SaaS Price Increase Playbook: How to Raise Prices Without Losing Customers

0:00All right, thanks everyone. I know I'm standing between you and lunch, so I'm going to make you some money in the next 10 minutes, hopefully. Not because I'm a greedy capitalist, but uh I assume you want to keep paying your employees, serving your customers, many of the reasons that Jason mentioned yesterday. So, not here to convince you to increase prices, but to talk to you about how to do so, make sure you do it smoothly. We're going to go through the nuts and bolts of it. So, uh once again,

0:30my name is Alex Pham. Um I spent most of my career in software companies uh on the sales, marketing, and operations side. And I have a former life as a VC and growth equity investor, which just means I spent a lot more time in spreadsheets than I care to admit. Um so, uh before Oh, excuse me. There's

0:50some money. Before we get into the talk, uh very on brand, let's do some math. Um let's assume you've got 4 million 4 million in ARR. Across the board, you increase pricing 10%, right? Uh and of course, some customers will churn. Let's assume 5% of your logos leave you. At the end of the day, that's 200k, you've increased your ARR, and a five times revenue multiple, you've created

1:17about a million in enterprise value. So, seems pretty easy. We'll get into the the playbook. It's it's not as complicated as you might think. But why do we avoid price increases? Well, it feels greedy, right? Like you're just ringing a buck out of your customer. Um it might be personal. You might know a lot of your earlier customers by by

1:42name. So, you just say, "Well, we'll handle that later uh when we're bigger and when it's, you know, justifiable." Well, OpenView did a study and found that 98% of SaaS pricing changes uh actually end up being positive or neutral to your revenue growth. So, I just want you all to think about that and um quick side note, personal story, a little bit embarrassing. Um as a teenager, I was really into old school hip hop and rap so much so that I ate dozens of eggs and taped the egg cartons up in one of my parents' shower stalls thinking it would make the acoustics better and proceed to try and record my own rap

2:27album. Um needless to say, I didn't sell a single copy. Uh but I did come across a group called Wu-Tang Clan. So, I made a framework for pricing increases called CREAM. Uh we'll get into each of these individually. Yeah, thank you. All right. So, the first one, choose a lever. This is what do you what are you going to change? How are you going to change it, right? Um three

2:53different categories I'd I'd lump into. The first is just change the number, right? Raise it from 49 a seat to 59. Pretty pretty simple, pretty vanilla. Number two, restructure your packaging. So, maybe you shift some features from one tier to another. You might create a new tier. You might start gating some features that were once free. Uh and then the third one, change the value metric. So, you might be on a per seat pricing today and you shift to usage-based pricing. Um we've been talking about outcome-based pricing I think yesterday. That's an example uh of

3:31that. This is definitely the most structurally um significant of a change, I would say. Uh so, you need to think about how you're going to message your your value prop if that changes at all to your customers. There's also a lot of back-end changes that will need to happen uh in terms of how you're billing customers. All right. Uh a little bit more to consider. Of course, the numbers. Make sure you understand how you stack up against your competitors, right? Where across your

4:02competitive landscape is your pricing? And then think about the feature set. Does it justify an increase in your price? And then these three below, happy to talk about these more in detail. But this is just again, more math. Think about how much revenue you can net from an increase. You know, of course, subtract potential churn and think about scenarios where

4:24your your pipeline will be impacted. Your close rates, right? That's that's going to be a little bit harder. It's going to make your sales team's job a little bit harder. All right. So, you've talked about we thought about what we're going to change and by how much. So, who's going to get the pricing increase? Right? And I'm not here to be a cowboy and say just increase everyone's prices. Actually, the reverse. Let's try and mitigate your risk, right? And so, what I'm trying to say here is phase the rollout by segment. So, think about your customer base. If we were to take them and say you've got your

5:02new new customers, your prospects, right? And your your current customer base. Let's start with the least risky one first and see how it goes. So, with your prospects, I would argue they are the least risky. They have less emotional anchor to your pricing today. And you can get faster feedback on their new pricing. So, we've seen in a couple of weeks your sales team is introducing new pricing. You should be able to see whether or not this new pricing is

5:30mentioned at all, even. Then, based on that, you can proceed to roll out to your current customer base. The second group, current customers. So, this is definitely going to be the most impactful to your revenue, right? As you increase your prices, but for sure the most risky group to roll it out to. So, there's actually more ways that you can segment that customer base. A few

5:54ways to think about it. Uh can you segment by cohort? You know, the the oldest ones versus your newer customers. Um how much revenue each customer represents to your company, right? A customer who is 15% of your revenue, different conversation and perhaps you might want to uh push back their price increase to a later date to see how the roll out goes

6:15with the smaller customers first. Um there's many ways you can slice it up, right? So, one call out here is um the more you slice it up, the more risk you reduce, but there's a lot more operational overhang, right? Think about the many variations of pricing profiles that you'll just have to maintain over the course of potentially years as you increase prices and get everyone to a

6:39level playing field. Hey, Rob Walling here. If you're watching this and thinking, "I wish I could be in the room for talks like this." You can, and you should. So much of the magic at our events happens in the hallway track. That's where you connect with two to 300 like-minded founders who are trying to solve many of the same problems you are. I hope you'll join us at our next event. Head to microconf.com/events to grab your ticket. Our next one is in Iceland in September of 2026 and then

7:07we'll be in Austin in April of 2027. All right, so you've you've thought about who's going to get it, when they're going to get it, what do you actually say to them? All right, so fact, uh starting with the first one. You want to talk about everything great that you've provided since the last price increase or since launch, right? Lead with the value you're bringing. Don't say, "Our costs have increased,

