We raised our prices 15% and immediately lost three enterprise deals worth $800,000 in total pipeline.
The deals were 90% closed. Terms were agreed. Contracts were being reviewed by legal. Then we announced our price increase and everything fell apart.
The first prospect said: "We were budgeting $150K based on your pricing page. Now you're telling us it's $172K. We need to go back to procurement for re-approval, which will take another six weeks."
They chose a competitor who could close immediately at their original budget.
The second prospect said: "This feels like a bait-and-switch. We've been evaluating you for four months at the old pricing. Now we're supposed to pay 15% more?"
They walked.
The third prospect said: "Can you honor the old pricing since we've been in conversations for three months?"
We said no, trying to hold the line on new pricing. They said they'd revisit in Q2 when they had budget for the new price. They never came back.
We'd raised prices to improve margins and instead we'd destroyed our pipeline and damaged our brand with prospects who felt like we'd changed the rules mid-negotiation.
Then we overcorrected. We froze pricing for two years to avoid disrupting deals and watched our margins erode 12% as our costs increased but our pricing stayed flat.
I spent the next three years learning that pricing changes aren't a one-time decision—they're an ongoing capability that requires strategy, communication, and operational discipline.
Why SaaS Companies Wait Too Long to Raise Prices
Most SaaS companies under-price early and then freeze their pricing for years because they're terrified of customer backlash.
We launched at $49/month in 2019 because we were competing with established players and needed to be "the cheaper alternative." By 2022, we'd added 3x the features, our costs had increased 40%, and competitors had raised their prices to $89-$129/month.
But we were still at $49/month because we were scared of three things:
Fear 1: Existing customers will churn
We had 2,000 paying customers at $49/month. If we raised prices to $79/month, would they revolt? We'd built our business on "affordable pricing for small teams" and now we wanted to raise prices 61%.
The CFO ran the numbers: if 30% churned, we'd lose $29K MRR. If 70% stayed, we'd gain $42K MRR. Net positive, but a huge risk.
We didn't have data on price elasticity. We didn't know if customers were paying $49 because that was the right price or because it was cheap. We were paralyzed by uncertainty.
Fear 2: New customer acquisition will crater
Our pricing page drove 40% of our trial signups. If we changed it from $49 to $79, would conversion drop 50%? Would we destroy our pipeline?
We didn't have the confidence to test it because we couldn't afford to be wrong. If conversion dropped more than projected, we'd miss our quarterly goals and the board would ask why we'd made an unnecessary pricing change.
Fear 3: Competitors will use it against us
We were the low-cost option in the market. If we raised prices, competitors would position us as "no longer affordable" and steal our differentiation.
We'd spent three years building a brand around "powerful features at SMB pricing." A price increase would require repositioning, and we didn't have the bandwidth or budget to rebrand.
So we did nothing. We kept $49/month pricing for four years while our costs increased and our competitors raised prices. We optimized for short-term stability and sacrificed long-term margins.
The Price Increase That Actually Worked
After four years of frozen pricing, we finally raised prices. Not because we wanted to, but because we had to—our gross margins had dropped to 62% and our board demanded we get back above 70%.
Here's what actually worked:
Grandfathering existing customers (with a deadline)
Instead of raising prices on everyone immediately, we grandfathered existing customers for 12 months.
The communication: "We're raising our prices to $79/month starting next week for all new customers. As a thank you for being an existing customer, you'll keep your current $49/month pricing through December 2024. After that, your price will increase to $79/month."
This did three things:
First, it eliminated immediate churn. Customers had a full year to decide if the product was worth $79/month. Most discovered they were getting way more than $49/month in value by the time the increase hit.
Second, it created urgency for expansion. Customers who were thinking about upgrading or adding seats did it immediately to lock in the old pricing before the increase.
Third, it gave us time to improve the product to justify the price increase. We shipped features specifically designed to make the $79 price feel like a bargain.
The result: when prices increased after 12 months, churn was only 8%. We'd built enough value in that year that most customers accepted the increase.
Segmented price increases based on customer value
Not all customers got the same price increase. We segmented based on their usage and value:
Power users (top 20% by usage): Price increase to $99/month
Standard users (middle 60%): Price increase to $79/month
Light users (bottom 20%): Price increase to $59/month
We'd been charging everyone $49 regardless of usage. Power users were using 10x the resources of light users but paying the same price.
