, and it costs trust rather than money
- Announce at renewal with no notice
- Remove features from an existing tier without a corresponding conversation
- Discount immediately for anyone who complains, which teaches everyone to complain