Ways to Announce Price Increases to SaaS Customers Without Losing Them

December 15, 2022

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From time to time, every company needs to increase its prices to stay profitable. Whether this is from a sudden increase in spending or just a natural market increase, informing your customers of the new price can be scary. And you’re likely going to lose some of your customers over it.

However, when done correctly, SaaS companies can take some of the scariness out of it and actually reduce the expected customer churn.

This article discusses how to announce price increases to SaaS customers and how to use this announcement strategically for their business.

You Owe Your Customers a Justification

This conversation is never easy to have with customers. After all, who wants to hear that the product your business relies on will cost more? However, no matter what, it’s always a great practice to give the customers a justification if a SaaS company wants to lose as less customers as possible when they increase the price of their service.

Think about it.

Let’s say you’re a fan of a certain restaurant, and one day you go in, look at the menu, and suddenly everything is double the price it used to be. How do you feel? Perhaps you feel confused. “Why is everything so much more expensive now?” Perhaps you feel betrayed. “I’ve been coming to this restaurant for years. Now I can’t afford it.” Or perhaps you feel angry. “They can’t treat me like this! I’ll start going somewhere else.”

These are all natural human emotions during these times. Change, especially sudden change with no warning, can cause people to feel all sorts of ways, and each can be difficult to predict. When you’re provided with no justification for that change, well, then your mind starts to make up its own reasons.

And one conclusion you or your customers may come to is that the restaurant (or company) no longer appreciates your business.

The goal of justifying a price increase is to reduce the stories they create in their heads about why the increase is happening and ultimately inform them that it is NOT because you don’t appreciate their business but something that has entirely nothing to do with them instead.

In the case of your favorite restaurant, it could be supply chain challenges. Perhaps they increased prices because food costs have gone way up. Maybe they want to expand so that you (and others) can enjoy their restaurant even more. There are dozens of reasons a company may increase its price.

But as Lady Gaga says, “But baby, I just need one good one to stay.”

Good Reasons to Tell Your Customers

A company can’t always be completely transparent to their customers about why they increased their prices. However, there are usually a few reasons they can provide–ones that sound diplomatic and “for the benefit” of the customers.

Service and Product Improvements

One great reason to give customers about price increases is that you’re now offering improved services or products. Letting users know they’ll get a better experience with this newer version can prevent them from leaving or getting upset over the increase.

Essentially, you’re telling them that what they’re getting is now more valuable than ever, and the price increase is probably less than the cost if they were to go somewhere else and start over.

Raised Quality Standards

The next best thing to providing service and product improvements is justifying the increase by mentioning that you are raising your quality standards.

For example, you could tell customers that the company is now using easier-to-navigate software or a better hosting platform, thus resulting in a more reliable product. Perhaps you could mention that your development team has raised their programming and design standards to ensure they deliver better user experiences and software solutions more quickly.

Everyone appreciates more efficiency and will likely understand that a company has to constantly find ways to compete if they want to stay afloat. Just make sure that it’s a genuine reason and that you can back up your claim.

Business Diversification

Another reason a company may increase prices is because it is trying to diversify its business and/or product offerings. For example, if you have recently integrated your products and software into other products and software, you may be required to pay licensing fees or some partnership agreement.

Telling your customers that the price increase could make their lives easier or make your products work better is a great way to get them to stay on your side as the increase goes into effect.

Market Changes

Sometimes, simply telling them the truth–that due to the market changes, you can no longer afford to keep your product at its current price–is the way to go. Most people understand that change happens, and markets can flip on a dime (or a quarter!). No one likes this reason. But it’s still a valid reason and a sound justification for having to raise your prices.

No matter what justification you provide, keep it simple and honest and back up any claims that you make along the way.

How to Announce Price Increases to SaaS Customers

Now that you have your justification for raising prices, how do you announce the price increase to your SaaS customers?

There are lots of ways.

1. Contact them directly

Instead of a mass announcement, contact your customers directly first. Email your customers about price increases and make sure to include information about what the increase means for them and how it will benefit them in the long

2. Offer to chat or call

You can also offer customers the opportunity to chat or call you directly with any questions they may have. This allows them to feel heard and allows them to express their concerns directly.

