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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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Below is how our book, Price to Scale, suggests handling customers who threaten to cancel due to price increases:
Directly Acknowledge Their Concerns
Instead of taking a confrontational stance, start by acknowledging the customer's perspective. Understanding their worry about cost versus value is critical.Segment Your Customer Base
As discussed in Price to Scale (see page 245), not all customers are the same. Identify which customers are most price sensitive—for instance, those who received deep discounts, are heavy users, or have negotiated special terms. This segmentation allows you to tailor your approach rather than apply a one-size-fits-all solution.Offer Proactive, Tailored Alternatives
Our book emphasizes creative and proactive measures. Instead of offering a unilateral concession simply to appease a frustrated customer, consider:
- Providing an upgrade that offers more value for the increased cost.
- Offering a discount in exchange for a longer-term commitment or contract extension.
- Designing a new pricing line-up that differentiates from previous tiers, thus avoiding direct one-to-one comparisons.
Improve Communication
As highlighted on page 287 and 285, clear communication is key. Explain the rationale behind the price adjustment, emphasizing the continued value and any enhancements made to the product or service. This helps reassure customers that the increase is accompanied by improvements or additional benefits.Use a Data-Driven Approach
By combining metrics into a churn propensity score, as mentioned on page 287, you can identify high-risk customers early on. This allows you to target them with personalized offers before they decide to churn. The goal is to maintain customer retention with a move that safeguards overall satisfaction.
In summary, when customers threaten cancellation due to price increases, focus on segmenting your customer base, offering tailored value-add alternatives (like upgrades or conditional discounts), and maintaining clear, proactive communication. This approach not only addresses the immediate threat of churn but also reinforces a customer-centric pricing strategy as described in our pricing strategy book, Price to Scale.