Dear SaaStr: How Do I Increase Pricing Again Without Angering Customers?
One simple thought: earn it.
First, plan to increase pricing in general once a year, each year for new customers. But earn it. And generally for new customers, not existing customers. How much? Well, that will depend on how much additional value you’ve added over last year, how strong you stack up vs the competition, and how strong your brand is. But you should be a bigger, better, and more highly regarded company and product this year than last. So increase pricing annually to reflect that. How much? Well, that depends on how much you’ve earned. Try to increase pricing annually for new customers. But make sure you’ve earned it.
Second, don’t rip your customers off. Don’t increase pricing beyond what you’ve earned. Yes, this will be hard to measure. But this is your job as CEO, to balance the different incentives and forces here.
Third, focus just as much on deal size than pricing. You can often make more money closing 2x the seats without futzing with pricing. Driving up deal size is often much more important than per-user pricing, per se. A little more here.
Fourth, start at the high end. You don’t have to wait a year here. If your largest customer is $25k a year and they are happy … ask for $35k the next time you get a similar lead. Then, if they are happy to pay $35k … ask for $50k for your next Biggest Deal. This will build confidence.
Spreadsheets are great, but pricing is a complicated topic. A spreadsheet isn’t the real world, and doesn’t incorporate brand, competition, sales friction, etc. The four tips above can help there.
