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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Introduction
For SaaS companies, product and pricing evolution is inevitable. As your business grows, you'll develop new features, target different customer segments, and refine your value proposition. Eventually, this evolution necessitates retiring older pricing plans that no longer align with your business strategy. This process, known as "sunset pricing," requires careful planning and execution to minimize customer friction while maximizing business outcomes.
According to OpenView Partners' 2023 SaaS Benchmarks report, 68% of SaaS companies update their pricing at least annually, with 42% making more frequent adjustments. Yet many executives struggle with how to gracefully phase out legacy plans without damaging customer relationships or brand reputation.
This article explores best practices for sunsetting pricing plans, with strategies that balance business needs against customer experience.
Why Sunset Pricing Becomes Necessary
Strategic Misalignment
As your business evolves, older pricing plans may become misaligned with your current strategy. Perhaps you've shifted upmarket, refined your value metrics, or significantly enhanced your product capabilities. Patrick Campbell, founder of ProfitWell, notes that "pricing is a process, not a one-time event," requiring continuous evolution alongside your product and market.
Economic Unsustainability
Legacy plans often become economically untenable. A 2022 Paddle study found that 37% of SaaS companies had at least one pricing tier that was unprofitable when accounting for all costs. When service costs increase but older plans remain at fixed prices, margins deteriorate.
Administrative Complexity
Supporting multiple grandfathered plans creates operational headaches. Each legacy plan requires maintenance in billing systems, customer support training, and documentation. This complexity increases operational costs and error rates.
Planning Your Sunset Strategy
Timeline: The 12-Month Rule
Success begins with proper timing. Most industry experts recommend a minimum 12-month runway for sunsetting enterprise plans. Kyle Poyar, Partner at OpenView, suggests: "For significant changes affecting enterprise customers, start planning at least one year ahead of full implementation."
This timeline allows for:
- Comprehensive impact analysis
- Development of migration paths
- Customer communication cycles
- Contract renewal alignment
- Sales team preparation
For SMB-focused products with shorter contract terms, 3-6 months may suffice, but longer is generally better.
Segmentation Is Critical
Not all customers on legacy plans are equal. Before executing your sunset strategy, segment affected customers by:
- Revenue impact
- Strategic importance
- Usage patterns
- Contract renewal dates
- Expansion potential
This segmentation informs personalized migration paths and helps prioritize high-touch conversations with key accounts.
Crafting Migration Paths
Value-Based Transitions
The most successful transitions focus on value rather than price. According to Tomasz Tunguz, Venture Capitalist at Redpoint Ventures, "The best pricing transitions aren't about charging more – they're about aligning price with newly created customer value."
For each customer segment, create a migration path that emphasizes:
- New capabilities they'll gain
- Problems the new plan solves better
- Long-term ROI improvements
- Implementation support during transition
Grandfather with Guardrails
For your most sensitive customers, consider selective grandfathering with clear boundaries:
- Time-limited extensions (e.g., "maintain current pricing for up to 24 additional months")
- Modest annual increases (e.g., "5% annual adjustment")
- Feature freezes (maintaining price but not adding new capabilities)
Atlassian's approach during their cloud migration provides a model: they offered extended timelines for enterprise customers while maintaining transparent communication about the inevitable transition.
Communication Strategy
Clear, Consistent, and Continuous
Successful sunset pricing requires transparent communication. Stripe's pricing change playbook emphasizes "no surprises" as the guiding principle. Their approach includes:
- Direct executive communication for top accounts
- Detailed email sequences explaining the why, what, and when
- Customer success check-ins at regular intervals
- FAQ documents addressing common concerns
- Dedicated migration support resources
Frame as Evolution, Not Extraction
The messaging around your sunset strategy should emphasize evolution rather than extraction of more revenue. HubSpot's 2018 pricing update provides an excellent example: they framed changes as responding to how customers had evolved in their usage of the platform, focusing on new capabilities and alignment with customer success metrics.
Implementation Tactics
Staggered Rollout
Rather than a "big bang" approach, consider staggering your sunset implementation:
- Pilot with a small segment to identify issues
- Roll out to less complex customers first
- Schedule enterprise transitions around renewal cycles
- Build in buffer time for unexpected challenges
Incentivize Early Adoption
Create incentives for proactive migration:
- Loyalty discounts for early adopters
- Implementation credits
- Extended onboarding support
- Feature previews or early access
Salesforce frequently employs this strategy, offering "loyalty pricing" for customers who voluntarily move from legacy editions to newer offerings.
Monitor Migration Metrics
Throughout implementation, track key metrics:
- Migration rate by segment
- Revenue impact vs. projections
- Support ticket volume related to changes
- Churn attributable to the pricing transition
- Customer satisfaction among migrated accounts
Common Pitfalls to Avoid
The Overnight Switch
The most disastrous sunset implementations happen when companies attempt to force migration without adequate notice or transition support. When LogMeIn abruptly ended their free tier in 2014, they faced severe backlash and customer exodus.
Ignoring Customer Economics
Understanding the financial impact on customers is crucial. A price increase might seem minor from your perspective but could significantly impact customer budgets or ROI calculations.
Communication Ambiguity
Vague or technical communication creates confusion and resistance. Christopher Janz of Point Nine Capital emphasizes that "clarity in communication is non-negotiable during pricing changes. Ambiguity breeds suspicion."
Case Study: Zendesk's Legacy Plan Transition
In 2019, Zendesk successfully migrated thousands of customers from legacy plans to their new "Suite" offering. Key elements of their approach included:
- Value-first messaging emphasizing consolidated tools and simplified administration
- Personalized transition paths based on current usage patterns
- Customer success involvement with high-touch migration support
- Phased implementation aligned with renewal cycles
- Clear timelines communicated well in advance
The result was a 93% retention rate through the transition and a significant increase in average contract value.
Conclusion
Sunset pricing, when executed thoughtfully, allows SaaS companies to evolve their business models while maintaining customer trust. The most successful transitions balance business imperatives with customer experience through careful planning, clear communication, and flexible implementation.
Remember that pricing changes reveal the true strength of your customer relationships. If your product delivers exceptional value and your communication demonstrates respect for customers' business needs, most will accept reasonable changes and continue their journey with you.
For executives managing pricing transitions, the keys to success lie in transparency, adequate lead time, and focusing on the value exchange rather than extraction. By following these principles, you can retire legacy pricing plans while strengthening—not weakening—your customer relationships.