Regardless of what model your B2b SaaS company uses, you've probably heard the rule of thumb that you should update your pricing regularly. More often that not, changing your pricing will include some kind of a price increase, or even a whole new set of tiers or offerings altogether. Whatever changes you're making, change is always hard, and breaking the news to your customers is a delicate art.
But you should make sure that the communication plan for how to rollout these changes and how to disclose them to your customers is not an afterthought - the last thing you need is a PR nightmare when angry customers take to social media to make their feelings known.
The key is to put together a plan that emphasizes transparency, value and trust, helping retain your customers and reducing any attrition and churn.
First: Assess how "major" this pricing change is
Is this a small price increase from $10/month to $11? Removing one feature to Premium or making it an Add-on instead? You probably don't need a full-blown strategy. But if you're changing pricing strategies, changing the price itself significantly, or changing the tiering, you probably should err on the side of communicating this to your customers.
Here are some examples of what we'd consider big changes:
- Charging free users for the first time, ever: Maybe you initially launched a fully free or open-source project to gain critical mass and users, and now you want to start charging something for it.
- Adjusting the free-to-paid threshold: Let's say your users initially signed onto the free trial / free tier that will revert to $10 a month, but your prices now changed to $12 a month, or perhaps the free tier now maxes out at 1 GB of storage versus 2.
- Changing models: Perhaps you were on a simple usage model, and now you want to move to a hybrid model where you charge a monthly base fee and then blocks of usage thereafter.
- Increasing prices altogether: Inflation is real. Maybe you've just been on the same prices for years and the market and competition have all raised their prices, too, so it's time to follow suit.
Once you've determined exactly what changes you are making, and that they're something worth telling your customers about, now you're ready to plan it out.
Not sure if you're ready to change your pricing, or what it should be? We're always here to help! Book a call for a free 1:1 pricing recommendation.
Planning
When to annouce
Timing is everything. The announcement should be made well in advance of the actual price change, giving customers ample time to understand and adapt to the new pricing structure. A general guideline is to notify customers at least 30-60 days in advance, depending on the extent of the changes.
Identify the right channels
Plan how you'll actually make these changes known across various channels. This might include personalized emails, in-app notifications, blog posts, and updates on social media platforms. Each channel can reach different segments of your customer base, ensuring the message is received by as many users as possible. Don't be shy to use more than one channel at once - some of your customers might read your Blog, but never read your email newsletter.
Messaging
Clear and Concise
Whatever channels you do use, make sure your language is simple, clear, and free of jargon. Explicitly state what the changes are, when they will take effect, and how they will impact the users. Avoid vague language that might lead to misunderstandings or confusion. Don't try to hide that you are increasing your prices - this can cause more headaches!
Explain the Reasoning
Customers appreciate transparency - provide a clear explanation for why the pricing changes are necessary. Did your costs increase? Did you underprice your product initially? Did you launch new features and are now providing customer support? SaaS businesses are not immune to inflation. Whatever it is, explaining the rationale can help mitigate negative reactions.
Highlight the Benefits
If applicable, emphasize any improvements or added value that come with the price increase. Maybe you included new features into your Basic tier which is now slightly more expensive. Maybe enhanced customer support or improvements in server uptime are available for all customers. Whatever it is, showing how the changes benefit the user can help justify the price increase and maintain customer satisfaction.
Pro tip: Stick to the 5 W's to keep things simple
- What: What pricing changes specifically are happening? If a customer does nothing, what happens to their account?
- Why: Why are you making these changes, and / or why now? What added benefits does this afford users?
- When: When will this be occurring? Is there a time period in which a customer has to take a certain action?
- Who: Which customer(s) does this affect?
- Where: Where do they go if they have questions or need more support?
Getting the Word Out
Q&A Sessions
Especially if you have larger-ticket customers, consider hosting live Q&A sessions, webinars, or even 1:1 sessions where customers can ask questions and express concerns about the new pricing. This direct interaction can help alleviate uncertainties and provide a platform for open dialogue.
Feedback Opportunities
Encourage feedback through surveys or direct channels. This not only helps in gauging customer sentiment but also demonstrates that you value their input and are committed to adapting based on their needs.
Follow-Up Communications: Reminder Notifications
As the date of the pricing change approaches, send reminder notifications to ensure that all customers are aware and have prepared for the transition. These reminders can be tailored based on user engagement with previous communications.
Follow-Up Communications: Post-Implementation Updates
After the new pricing has taken effect, continue to communicate with your customers. Provide updates on how the changes are being implemented and any positive outcomes that have emerged. This ongoing communication can help smooth over any lingering concerns and reinforce the value that you provide.