The segmented increase was based on actual value delivered. Power users were getting massive value, so we charged them more. Light users got a modest increase because we didn't want to lose them over $10/month.
The surprise: power users didn't complain about the $99 price. Many of them told us they'd have paid even more. We'd been leaving money on the table by under-pricing our best customers.
Packaging the increase with new features
We didn't just raise prices—we launched new capabilities simultaneously and positioned the price increase as a "new pricing for our enhanced platform."
The announcement: "We've added AI-powered analytics, advanced integrations, and enterprise-grade security. To support continued innovation, we're updating our pricing to $79/month starting next month."
Customers saw the price increase in the context of new value, not as an arbitrary price hike. They were getting more features, so paying more felt justified.
The critical detail: we'd actually planned these features for six months. We just held the launch until we were ready to raise prices so we could bundle them together narratively.
When to Raise Prices (And When Not To)
I've learned that timing a price increase is as important as the increase itself. Raise prices at the wrong time and you'll destroy deals and damage trust. Raise them at the right time and customers will accept the change.
The right time to raise prices:
After a major product release
If you've shipped significant new capabilities that change the product's value proposition, that's the time to raise prices. Customers understand that new value justifies new pricing.
We waited to raise prices until we'd shipped our v2 platform with AI features. The price increase felt like "paying for the new platform" instead of "paying more for the same product."
When competitors have raised prices
If your competitors have increased prices and you're now the low-cost option by a wide margin, you have room to raise prices without losing competitive positioning.
We tracked competitor pricing and discovered our closest competitor had raised from $79 to $109. That gave us room to go from $49 to $79 while still being cheaper than alternatives.
When you've improved your market position
If you've won major customers, gained market share, or established category leadership, you can raise prices based on increased brand value.
We won three Fortune 500 customers in six months, which gave us credibility to raise prices and position ourselves as "enterprise-ready" instead of "SMB-focused."
When your costs have increased significantly
If your cost to serve customers has increased due to infrastructure, support, or regulatory requirements, you need to raise prices to maintain margins.
Our infrastructure costs increased 35% due to growth, and our support team doubled. We couldn't absorb those costs at old pricing—we had to pass some of it to customers.
The wrong time to raise prices:
During an economic downturn
Raising prices when your customers are cutting budgets will accelerate churn. We delayed a planned price increase during COVID because customers were struggling financially.
Right after a major outage or product failure
If you've just had a service disruption or shipped a broken release, raising prices will feel tone-deaf. Fix the problems first, then raise prices.
In the middle of a major sales cycle
We learned this the hard way. Don't announce price increases when your sales team is closing end-of-quarter deals. It destroys pipeline and breaks trust with prospects.
When you're behind on product commitments
If you've promised features and haven't delivered, raising prices will make customers feel like you're charging more for unfinished work.
The Communication Strategy That Prevents Churn
The way you communicate a price increase matters as much as the increase itself. Communicate poorly and you'll trigger panic and churn. Communicate well and customers will accept or even appreciate the change.
The 90-day advance notice
We gave customers 90 days notice before prices increased. This gave them time to:
- Budget for the increase
- Evaluate whether the product was worth the new price
- Lock in old pricing if they prepaid annually
- Churn gracefully if they couldn't afford the increase
The 90-day window eliminated surprise and gave customers control over their decision.
The multi-channel communication plan
We didn't just send one email announcing the price increase. We communicated across multiple channels over the 90-day period:
Day 1: Personal email from CEO explaining why we're raising prices and what new value we're delivering
Day 30: In-app notification showing current vs. new pricing and offering option to prepay for a year at old pricing
Day 60: Account manager outreach to high-value customers offering custom pricing or enterprise packages
Day 75: Reminder email with FAQ addressing common objections
Day 90: Final reminder before price increase takes effect
Multi-channel communication ensured every customer saw the message and had time to make decisions.
The "lock in old pricing" option
We offered customers the ability to prepay for annual plans at the old pricing, which would extend their old price for 12 months.
"Prepay for a year at $49/month ($588 total) and lock in this pricing through 2025. Or, switch to monthly billing at $79/month starting next quarter."
About 30% of customers chose to prepay, which gave us a huge cash infusion and locked in retention for a year. Those customers had skin in the game and were unlikely to churn.
