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your own CSS here. Click the help icon above to learn more. */ </style> </head> <body class="post-template-default single single-post postid-1868 single-format-standard custom-background custom-header header-full-width content-sidebar"><div id="wrap"><div id="header"><div class="wrap"><div id="title-area"><p id="title"><a href="https://sixteenventures.com/">Customer-centric Growth by Lincoln Murphy</a></p><p id="description">Growth-oriented Customer Success</p></div></div></div><div id="subnav"><div class="wrap"><ul id="menu-page-menu" class="menu genesis-nav-menu menu-secondary"><li id="menu-item-2604" class="menu-item menu-item-type-custom menu-item-object-custom menu-item-home menu-item-2604"><a href="http://sixteenventures.com">Customer Success Articles</a></li> <li id="menu-item-8249" class="menu-item menu-item-type-custom menu-item-object-custom menu-item-8249"><a target="_blank" href="https://www.impactdemy.com/collections?ref=58b2b0">2024 CSM and Head of CS Training</a></li> <li id="menu-item-55" class="menu-item menu-item-type-post_type menu-item-object-page menu-item-55"><a rel="author" href="https://sixteenventures.com/lincoln-murphy-strategic-consultant">Customer Success Consulting</a></li> <li id="menu-item-8433" class="menu-item menu-item-type-custom menu-item-object-custom menu-item-8433"><a target="_blank" href="https://www.impactdemy.com/pages/impact-weekly-podcast">Customer Success Podcast</a></li> <li id="menu-item-8900" class="menu-item menu-item-type-custom menu-item-object-custom menu-item-8900"><a target="_blank" href="https://www.impactdemy.com/courses/fundamentals?ref=58b2b0">Free CS Fundamentals Course</a></li> </ul></div></div><div id="inner"><div class="wrap"><div id="content-sidebar-wrap"><div id="content" class="hfeed"><div class="post-1868 post type-post status-publish format-standard hentry category-business-model category-conversion-rate-optimization-2 category-free-trials category-freemium category-marketing category-pricing-strategy tag-app-store tag-apps tag-b2b tag-b2c tag-churn tag-cloud tag-cloud-computing tag-clv tag-continuity tag-conversion-rate-optimization tag-copywriting tag-cro tag-cta tag-design tag-form tag-free-trial tag-free-trials-2 tag-freemium-2 tag-funnel tag-iphone tag-landing-page tag-marketing-2 tag-metrics tag-price-testing tag-pricing-page tag-pricing-strategy-2 tag-psychology tag-saas tag-sales tag-sales-copy tag-sales-process tag-signup tag-software-as-a-service tag-startup tag-transparent-pricing tag-value-pricing tag-web-app tag-webapp entry"><h1 class="entry-title">SaaS Pricing Model: How a 10x Price Increase lead to Happier Customers</h1> <div class="post-info"><span class="date published time" title="2012-08-22T22:49:14-05:00">August 22, 2012</span> Article by <strong><a href="https://sixteenventures.com/lincoln-murphy-strategic-consultant" target="_blank">Lincoln Murphy</a></strong> </div><div class="entry-content"><p><strong>Stormpulse adjusted their SaaS pricing model by raising their prices 10x… and getting happier customers in the process.</strong></p> <p>So I just had a Progress Check and Planning meeting with a retainer client, Matt from <a href="http://stormpulse.com/" target="_blank">Stormpulse</a>, who told me since they moved away from Freemium just 4 months ago to a Premium-only SaaS offering with a Free Trial they are now profitable and are on track to do <strong><em>$100,000</em></strong> in revenue this month!</p> <p>That is absolutely amazing for a company with just a couple of employees.<span id="more-1868"></span></p> <p>Interestingly, I was looking through some older emails after my conversation with Matt and I found this one he sent me after they had made a massive change to their pricing.</p> <p>Like many SaaS companies, Stormpulse seriously under-priced their offering… where they differ from most is that they realized they under-priced and decided to do something about it!</p> <p>Raising prices was the step before they dropped Freemium altogether and this email is super-interesting to read, especially with the additional context of where they’re at today, and it gives insights into how the founder and CEO of a SaaS company should think about Pricing Model (though earlier in the company lifecycle is ideal, but better late than never, right?)</p> <p>This is from Matt…</p> <p>=======================================<br /> “<em>Lincoln – You mentioned raising prices recently.</em></p> <p><em>Just wanted to tell you that Stormpulsehas raised its base price from $8.95/mo / $24.95 for 6 months / $49.95 per year to $499 per year with no monthly option… a 10x increase!</em></p> <p><em>We are seeing businesses renewing no questions asked at even higher prices (alt. configurations) like $690 per year or $990 per year when they paid us only $24.95 or $49.95 last year. Amazing, eh?