Your costs have increased. Your product has improved significantly. Your pricing hasn't changed in three years.
You need to raise prices, but you're terrified of losing customers.
This fear keeps most companies underpriced for years. They watch margins shrink, they delay investing in the product, and they subsidize old customers while new customers pay higher rates.
Eventually, the price increase becomes unavoidable—and by then, it needs to be so large that it creates real churn risk.
Better approach: raise prices proactively, communicate them well, and lose fewer customers than you fear.
Here's how to execute price increases without destroying your business.
When to Raise Prices (And When to Wait)
Not all moments are equally good for price increases.
Good times to raise prices:
You've added significant value since last pricing
- Shipped major features customers have requested
- Improved product performance meaningfully
- Added integrations or capabilities that expand use cases
Customers accept price increases when they see the product getting better.
Your costs have increased structurally
- Infrastructure costs rose due to cloud provider increases
- Support costs increased due to customer growth
- Payroll increased due to market competition for talent
Inflation-driven increases are reasonable; customers understand this.
You've been underpriced for years
- Competitors charge 30-50% more for similar capabilities
- Customer ROI is 10x+ your price (you're capturing tiny % of value)
- New customers accept higher pricing without objection
You have pricing power you're not using.
Bad times to raise prices:
You haven't shipped meaningful improvements Raising prices on a stagnant product feels like a cash grab.
You've had reliability or quality issues Don't ask for more money when customers are frustrated with current service.
Economic downturn Customers are cutting budgets. Price increases now accelerate churn.
Major competitive pressure If competitors are lowering prices or aggressive new entrants are attacking, price increases hand them easy wins.
How Much to Increase (Without Triggering Mass Churn)
The size of increase matters as much as the communication.
General guidelines:
- 5-10% increase: Low churn risk, acceptable as inflation/improvement adjustment
- 10-20% increase: Moderate risk, requires strong value communication
- 20-30% increase: High risk, should only happen with major product changes
- 30%+ increase: Extreme risk, typically results in significant churn unless grandfathering old customers
Segmented increase strategy:
Don't raise prices uniformly across all customers. Segment:
New customers: Can handle larger increases (no expectations to manage)
- Apply full intended price increase
- Grandfather existing customers at old pricing (or smaller increase)
High-value existing customers: Small increases, maintain relationship
- Customers with large contracts or expansion potential
- 5-10% increase maximum
- Emphasize relationship and value delivered
Low-engagement existing customers: Larger increases acceptable
- Customers who don't use product extensively
- More likely to churn anyway
- If they accept increase, great. If they churn, it's okay.
Price-sensitive segments: Consider holding pricing flat
- Startups, nonprofits, education
- These aren't your margin drivers anyway
This segmentation minimizes revenue impact from churn while capturing most of the increase value.
The Communication Timeline: When to Tell Customers
Surprise price increases create churn. Predictable, well-communicated increases don't.
Recommended timeline:
90 days before increase (for annual contracts):
Send initial notification:
- Price will increase on [specific date]
- Current customers grandfathered at existing pricing through current contract term
- New pricing applies at renewal
This gives customers:
- Time to evaluate if they want to continue
- Opportunity to lock in old pricing with multi-year extension
- No surprises when renewal conversation happens
60 days before increase (for monthly customers):
Send notification:
- Price will increase in 60 days
- Current customers can lock in old pricing by switching to annual plan before deadline
- Monthly customers will see increase on [specific date]
Creates incentive to convert to annual (better for your cash flow).
30 days before increase:
Send reminder:
- Price increase happening in 30 days
- Reiterate options to lock in old pricing
- Remind of value delivered and product improvements
Day of increase:
Send acknowledgment:
- Pricing change is now in effect
- Thank customers for continued partnership
- Highlight what they can expect going forward
Common mistake: Too little notice
Telling customers 30 days before annual renewal that prices are increasing creates negative surprise and limits their options. 90 days is minimum for annual contracts.
The Message: How to Frame Price Increases
The way you communicate price increases matters more than the amount.
Bad price increase message:
"Due to rising costs, we're increasing prices 15% effective next month."
This focuses on your problems, not customer value.
