This article will probably be interesting only if you deal with SaaS.
First, what is grandfathering?
It’s when you introduce a new (higher) price for your product but let your customers who signed up before the price increase keep their prices.
It’s how I keep paying $12/month for a service that now costs $25/m. I’ve been paying them for a few years now, and my price has been grandfathered (more about it in PS.)
The article explains why this is bad for your business.
For your business to succeed, you need to continually drive growth. By charging your earlier customers a fair (new) price, you’re strengthening the financial foundation of your business and extending your ability to continue providing your service.
Increasing your prices funds your efforts to build a better product which ultimately benefits those earlier customers more than the price break you’re giving them.
The path to growth requires a balanced approach to growth that goes beyond bringing new customers on board.
So how to solve this problem without angering or losing your loyal customers?
Gradually transition these treasured customers to your current pricing by offering them a timeboxed grandfathered discount. You can let them know that you’re going to raise the price they’re paying, but you’ll give them twelve months at their current rate before that increase kicks in.
Grandfathering acts as a brake on your growth. It does tremendous damage to your relationships with your customers and makes them more likely to churn. It’s just a bad strategy for growing your business.
There’s no excuse: letting go of grandfathering leaves you with happier customers and more money in the bank.
Why Grandfathering Your Pricing is Terrible for Your Business
PS. The service I’m paying $12 per month for? Freckle. Online time tracking software. I’ve been using it for years, and I can tell you exactly what I’ve been working on 2 or 3 years ago, and for how long. It keeps you organized and disciplined, showing how much you’re doing, or how much you’re *not* doing.
