Most startups have more than one product or pricing level. In all likelihood, yours is no different. In the early days of a startup you may consider offering your customers a lower price in exchange for their business. Some startups even offer to lock customers in to this rate (aka grandfather) for the length of their relationship.
This can be an effective method of generating early buzz and getting cash flowing when you first launch. Ultimately, as most startups grow, their product grows with them. At a certain point, you’ll want your customers to grow as well.
As your startup grows, you will learn to be more precise with your pricing and margins. Often, you’ll find that what you charged in year one, isn’t going to work in year two or three. Sometimes a change is necessary.
It isn’t always a question of getting those early customers to give up their locked-in discount. There are always hold outs who are paying full retail price, but that flatly refuse to upgrade. Even though you’re four or five versions in, they’re still using the first offering. Consider web browsers or operating systems as an example. Sometimes customers become familiar with a product and don’t see a point in taking the next step.
Truly, unless you have hundreds of customers in either of these situations, it probably isn’t causing a financial burden. Often what evolving companies discover is that it becomes a hassle to support these customers who are locked in to using outdated versions of products you aren’t even selling anymore. In short, it isn’t always about the price.
What Not To Do
Whether we’re talking about the early adopters, or the hold-outs, it’s important to remember that these customers have been with you for a while. If nothing else, they’ve been loyal and that should be rewarded.
Unless you have it written in your terms that the deal is subject to change, you may not be legally allowed to simply end the terms of a lifetime discount. It also isn’t a wise decision as no matter how nicely you present it, it’s not going to sound good to them.
Furthermore, you don’t want to force the customer into a price raise, or penalise them by rolling back certain features or benefits that they’re currently enjoying. If your goal is to move them off of their current plan, you’ll achieve that, but it won’t be by moving up and giving you more money.
Three Possible Ways to Do It Right
There are two reasons why someone will stop using your product: a negative reason or a positive reason. The methods above will get these customers to stop using your product, at the expense of them likely never wanting to do business with your company again.
Rather than give them a negative reason to cancel and leave, give them a positive reason to stay and upgrade.
- Make a New Deal: Offer to move them up to the next price tier, but with another discount. 50% off their first 6 months or even a year is an attractive offer that will be hard to pass up. This way they’re off of the plan they were on, and they’re on their way towards paying your full retail price eventually.
- Increase The Value Add-Ons: Enhance the value of the higher tiered product by adding additional benefits, or add-ons. This moves the customer upward while still providing a value.
- Oversell the Top Tier Product: If they’re on plan “A,” but plan “B” might be better suited to their needs, offer them a deal for plan “C” at the same price level as plan “B.” This moves them off of the plan they were on, gets the customer paying more and adds value by moving them up two levels.
Ensure a Win-Win Scenario
As your startup grows, you want your customers to come along for the ride. Ultimately, you may have to make some tough decisions with regard to plans and pricing. At the end of the day, growth is still a priority. However, when possible it is always a good idea to ensure that both your company, as well as the customer benefit from any changes.