Communicate value, not price
If there is one concept that is foundational to pricing strategy, it is this. What matters is the value people will get in exchange for the price, not the price itself.
Sure, people will want to know the new pricing and structure. But the question they really want answered is, “What will I get in return?”
This is why communication is the important part of a price raise. Anyone can raise prices, but raising prices and customer satisfaction requires a strong understanding of your customers' valued features and willingness to pay, which you get from your research above. A strong communication plan that frames the price increase in these terms.
Get it wrong and customers will churn, acquisition will fall, and you'll lose money. Get it right, though, and customers will 100% understand that they are still getting great value with your product. The value is the important part. Yes, they will want to know the new pricing and you have to be upfront about that, but you have to be clear about the extra value that you are providing as well. Your communication plan needs three fundamental components to succeed:
1. It needs to be to the point.
Don't waffle on about your achievements so far. Get to the point, and that point is value. You should decide with your team the core value proposition that best aligns with your new pricing. This should then be front and center of your email to current customers, your blog post announcing the change, and in the brains of your customer success team when they start to be asked questions.
2. It needs to include specific plans for current customers.
Maybe you aren't increasing prices for current customers. In that case, price increases won't bother them too much. But if you are going to be changing up on your customers, then you need to decide how it will impact them. You have three options:
- If the increases are small, as they should be if you are constantly iterating and want to keep satisfaction high, then you can simply include them in the change. Some will churn, but if value = price, most will stay.
- If it's a big change, then you can grandfather them into their current rate. This means that their price is set to what was initially promised, no matter what increases you implement in the future. This can work for a handful of customers, but defeats the purpose if it goes beyond that.
- Your best bet for keeping customers and satisfaction high is a grandfather discount. This ties them into their current rate for a predetermined time period, say the next year. When the year is up, their pricing increases in line with all other customers. This is also a great way to tie customers into long-term, annual plans. Say that they can “lock in” their current price for the next year if they upgrade before the price increase goes into effect.
3. It needs to ask for feedback.
This is vital. Part of the reason for a price change is to align value and price for everyone. You will get feedback from your select customers during testing, but you'll get a better understanding from all your customers if you open up communication channels with them during price changes. This is one of the things founders hate about price changes, but it is the only way you get better.
Not everyone is going to get it. You will lose customers in the short term. But in the long-term, by showing customers the value they get for the price, the pricing can be anything as long as it truly represents that value.