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Estd 4.22.2023
Below is a concise summary based on our saas pricing book, Price to Scale:
• Direct Answer:
When dealing with custom contracts during across-the-board price increases, the key approach is to treat these accounts as a unique segment with tailored migration strategies instead of a one-size-fits-all pricing update.
• Supporting Book Content:
Our book suggests that if a pricing change is driven by a decision to move to graded, standardized packages, custom contracts often require a separate, dedicated project. As highlighted in Price to Scale, you might need to:
– Map customers on custom contracts to the new pricing tiers, potentially offering alternative incentives such as higher discounts or deferred payments to encourage migration.
– Consider creating a different list price for new packages for existing custom contract customers, while making sure you have policies (e.g., no-downgrade clauses) that prevent showing a lower list price than what they currently pay.
– Clearly communicate any changes and include explicit language in updated contracts about usage and overage pricing to avoid stretching future negotiations.
• Contextual and Practical Details:
Since custom contracts are often negotiated based on previous bespoke terms and usage expectations, it’s important to:
– Treat the price adjustments for these customers as a separate initiative rather than bundling them into the initial price rollout.
– Collaborate closely with finance and sales teams to ensure consistency in value representation while remaining sensitive to your customer history and relationship.
– Leverage the migration opportunity to analyze usage patterns and, where possible, nudge customers into higher value tiers through structured incentives.
• Summary Takeaway:
Custom contracts need a tailored approach when increasing prices across the board. By mapping customers to new pricing tiers, offering appropriate incentives, and clearly revising contractual language, you can better manage the transition and maintain strong customer relationships while achieving revenue optimization.
This strategy, as discussed throughout Price to Scale, ensures that you balance the need for increased Average Selling Prices (ASPs) with ongoing customer satisfaction and retention.