How to communicate your SaaS price increase to clients

Given the current economic climate, a price increase is inevitable. And in the SaaS space, prices eventually increase regardless of what’s going on in the economy. There are a number of reasons for why you might need to implement higher prices – maybe you’ve worked on a new pricing strategy, you’ve added new features, a customer’s discounted rate has expired (particularly among brand new startups), or the market value has changed. 

So, with the price of materials, labour, and other factors going up and costing your business more money, coupled with the nature of SaaS businesses, it might be time to increase your prices. But how do you do this without losing customers?

While many SaaS startups will dread increasing the prices for fear of irking customers and losing their business, but the risk of not increasing your prices is much greater.

Why should you increase your prices?

• Increasing your profits year-on-year is important for any business, particularly in the competitive SaaS space, and of course, the easiest way to do that is by raising your prices.
• When going into the space, you probably had a key target demographic in mind. Under-pricing your product cuts out that demographic and doesn’t target them directly. You might lose some customers in the process, but you want to hold on to and attract the right ones.
• Particularly in times of inflation, static prices will mean you lost out financially. But it also reduces the value of your product in the eyes of your customers. If you get the unshakeable reputation of being the cheaper product, your target audience will see it less valuable than your competitors.

While we know that there are plenty of reasons for increasing your prices, it’s important to communicate this effectively and sensitively.

How to communicate SaaS companies price increase

Generally, people respond better to a phone call or an in-person visit (where possible) than to an email. Emails are less personal and feel less genuine than actually hearing a person’s voice. Of course, this isn’t always possible, especially if you have hundreds or thousands of customers to notify. In this case, research suggests that there are two effective ways to communicate a price increase:

1) Answer the question before they even ask it while reminding customers the value of your service. If you’ve had to increase your price due to adding new features or functionalities, it’s a good idea to include this reasoning behind it and demonstrating your value.

2) Reward their loyalty and make sure they know they’re getting a better deal for being loyal. While new customers have to pay 20% more, current customers will be paying 10% more.

5 Tips to communicate SaaS price increase

• The most important tip is to give your customers a choice. They can choose to go elsewhere, or you could offer existing customers an alternative solution with reduced features for a lower price or for their current price. There are several ways to go about this, no one answer is right.
• Tell your clients as early as possible. If you’re sending correspondence about a price increase happening in July and it’s May, that’s not giving the customer enough time to get used to the idea. Businesses can only attach a reasonable deadline date for any decision the customer must make, and send a reminder closer to the time that the date is coming up.
• Be direct and clear with your communication. Rather than beating around the bush of the awkward topic of a price increase, try using language that tells it straight – “We’re increasing our pricing because of XXX to XXX.”
• No matter how clear you are, there will be customers that have questions. The last thing you want is confused clients, so you could leave a call to action that offers support or the opportunity to ask any questions about the upcoming price change. A live chat is a good idea here, although the bigger customers will probably want to speak to someone high up in the business.
• Finally, say thank you. Navigating a price increase can be tricky – it’s a big but usually necessary risk and it’s important to be gracious whether a customer chooses to stay or leave. If they do choose to leave, leave them with a positive feeling about your SaaS business with polite and understanding language that thanks them for their business. Even more importantly, make sure existing customers know that their loyalty is appreciated and because of their continued support, you can expand the business and offer them even better features and functionalities.