Good price increase message:
"Over the past year, we've shipped [specific improvements your customers use]. We've also significantly expanded our support team and infrastructure to ensure reliability.
To continue investing in the product and support you've come to rely on, we're adjusting pricing to $[new price] per month, a 15% increase from current pricing.
As a valued existing customer, your current rate of $[old price] is locked in through [date]. After that, pricing will adjust to $[new price].
If you'd like to lock in current pricing for another year, you can extend your contract before [deadline]. We're happy to discuss multi-year agreements as well."
Why this works:
- Leads with value delivered (product improvements)
- Explains why increase is happening (reinvestment)
- Grandfathers existing customers through current term
- Offers option to extend at old pricing
- Maintains relationship tone
Grandfathering Strategies: Who Gets Old Pricing?
You don't need to raise prices on everyone simultaneously.
Option 1: Full grandfathering
Existing customers keep old pricing indefinitely. Only new customers pay new prices.
Pros:
- Minimal churn risk from existing customers
- Maintains goodwill with current base
Cons:
- Pricing disparity grows over time
- Revenue impact of increase is delayed (only affects new customers)
When to use: When customer retention is critical and churn would be very expensive.
Option 2: Limited grandfathering
Existing customers keep old pricing for 12-24 months, then transition to new pricing.
Pros:
- Gives customers time to adjust
- Eventually normalizes pricing across base
Cons:
- Defers some churn to later date
- Requires second communication when grandfathering ends
When to use: When you need to avoid immediate churn but want pricing consistency long-term.
Option 3: No grandfathering
Everyone moves to new pricing at renewal.
Pros:
- Immediate full revenue impact
- Pricing consistency across all customers
Cons:
- Higher immediate churn risk
- Can damage customer relationships if not communicated well
When to use: When increase is small (<10%) or when product improvements clearly justify higher pricing.
Handling Customer Pushback
Some customers will object. Here's how to respond.
Objection: "We can't afford this increase"
Response:
"I understand budget concerns. Let me ask—is the product delivering the value we discussed when you first bought it? [Listen]
If value is there, let's talk about what budget flexibility exists. Would it help to:
- Extend your current contract for another year at existing pricing?
- Adjust to a lower tier that meets core needs at lower cost?
- Shift to annual payment to reduce monthly cost?
If budget truly isn't there, I'd rather have an honest conversation now than put you in a difficult position later."
Objection: "You haven't improved the product enough to justify this"
Response:
"I appreciate the feedback. Can you help me understand what improvements you're looking for? [Listen]
We've shipped [specific features] this year, but I hear that those aren't the ones that matter most to your team. Let me loop in our product team to understand your priorities better.
In the meantime, I can grandfather your current pricing through [date] to give us time to make sure we're investing in what you need."
Objection: "Competitor X is cheaper and we're considering switching"
Response:
"That's fair. Before you make that switch, let's make sure we're comparing apples to apples. What pricing did they quote, and for what capabilities?
[Review competitive differences]
If [Competitor] is truly a better fit, I get it. But if the difference is mostly price, let's talk about whether there's a middle ground. We've been working together for [time period], and I'd hate to see you go through migration pain just over pricing."
Measuring Price Increase Impact
Track these metrics to know if your price increase strategy worked:
Churn rate during increase period vs. baseline churn
- Expect some lift, but should be <5% higher than normal churn
- If churn spikes 15-20%+, increase was too aggressive or communicated poorly
Revenue retention despite churn
- Lost revenue from churned customers vs. gained revenue from increase
- Price increase should net positive even with churn
Conversion to annual plans (if you offered this option)
- How many monthly customers converted to annual to lock in old pricing?
- This improves cash flow and reduces future churn risk
Multi-year extensions from existing customers
- Did any customers extend at old pricing to avoid increase?
- These are high-value retention wins
Downgrade rate to lower tiers
- Some customers stay but downgrade to lower tier instead of churning
- This is partial success (retained customer, reduced revenue)
The Real Goal
Price increases don't have to destroy customer relationships.
Communicate early. Provide options. Emphasize value. Handle objections with empathy.
Most customers will accept reasonable price increases on products they value. The ones who churn were likely marginal customers anyway.
Raise prices to support sustainable growth. Your best customers will understand.