3. Warn them in advance

Give customers time to prepare for the price increase. Make sure to inform them in advance and give them enough time to make changes or prepare before the increase goes into effect.

4. Offer a lower-priced alternative

If you have a lower-priced version of your product or service, make sure to let customers know. This allows them to decide whether to switch to the lower-priced option or remain with the higher-priced one.

5. Don’t focus on profits

Focus on the product’s value rather than what the price increase means to your company. Customers don’t want to hear that a business will make more profits from them. They only care about what’s in it for them.

6. Make the change easy to implement

Don’t expect your customers to jump through hoops to continue using your product. The price change should be automatic and happen as if nothing has changed on the customer’s part.

7. Demonstrate the value simply

If you can, share with them the extra value they will now receive with the price increase. But do it in a way that’s simple and easy to understand. If you can share the increase in a video or piece of content, that is best.

8. Update the information on your website

Even if you email the customers directly, put the new information on your site as well. You want your message of an increase to be consistent and not cause confusion for those that visit your pricing pages.

9. Share the increase across different platforms

Besides your website, you may also want to share the price increase on your social media platforms. Again, this creates consistency in your message and provides different avenues for your customers to learn about the increase–lessening the chance of it being a surprise to them.

10. Personalize your message

When you can, it’s best to personalize your message. Use their names and make sure that your copy doesn’t sound political or like it’s trying to appeal to the masses. Something as sensitive as this should sound like it’s coming directly from you to each individual.

11. Don’t expect all of them to see or read your message

Regardless of how many emails, social messages, or direct messages you send out, there are always going to be some customers that just simply ignore or don’t see the message. You can’t expect everyone to know or understand why you’re increasing your prices. But, you should be prepared for the pushback, just in case.

Fact: There’s Always Some Negative Reaction

No matter how well a price increase event is communicated, there’ll always be some negative reactions to it. The challenge is to limit that as much as possible, not to completely remove that because that’s virtually impossible.

However, with a well-thought-out strategy in place, you can help ensure that most of your customers understand the price increase and even less feel like they’ve been tricked into it..

Examples of Good Price Increase Emails

Need some help crafting that perfect announcement email? Here are a few examples borrowed from HubSpot:

Example 1 from Spotify:

Example 2 from Hulu:

Example 3 from Disney:

Example 4 from Upwork:

Email Templates for SaaS Price Increase Announcement

And if those examples aren’t enough, here are some templates you can consider using (kalungi):

Example 1

XXX is increasing our pricing to more accurately reflect the value users get from the solution. This change will help fund some great new features coming your way, just like the additions you have seen in the past years like for example [ABC and XYZ].

This pricing change will not affect your current payment schedule; you are grandfathered into your current pricing plan. As a current XXX customer, we want to keep you informed about the change. Here are the new pricing levels:

If you’re interested in upgrading to a different tier of service, we’d be happy to honor our previous pricing tiers through Wednesday, January 31st.

If you have any questions or concerns, just reply to this email. We will get back to you asap.

Thanks

Example 2

Dear Client,

We are very pleased to count you as one of our loyal customers. We are proud to help you achieve great results for your clients. In order to ensure we can continue to provide exceptional service, we’ll be increasing the rates on all our packages effective 1 June.

Some of our packages will also be tweaked to reflect the services our clients most need.

You can see the new packages and pricing here [link]. We’ll be rolling this out to new clients from June 1, however, we wanted to give you the first month on your new package at the current rate [offer for longstanding clients] as a thank you for being such an amazing client!

This increase will enable us to continue to provide the quality and breadth of service you love. If you have any questions about the price increase or our new packages, don’t hesitate to let me know.

Yours Sincerely,

Example 3

XXX is increasing our pricing to more accurately reflect the value users get from the solution and make room for some great new features coming your way.

Want to lock in our old pricing before the change is made? You can upgrade your account we’ll honor our previous pricing tiers.

Here are the new pricing levels:

For most customers, this is a modest price increase. For a few customers, this represents an actual decrease in pricing.

No matter how this price adjustment affects you, you’ll want to act now and get the best XXX pricing possible. Just upgrade your XXX account and if the old plan is cheaper for you, we’ll adjust your recurring charge to reflect the lower price.