Why Automatic Price Increases in SaaS are a Bad Idea

Feb 9, 2024 | Blog

Why Automatic Price Increases in SaaS are a Bad Idea

I’d like to think that not much upsets me…but there is one B2B practice that does. I was reminded of it twice this week…

When did we begin to believe that including automatic annual price increases in contracts actually improves profitability and revenue? Sure, maybe you’re winning a little playing the short game – free money, right?

It’s the opposite of transparency. It’s a short-term win that harms the mid- and long-term.

For example, you probably subscribe to streaming TV services, right? Each month, you pay an amount. It’s likely you don’t even think about it…until…

…you receive a notification that the price is going up. Your brain likely begins to process whether this subscription is still worth it. Maybe you cancel. Maybe you evaluate & stay. Maybe you begin couch-tracking alternatives…
…and cancel sooner than you would have otherwise.

Now take that into B2B.

Your customer signs a subscription agreement at a certain amount. If you’ve managed to slide an auto-price increase into it…
◼ You’ve probably eroded some trust at the goal line by sneaking it in there, which I’m sure your customers try to negotiate out, but that’s the least of the problems…
◼ At renewal time, the customer probably doesn’t remember it’s there. Or, the person doing the renewal isn’t the person who signed the agreement originally… so, they’re paying it reluctantly, and the budget issue you’ve created just stole the customer’s time, resources, and opinion of you.

Which means now your auto price increase is also likely:
(a) creating a cost of sale/renewal when a percentage of your customers are now beginning to re-evaluate,
(b) creating a potential churn, that,…
(c) your account management / CSM team has to spend time saving, versus spending time growing another account, and along with it,…
(d) your upsell/cross-sell is likely minimized via this practice!

Automatic price increases in subscription contracts, to me, is the opposite of transparency.

Yes, sometimes you have to raise prices…I get it! Every year automatically? I’d argue you’re eroding your profitability with that practice, not raising it.

Earn your price increases! Cards face up!

In a subscription economy, success comes from signing customers who stay, buy more, and become advocates. Your auto-price-increases are likely reducing the odds of all three!

*end of rant*


Caponi Logo

I speak and teach revenue organizations on how to leverage transparency and decision science to maximize their revenue capacity. It’s what I do…teach sellers, their leaders, well…entire revenue organizations how we as human beings make decisions, then how to use that knowledge for good (not evil) in their messaging (informal and formal), negotiations, and revenue leadership. I wrote a book Book Authority lists as the 6th best sales book of all time (𝘛𝘩𝘦 𝘛𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘤𝘺 𝘚𝘢𝘭𝘦), and a second award-winning book (𝘛𝘩𝘦 𝘛𝘳𝘢𝘯𝘴𝘱𝘢𝘳𝘦𝘯𝘵 𝘚𝘢𝘭𝘦𝘴 𝘓𝘦𝘢𝘥𝘦𝘳).

Reach out if you want to discuss The Transparency Sale sales methodology, or really…anything else (sales kickoffs, workshopskeynotes, the economy, history, etc.)! Email info@toddcaponi.com or call 847-999-0420.

Sign up for the newsletter for more of my nonsense in your inbox every other week, with some sales history sprinkled on top…Sign Up – The Transparent Newsletter

0 Comments

Submit a Comment

Your email address will not be published. Required fields are marked *

Other Articles You Might Enjoy

How Sales Hasn’t Changed – And Probably Should!

How Sales Hasn’t Changed – And Probably Should!

How Sales Hasn't Changed - And Probably Should! “He who plans no further than the present is mentally blind. He who plans for a year ahead is a general. He who plans for a lifetime is a genius. He whose mental vision extends beyond his life and plans for generations...

read more
Question Tradition: The Sales Scoreboard Reset

Question Tradition: The Sales Scoreboard Reset

Question Tradition: The Sales Scoreboard Reset It's that time of year again...when we embark on the unquestioned tradition of resetting the scoreboard for all of our revenue-responsible team members. Well, I’m here to question it…in another case of something sales...

read more
Building Personal Values – Ten Mottos To Be Your Best You

Building Personal Values – Ten Mottos To Be Your Best You

Building Personal Values - Ten Mottos To Be Your Best You As we usher in the new year, advice abounds about how to make this year the best one yet. Instead of recreating the wheel on these ideas, let’s turn the clock back 87 years. In 1937, Paul W. Ivey released a...

read more