Raising Prices: How and When to Increase Without Losing Customers
Most companies wait too long to raise prices, then do it badly. A well-executed price increase strengthens your business with minimal customer impact. Here's how to do it right.
When to Raise Prices
If you haven't raised prices in 2+ years, you're probably overdue. Price increases should be a regular part of business management. For context on overall approach, see our complete pricing strategy guide.
Signs You Should Raise Prices
Signs to Wait
The Fear Factor
Most founders fear price increases more than customers do. The reality: customers expect prices to increase occasionally. A 5-10% annual increase is normal and expected. The fear is usually worse than the reality.
How Much to Raise
Price increase magnitude depends on how underpriced you are, market conditions, and how much value you've added. Understanding value-based pricing helps justify increases to customers.
Increase Guidelines
| Increase Size | When Appropriate | Expected Impact |
|---|---|---|
| 5-10% | Routine annual increase | Minimal churn impact |
| 15-25% | Significant value added | Some churn likely |
| 25-50% | Major underpricing correction | Moderate churn expected |
| >50% | Strategic repositioning | Significant churn likely |
Increase Strategies
All-at-Once
Single increase to target price. Simpler to communicate but bigger shock. Better for smaller increases.
Phased Increases
Multiple smaller increases over 12-24 months. Easier to absorb but prolongs communication burden.
New Customer First
New price for new customers immediately. Existing customers increase later. Tests market tolerance.
Feature Gate
Add features at higher price tier. Existing customers keep current features at current price.
Communicating Price Increases
How you communicate a price increase matters as much as the increase itself. Poor communication turns acceptable increases into customer relations disasters.
Communication Best Practices
Sample Communication Framework
"We're writing to let you know that on [date], our pricing will increase from [old price] to [new price]. This reflects the significant value we've added over the past year, including [specific improvements]. We understand this is a meaningful change, and we're offering existing customers the option to [lock in current pricing with annual commitment / choose a different tier]. Please reach out if you have questions."
Don't Apologize
Don't apologize for the increase or act like you're doing something wrong. You're running a business and providing value. Confidence in your pricing conveys confidence in your product.
Grandfathering Policies
Grandfathering keeps existing customers on old pricing. It's a loyalty reward but creates operational complexity.
Grandfathering Options
Full Grandfather
Keep existing customers on old price indefinitely.
- Maximum customer goodwill
- Creates long-term revenue drag
- Complex to manage multiple price cohorts
Time-Limited Grandfather
Old price for 6-12 months, then new price applies.
- Gives customers time to adjust
- Eventually normalizes pricing
- Clearer long-term planning
When to Grandfather
- Large increases (>30%): Grandfather helps absorb shock
- Long-term customers: Reward loyalty, especially early adopters. Consider different policies for SMB vs. enterprise accounts.
- Annual customers: Honor contract until renewal
When Not to Grandfather
- Small increases (<15%): Usually not worth the complexity
- Problem customers: Price increase is natural filtering mechanism
- Frequently: If you grandfather every increase, it becomes expected
Planning a Price Increase?
Eagle Rock CFO helps companies plan and execute successful price increases.
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