</em></p> <p><em>That’s how much we were leaving on the table by being consumer focused instead of B2B.</em></p> <p><em>I would clarify that by saying that we were focused on a low-stakes versus high-stakes segment … i.e. for some of our buyers, Stormpulse was like Sunday NFL Ticket, nice to have and fun and entertaining, but how much is that worth versus alternatives? Can’t you find entertainment for $0.99 on your iPhone these days?</em></p> <p><em>For other buyers, Stormpulse was helping them determine when to fly and when to ground multi-million dollar aircraft, when to shut down operations at a manufacturing plant, etc. Much bigger deal with much bigger consequences if you are going to use an inferior alternative.</em></p> <p><em>This is basically restating my latest realization–there are different kinds of value: entertainment is one kind, security is another, etc. You need to know which kind you are dishing out, and price accordingly. But you know that already. 🙂</em></p> <p><em>This shift also required us killing off our personal edition. We did this by making almost all of the personal edition features free (the ones that most consumers were after) and then taking away the beloved full-screen view option, which is what businesses can’t live without.</em></p> <p><em>Sure, we’re getting some consumer backlash but we are looking forward to a much more stable business model with happier customers that have even fewer needs (support issues) than the individual consumers.</em>”</p> <p>=======================================</p> <p>Pretty interesting stuff, right?</p> <p>To me, there are a number of amazing take-aways from Matt in that email.</p> <p>1. I know that Matt and the rest of Stormpulse didn’t come to this conclusion from their own assumptions. They took a deep look at the <em><strong>VALUE</strong></em> that the big (<em><strong>MASSIVE</strong></em>) companies who were using their product derive from that use and knew that even if they raised their prices 10x, their customers would <em><strong>STILL</strong></em> derive <em><strong>AT LEAST</strong></em> <a href="http://sixteenventures.com/saas-pricing-strategy" target="_blank">another 10x value from it</a>.</p> <p>How many <em><strong>HUGE</strong></em> companies are using your product right now and paying you $8/mo?</p> <p>2. By not recognizing the value the customers are getting from their product, Stormpulse would have left <em><strong>HUGE</strong></em> amounts of money on the table and put their business in jeopardy in the process. If you aren’t in business anymore, you can’t help anyone, right?</p> <p>3. Stormpulse made a strategic decision to alienate the low-end users of their product in an effort to save – and grow – their business. Sometimes you have to <em><strong>FIRE</strong></em> your low-end customers that are too burdensome for your company to continue to support.</p> <p>4. They had to acknowledge the actual size of their company now, but also where they wanted to be in the future. Is supporting low-end customers keeping you from focusing on the big picture and moving the company forward?</p> <p>Do you want to be an organization that must support low-end users of your product or do you want to focus on larger, more profitable customers? It might be time to <em><strong>FIRE</strong></em> the low-end customers. If you doubled your prices and lost 50% of your customers, you’d be at the same revenue level with less headaches and better customers, right?</p> <p>5. Let me be clear… you will get pushback from the firing of low-end customers (in fact, they are often the loudest), but done properly it is manageable. Don’t keep from making a strategic decision that is required to take your business to the next level – or save it – because you don’t want to make some people mad.</p> <p>People will get mad anyway. So just be up front, as transparent as possible, communicate well (for example, you probably shoulnd’t state publicly that you’re firing your low-end customers), and manage expectations.</p> <p>Remember, in everything you do – including raising pricies – it is <em><strong>ALL ABOUT THE CUSTOMER</strong></em> and when you announce it, it has to be framed that way.</p> <p>Changing your SaaS pricing model is not something to do on a whim, but if you’ve done a value-based assessment of your model – with the customer at the center of that analysis – and feel you’re leaving money on the table and could still deliver 10x the value if you raised your prices, it might be time to look at doing that.</p> <p>If you’ve been in-market at least 6 months and are curious how we could Accelerate your Profitable Growth – perhaps by optimizing your Pricing Strategy – contact me and we’ll setup a time to discuss your options for improving and accelerating customer acquisition and profitability.