7:30therefore we need to charge you more." Then you want to say very clearly what's changing, uh what the number's changing to, when it's going to happen, who's going to get it, right? Just don't bury it. Be very clear there. Give them some time. 30 days is standard, but depending on your industry or your customer base, you might need to give them a bit more time. But again, no surprises. That's the best thing you

7:56want to you want to go for. Uh and then finally, don't apologize. Don't say sorry. Don't say unfortunately because that signals that you think the price increase is wrong. Uh so, that is the FACT framework. Let's look at it in practice. This is from Slack's 2022 price increase, which uh was the first one

8:17since they launched. You see here they talk about everything that's changed with the product. So, they're they're going with front-loading the value. F. In these two snippets, you'll see a couple of things. So, the first one, they say what the number is changing to very clearly. They say when this is going to happen. September 1st. And they announced this, I believe, in July 2022. So, they gave customers about 2 months to digest and then also to lock

8:48in old pricing if they wanted to. Right? So, here's here's what you have to do uh if you want to keep your pricing. And then nowhere in here are the words unfortunately or or sorry. All right. Now you've got the communication set up. You know what you're going to say. Uh you got to get your team ready for this roll out, right? It It doesn't end with just sending the email. So, support CS. Make sure, of course, they have talk tracks to de-escalate angry

9:18customers. Um I've never heard a customer call in and say, "Thank you for increasing my prices." So, 100% of those calls are going to be negative. It's just uh figuring out what flavor or intensity uh of negative it's going to be and and making sure that you uh validate, you know, their concerns. Um if that doesn't work, arm your team with what I recommend multi-pronged or multi-rung strategy to catch customers before they they churn. So, what I mean by that Say your talk tracks don't work. Before a customer you know decides to cancel, offer them some way to lock in pricing, right? And then maybe the second tier is

10:00something even more valuable. If they say that the first one, you know, it's not going to cut it for them. Pre-approve this so that your your support, your front line is empowered to use these. They don't have to go for approval on a case-by-case basis, right? The goal is to get most customers increased and and save the ones who are the most risky or the ones ones that are

10:21likeliest to to churn. Um Second group you need to to prep sales. Their job's going to get 10,000 times harder, right? You just increase prices. So, you need to share why this increase is important for your company, for them as individuals, right? They need to be bought in about what's going on and and why we're doing this. You can also give them a little bit of a a back pocket lever to accelerate their pipeline. Um We can talk about this, you know, after this discussion, but what I would warn is just being careful not to tease the price increase explicitly

10:59before it's announced publicly. Okay, marketing. So, marketing I I've seen folks basically just monitor forums, Reddit X to get a sense for what the sentiment is from your user base. You might you might find customers who are extremely loud, maybe some of your biggest ones. Those are the ones that you yourself as the founder might want to reach out and and have a discussion

11:25and and de-escalate. So, you figured out what you're going to do, who's going to get it when, and you've got the internal FAQs, you've got your team prepped. All right. You send the email. And this is what I've seen generally, there's four waves that you can expect uh either churn or people calling in. Um so, think about that when you are, you know, doing capacity planning or just prepping your teams for this incoming wave. The first is the day of the announcement, of course. Uh again, monitor your email open rates. Um if it's super quiet, maybe the emails didn't get delivered. Um but, you'll get a lot of calls in uh that day. So, just

12:06be prepared for that. Over the next couple of weeks, you'll see more customers trickle in in terms of inquiries. Uh and I would be measuring is it more we're confused about what's going on, which it has to do with how you're communicating the price increase, or we're upset and we're looking for a a

12:23release valve. Right? Things will be quiet uh until the next billing cycle hits. The people who who may not have seen the first email, they see the invoice, "Oh, crap. Prices have increased. I didn't know." So, you'll see more calls come in there and then trickle in uh over the next couple of weeks. So, that's just what to expect uh

12:44in general. One thing to call out, there will be customers who don't complain at all. They'll just use your product less and less and maybe eventually just cancel. So, try and have a way to flag that declining engagement and reach out proactively before that happens. And see if it's even pricing related. All right. So, just to recap, cream, choose a lever, reduce risk, email the customer, arm your team, and then

13:14monitor the response. Here's a couple of pitfalls I've seen. Um we don't have a ton of time to go through all of them, but the ones I want to call out specifically are uh contracts, promises. If you've, you know, made those to your customers, please don't break them. Um, if you've got a two-year contract, don't increase pricing uh, in the middle of that. This is common sense. Um, and then finally, uh, I'll challenge everyone in this room to make pricing increases not a one-time

13:43event, but something you do every year. Make it a muscle. And the reason I'll end with some math. Um, so say you started with 4 million in ARR, once again, right? 10% increase, 5% of your logos churn. So, 5% net increase every year. By year five without doing anything, right? Um, anything else, ARR is 5 million. So, apply that five times revenue multiple and you've created 5 million in

14:16enterprise value. So, put this on your calendar, is what I would challenge you. Make it just a program, a part of how your team operates, right? A 5% increase, 5 to 10% increase, uh, that's probably within your customer's annual budgeting cycle. If you don't do anything for five years and then on year five, you ratchet prices up 20 to 40%, that's going to you know, trigger a conversation, renegotiation,

14:48switching to another vendor. Uh, so just make it boring. Make it routine. Uh, if there's anything I can do to help related to to pricing, please feel free to reach out. That's my contact information right there. Uh, and good luck. [applause] I've been running MicroConf for more than a decade and the thing I hear from attendees more than anything else is I wish I'd come sooner. Not because of any single talk or tactic, but because they finally found their people. Founders who get it. Founders who are building the same way they are. At our events, it's not just about the talks. In Portland, we organized waterfall hikes, food

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