The Pricing Dilemma
Every subscription business faces this question: "Can we raise prices without losing customers?" The answer is almost always "yes" - but only if you do it right.
The Cost of Underpricing
- • Leaves money on the table
- • Attracts price-sensitive customers
- • Limits your ability to invest in product
- • Makes CAC payback slower
The Risk of Overpricing
- • Increases churn rate
- • Damages customer relationships
- • Limits market size
- • Creates competitor opportunities
The key is understanding your customers' price elasticity and modeling the impact before making changes. That's where data-driven pricing comes in.
Model Your Price Change Impact
Before implementing any price change, model the revenue and churn impact. Try different scenarios below to understand how price changes affect your business.
Before Price Change
After Price Change
The price increase generates $7,200 more revenue, but higher churn costs you $600. Net benefit: +$6,600 annually.
When Should You Raise Prices?
Not every business should raise prices every year. But if you're in one of these situations, a price increase might be the right move.
Strong Signals to Increase
- ✓Churn rate below 3% consistently
- ✓Net Promoter Score above 50
- ✓Product usage increasing quarter over quarter
- ✓Competitors have raised prices successfully
Warning Signs to Wait
- ✗Churn rate above 7%
- ✗Recent competitor price decreases
- ✗Economic downturn affecting your market
- ✗Product satisfaction scores below 8/10
How Much Should You Raise Prices?
The "right" price increase depends on your business stage, market position, and customer economics. Here's a framework for deciding:
Early Stage (0-100 customers)
Focus on finding product-market fit, not maximizing revenue. Small, frequent adjustments.
Growth Stage (100-1,000 customers)
Balance growth and profitability. Larger increases are possible with strong retention.
Mature Stage (1,000+ customers)
Optimize for unit economics. Regular, smaller increases compound over time.
How to Implement Price Changes Successfully
1. Plan Your Communication
Don't just send a price increase email. Explain the value you're delivering.
Good Example:
"Over the past year, we've added 15 new features, improved response time by 40%, and expanded our support team. To continue delivering this level of service, we're adjusting our pricing from $49 to $59/month."
2. Segment Your Customers
Not all customers should pay the same price. Use data to segment and price accordingly.
3. Time It Right
The best time to raise prices is when you have momentum and can communicate value.
- • After major feature releases
- • During renewal periods
- • When competitors increase prices
- • During high-demand periods
- • During economic uncertainty
- • Right after a service outage
- • When competitors cut prices
- • During holiday shopping seasons
Common Price Change Scenarios
Scenario: Annual Price Increase
Your standard annual adjustment. Model the churn impact carefully.
Scenario: Feature-Based Increase
Adding valuable features justifies a price increase.
Scenario: Market Adjustment
When competitors raise prices, you can too.
Scenario: Tier Introduction
Add tiers instead of blanket price increases.
Model Your Price Change Strategy
Don't guess at price changes. Use our price impact calculator to understand the revenue and churn effects before implementing any pricing strategy.