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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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Based on the insights from our SaaS pricing book, Price to Scale, here are some key points on managing price increases in enterprise agreements and long-term contracts:
• Enterprise deals often come with significant discounting. In many cases, enterprise-level contracts are locked in at levels that can include discounting as much as 80% compared to list prices (as noted on page 83). This means that any planned price increases need to be carefully balanced against the initial pricing concessions made.
• Instead of a blanket “price increase upon every renewal,” a more strategic approach is to segment and tailor your negotiations. For example, rather than trying to increase prices frequently, you might:
- Offer a better value proposition (like an upgrade or new feature set) that justifies a higher price.
- Introduce a new pricing package that distinguishes itself from the original deal rather than simply applying a higher rate to the old terms. This minimizes direct comparisons with past pricing (see page 245).
- Use milestone or performance-based pricing adjustments that reflect the evolving value the customer receives.
• For long-term contracts, many large customers do push to lock in prices over multiple years. In these situations, it’s important to build in mechanisms for scheduled price reviews or adjustments. Rather than trying to increase prices significantly at each renewal, focus on a contractual structure that may allow for modest, incremental increases tied to factors like increased usage or additional value delivered over time (as discussed on page 177).
In summary, while quarterly or annual renewals might allow for more frequent adjustments, enterprise agreements that extend over multiple years generally warrant a more nuanced, value-based approach to price changes. This involves designing contracts that include either upgrade options or scheduled reviews so that adjustments are predictable and clearly tied to additional value, rather than abrupt price hikes.