How to Increase Price Without Losing Your Best Customers

Are you putting off raising your pricing because you are worried about churn? Have your costs creeped up while your prices remained static? Do you suspect that your customers are getting an extraordinary deal for the price you are charging them?

A well designed price increase can reset the relationship between the value you create and the value you capture. It can also fund continued investment in your product or service. However, done badly, it can erode trust, accelerate churn, and provide an opening to your competitors.

The good news is that the customers most leaders fear losing in a price increase - that is, the larger deals, or most loyal or engaged customers, are rarely the ones who actually leave. The customers who leave are usually the ones you suspected were a poor fit anyway. But that only holds true when the price increase is well designed, well communicated and well executed.

Segment Before You Raise Price

If you service multiple customer segments -  not every customer should see the same increase. Different segments derive very different amounts of value from your offer in very different ways, and a flat price increase applied across the board is the wrong way to go.

We recently worked with a SaaS organization whose pricing had not kept pace with how their customers were using the product. Heavy users derived enormous value from the platform, but paid roughly the same as light users on the same flat plan. So we designed a price increase that was structured around usage and value tiers. Heavy users absorbed a meaningful price increase because it was possible to articulate and quantify the value they were getting. Light users saw a small increase or none at all, with a clear pathway to more value creation over time.

So start by segmenting by value before you decide who pays what.

Start with Value

A price increase without a credible value story is just a bill that went up. A price increase rooted in a credible value story re-anchors the relationship with your customers

Ask yourself honestly, what has changed since you last set prices? Have you introduced new capabilities? Are there new customer outcomes? Are there new industry benchmarks, or have you broadened your reach to new customer categories? 

Most organizations do not document the value they have added over the years. So start by surfacing it and quantify where possible. The value-based narrative you bring to support the  pricing increase determines whether there will be customer price acceptance or pushback..

Choose the Right Mechanism

Consider whether you should be:

The best price increase mechanism for your business requires a deep understanding of how your customers buy, how they renew, and how much flexibility there is in your pricing architecture today.

Communicate with Confidence

The single most common mistake we see is apologetic communication. A hesitant, defensive announcement signals to customers that you do not believe the new price is fair. Your customers will take their cue from you.

So, be direct. Explain what is changing, when, and why. Most importantly anchor every communication in value. Give customers enough notice to plan. For your most strategic accounts, start early and have a real conversation with someone they trust.

Protect the Right Customers, Strategically

Do not grandfather everyone who pushes back. Grandfathering should be a strategic choice, not the default. Grandfather customers only when the relationship is genuinely strategic -  when the cost of churn is materially higher than the cost of the foregone increase.

The Ones Who Leave

Some customers will leave, that is inevitable. The customers who churn over a well designed, well communicated price increase are usually the ones who were never getting fair value relative to the price being charged. 

A well designed and executed price increase is a clear signal that an organization understands the value it creates and that it intends to keep investing in ongoing value creation for its customers.

We Can Help

At GTM Pricing Innovations, we help B2B organizations design and execute price increases that capture a fair share of the value they create for their customers. If you have a price increase on the horizon and need support with execution, or you have been putting one off, or you are unsure where to start, we would love to talk.

Reach out to us - let us help you with pricing design that strengthens your customer relationships rather than tests them.