Transitioning: Grandfathering and Upgrade Incentives
Grandfathering Current Plans
Consider keeping existing customers on their current plans for a set period. This approach, often seen as a gesture of goodwill, can enhance customer loyalty and minimize churn. It shows that you value your current customer base and recognize their contribution to your business.
Offering Transition Incentives
To smooth the transition to new pricing, consider offering incentives for customers to move to the updated pricing model. This could be a discounted rate for the first few months, additional features, or increased limits at no extra cost. Even if it seems small, these gestures do help show you care, and can help reduce churn.
Managing the Public Pricing Page
Updates on the Pricing Page Your
pricing page should always reflect the most current pricing information. Before announcing the change publicly, make sure all relevant elements are ready to be updated on your website at once to help avoid confusion. If the pricing change is scheduled for a future date, consider having a countdown or a clear mention of when the new prices will take effect.
Handling Customer Queries
Prepare your customer service and sales teams to handle inquiries regarding pricing changes. This should include training on the reasons behind the price adjustments and how to communicate these reasons effectively to customers. Ensure that FAQs on your website are updated to reflect these changes and provide detailed explanations that can help in preemptively addressing customer concerns.
Examples of SaaS Pricing Updates: The Good and The Bad
When it comes to updating pricing in the SaaS industry, the approach can significantly impact how the changes are received by the customer base. Here are two real-world examples—one where a SaaS pricing update was managed exceptionally well, and another where it led to significant backlash, serving as a cautionary tale for other SaaS companies.
A Successful Pricing Update: Adobe Creative Cloud
The Transition from Perpetual Licenses to Subscription
In 2013, Adobe shifted from selling perpetual licenses for its software to a subscription-based model under the Adobe Creative Cloud banner. This was a significant change in Adobe's pricing strategy, moving away from a high upfront cost to a more accessible monthly or annual subscription fee.
Why It Went Well
Clear Communication and Value Proposition
Adobe clearly communicated the benefits of the new subscription model, emphasizing constant access to the latest updates, additional cloud storage, and more collaborative tools which were not available with the perpetual licenses.
Gradual Transition
Adobe provided a transitional period where existing customers could still use the older versions and offered them discounted subscription rates to ease the shift.
Enhanced Product Offering
The subscription model allowed Adobe to roll out continuous improvements and new features, enhancing the overall value for users and justifying the ongoing cost.
The result was a substantial increase in user base and revenue, with Adobe Creative Cloud becoming a standard in the creative industry, demonstrating how well-managed pricing transitions can lead to growth and customer loyalty.
A Problematic Pricing Update: Netflix 2011 Pricing Split
The Separation of Streaming and DVD Rental Services
In 2011, Netflix announced a decision to separate its DVD rental service and streaming service into two distinct offerings, each with its own subscription fee. This effectively raised prices for users who wished to continue using both services.
Why It Went Poorly
Sudden and Poorly Communicated Changes
The price increase was perceived as sudden and was poorly communicated. Netflix did not adequately explain the reasons for the split in services and the subsequent price increases, leading to customer confusion and frustration.
Lack of Added Value
Unlike Adobe, which enhanced its product offering with the pricing change, Netflix's service separation appeared to offer no new benefits to the customers who were facing higher costs.
Immediate and Steep Price Increase
The new pricing model nearly doubled the cost for users who wanted to keep both streaming and DVD rental services, which led to significant customer backlash.
The announcement resulted in a loss of approximately 800,000 subscribers, and a significant drop in stock prices, highlighting how drastic pricing changes without clear communication and added value can alienate customers.
Why It Went Poorly
Sudden and Poorly Communicated Changes
The price increase was perceived as sudden and was poorly communicated. Netflix did not adequately explain the reasons for the split in services and the subsequent price increases, leading to customer confusion and frustration.
Lack of Added Value
Unlike Adobe, which enhanced its product offering with the pricing change, Netflix's service separation appeared to offer no new benefits to the customers who were facing higher costs.
Immediate and Steep Price Increase
The new pricing model nearly doubled the cost for users who wanted to keep both streaming and DVD rental services, which led to significant customer backlash.
The announcement resulted in a loss of approximately 800,000 subscribers, and a significant drop in stock prices, highlighting how drastic pricing changes without clear communication and added value can alienate customers.
Conclusion
Announcing pricing updates can be a dreaded activity for B2B SaaS. But if done well, they can help bring in new revenue while serving new markets and keeping your core customer base happy.
To recap, here's our top tips for how to go about this:
- Make a plan, and craft your messaging to avoid any confusion, giving customers ample heads' up, and answering the Who/What/When/Where/Why.
- Always provide a clear rationale for why prices are being adjusted. Transparency goes a long way towards maintaining trust and retaining your customers.
- Stay aggressively customer-focused. Be ready to listen, respond, and make the transition as easy as possible for them.