</p> <p>– <a href="mailto:lincoln.murphy@sixteenventures.com">Lincoln<br /> </a>(972) 200-9317</p> </div><div class="author-box"><div><img alt='' src='https://secure.gravatar.com/avatar/3334de1f544b64f1d1b3383098d14892?s=80&d=mm&r=g' srcset='https://secure.gravatar.com/avatar/3334de1f544b64f1d1b3383098d14892?s=160&d=mm&r=g 2x' class='avatar avatar-80 photo' height='80' width='80' decoding='async'/> <strong>About Lincoln Murphy</strong><br /><p>I invented Customer Success. I focus primarily on Customer Engagement. <a href="https://sixteenventures.com/lincoln-murphy-strategic-consultant">Learn more about me here.</a></p> </div></div><div class="after-post widget-area"> <div id="recent-posts-3" class="widget widget_recent_entries"><div class="widget-wrap"> <h4 class="widget-title widgettitle">You should read these articles, too…</h4> <ul> <li> <a href="https://sixteenventures.com/true-cost-of-meetings">The True Cost of Meetings in Customer Success Management</a> </li> <li> <a href="https://sixteenventures.com/meetings-as-a-metric">Meetings as a Customer Success Metric: The Misguided Path</a> </li> <li> <a href="https://sixteenventures.com/no-goals-no-customer-success">No Goals, No Customer Success: Unlocking the Power of the Goal Discovery Framework</a> </li> <li> <a href="https://sixteenventures.com/revenue-roadblocks">Revenue Roadblocks: How We’re Sabotaging Our Own Growth</a> </li> <li> <a href="https://sixteenventures.com/bad-fit-vs-good-fit-customers">Good Fit vs. Bad Fit vs. Ideal Customers: The Key to Unlocking Sustainable Growth</a> </li> </ul> </div></div></div></div></div><div id="sidebar" class="sidebar widget-area"><div id="custom_html-2" class="widget_text widget widget_custom_html"><div class="widget_text widget-wrap"><div class="textwidget custom-html-widget"><div id="enews-ext-2" class="widget enews-widget"> <div class="widget-wrap"> <div class="enews"> <h4 class="widget-title widgettitle">Join the other 53,897 folks who get my emails and…</h4> <div style="text-align:left"> <ul> <li>Get the latest on <strong>ChatGPT, AI, & Prompt Engineering</strong></li> <li>Stay updated on <strong>Customer Success</strong> & <strong>RevOps</strong></li> <li>Take your <strong>Growth Strategy</strong> to the next level</li> <li>Learn about <strong>Psychology, Engagement, and More</strong>!</li> </ul> </div>  <form id="ck_subscribe_form" class="ck_subscribe_form" action="https://app.convertkit.com/landing_pages/256863/subscribe" data-remote="true"> <input type="hidden" value="{"form_style":"naked","embed_style":"inline","embed_trigger":"scroll_percentage","scroll_percentage":"70","delay_seconds":"10","display_position":"br","display_devices":"all","days_no_show":"15","converted_behavior":"show"}" id="ck_form_options"> <input type="hidden" name="id" value="256863" id="landing_page_id"> <input type="hidden" name="ck_form_recaptcha" value="" id="ck_form_recaptcha"> <div class="ck_errorArea"> <div id="ck_error_msg" style="display:none"> <p>There was an error submitting your subscription. 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https://sixteenventures.com/wp-content/uploads/2022/12/Impact-Weekly-with-New-Episodes-Text-150x150.jpg 150w, https://sixteenventures.com/wp-content/uploads/2022/12/Impact-Weekly-with-New-Episodes-Text-768x768.jpg 768w, https://sixteenventures.com/wp-content/uploads/2022/12/Impact-Weekly-with-New-Episodes-Text-1536x1536.jpg 1536w, https://sixteenventures.com/wp-content/uploads/2022/12/Impact-Weekly-with-New-Episodes-Text-2048x2048.jpg 2048w" sizes="auto, (max-width: 1024px) 100vw, 1024px" /></a></figure> </div></div> <div id="recent-posts-4" class="widget widget_recent_entries"><div class="widget-wrap"> <h4 class="widget-title widgettitle">Customer Success & Growth Articles</h4> <ul> <li> <a href="https://sixteenventures.com/true-cost-of-meetings">The True Cost of Meetings in Customer Success Management</a> </li> <li> <a href="https://sixteenventures.com/meetings-as-a-metric">Meetings as a Customer Success Metric: The Misguided Path</a> </li> <li> <a href="https://sixteenventures.com/no-goals-no-customer-success">No Goals, No Customer Success: Unlocking the Power of the Goal Discovery Framework</a> </li> <li> <a href="https://sixteenventures.com/revenue-roadblocks">Revenue Roadblocks: How We’re Sabotaging Our Own Growth</a> </li> <li> <a href="https://sixteenventures.com/bad-fit-vs-good-fit-customers">Good Fit vs. Bad Fit vs. Ideal Customers: The Key to Unlocking Sustainable Growth</a> </li> <li> <a href="https://sixteenventures.com/opt-in-vs-opt-out-trials">Opt-In vs. Opt-Out Trials: The Hidden Impact on Customer Retention and Success</a> </li> <li> <a href="https://sixteenventures.com/beyond-transactions">From Transactions to Relationships: Unleashing Customer Potential with AX</a> </li> <li> <a href="https://sixteenventures.com/renewal-psychology">Renewal Psychology: From an Adversarial Process to a Celebration of Success</a> </li> <li> <a href="https://sixteenventures.com/pods-customer-success-sales">Pods in Customer Success 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