The remaining 70% accepted the price increase without prepayment, and only 8% churned.
How to Handle the Customers Who Threaten to Churn
No matter how well you communicate a price increase, some customers will threaten to churn over it. Here's how we handled these conversations:
Segment by customer value before responding
Not all "I'm going to churn" threats deserve the same response. We segmented customers into three tiers:
Tier 1: High-value strategic customers (top 10% by revenue or strategic value)
Response: Personalized outreach from account manager or executive offering custom pricing, contract extensions, or additional services to justify the increase.
One enterprise customer paying $12K/year threatened to churn over a $2K increase. Our VP of Sales called them, learned their real issue was budget timing, and restructured the increase to phase in over 6 months. They stayed.
Tier 2: Solid customers (middle 70%)
Response: Empathetic but firm communication emphasizing new value and offering options (prepay at old price, downgrade to lower tier, pause instead of cancel).
We created scripts for support to use: "I understand the price increase is challenging. Here are your options: prepay for a year at the old price, downgrade to our Basic plan at $39/month, or pause your account for 3 months and restart later."
Most customers chose one of these options instead of churning completely.
Tier 3: Low-value customers (bottom 20%)
Response: Let them churn. These customers were already marginal from a profitability perspective.
We didn't chase low-value customers who threatened to churn. We thanked them for being customers and made offboarding easy. Some came back later when they realized alternatives were more expensive.
The churn reason that matters vs. the one that doesn't
Customer: "I'm churning because you raised prices."
Translation: "I was already thinking about churning and the price increase gave me an excuse."
We learned that customers who churned immediately after a price increase were usually customers who were already at risk. The price increase was the trigger, not the cause.
High-engagement customers who were getting value didn't churn over a 15-20% price increase. Low-engagement customers who weren't getting value used the price increase as a reason to leave.
This insight changed how we handled price increase churn. Instead of trying to save every customer with discounts, we focused on identifying at-risk customers before the price increase and either improving their engagement or letting them churn gracefully.
The Price Decrease Nobody Talks About
Every article about pricing strategy talks about raising prices. Nobody talks about lowering prices, but sometimes it's the right move.
We launched an enterprise tier at $299/month assuming enterprise customers would pay premium pricing for premium features. After six months, we'd sold exactly three enterprise plans.
The problem: we'd priced enterprise based on our costs and desired margins, not on market willingness to pay. Enterprise customers saw our product as a "nice to have" not a "must have," and $299/month put us in competition with mission-critical tools.
We lowered the enterprise price to $199/month and positioned it differently. Instead of "premium tier with advanced features," we positioned it as "team tier with unlimited seats."
Sales of the enterprise tier increased 400% in the next quarter. We'd been pricing ourselves out of the market by overvaluing features customers didn't care about.
The lesson: raising prices gets all the attention, but lowering prices in the right context can unlock growth. Don't be so committed to your pricing that you ignore market feedback telling you it's wrong.
The Truth About Dynamic Pricing in SaaS
Most SaaS companies treat pricing as a set-it-and-forget-it decision. They pick a price at launch and change it once every 3-5 years when they're forced to by margin pressure or board demands.
This is a mistake. Pricing should evolve continuously as your product, market position, and customer value change.
The companies that win at pricing treat it as a capability, not a decision. They build infrastructure to test pricing changes, communication playbooks to roll out increases without destroying trust, and data systems to understand price elasticity by segment.
They raise prices regularly (every 12-24 months) by small amounts (10-20%) instead of waiting years and making massive changes that shock customers.
They grandfather existing customers selectively based on strategic value instead of applying one-size-fits-all policies.
They segment pricing by customer value and usage instead of charging everyone the same price regardless of value delivered.
Most importantly, they're not afraid to change prices when market conditions or product value shifts. Freezing pricing for years to avoid customer backlash is optimizing for short-term comfort at the expense of long-term margins.
Pricing is never perfect. Markets change, competitors move, products evolve, and customer willingness to pay shifts. Your pricing should change with it.
The goal isn't to find the "right" price and lock it in forever. The goal is to build the capability to change prices strategically, communicate changes effectively, and manage the transition without destroying trust or revenue.
That's not a pricing decision. That's a pricing capability. And it's the difference between companies that extract fair value for the solutions they deliver and companies that leave millions on the table because they're afraid to change.