2023 - Renewal price increases

ryanwhite8991

Hello fellow CS professionals,

I just joined the community and look forward to contributing and learning from everyone here!

I'd love to gather some insights from other CS Leaders who are performing price increases at renewal in 2023. Specifically, I'd love to hear how y'all perform the following:

1. When and how do you engage customers in the conversation? How far in advance of renewal do you start this conversation?

2. Are you determining price increases on a percentage basis? 

3. How are you, or your team, managing objections to pricing?

Michelle Wideman

@ryanwhite8991, depending on the size/type of org you are selling too, these conversations can happen in the original contract negotiations where a renewal cap is outlined.  If this is happening, I'd definitely recommend getting in front of this, so you are flagging it in your CRM so your renewal rep is aware of the negotiated cap.  

I've a fan of starting renewal correspondence 120 out.  As for price increases, I've seen different companies handle this in different ways. This article outlines a 5-7% price increase is standard for most SaaS companies.  I've found it easier to have a higher renewal price increase at companies that are delivering a lot of upgrades and therefore adding a lot more value each year.  In regards to managing objections, we've incentivized customers to go with multi-year renewals in exchange for lower renewal price increase.  We've created ROI documents to showcase the savings in going for a 3 year vs. 2yr vs 1 yr renewal.  

Andrea Brisker

For standard renewals, 120 days out is a great marker. Over the last few years we've been doing longer term contracts to get customers to "lock in" their current rates. If they do not want to do a long term contract we put a standard 5% annual increase in the terms (there is of course some redlining back and forth about this). 

If you are having a bigger and unexpected increase I recommend communicating this as early as possible. This is also a great opportunity to lock in some renewals early. If not communicated early, it may not be budgeted for, and budgets are incredibly tight this year. 

Javed Maqsood

Renewal conversation start - usually 120 days. It could be less depending on the segment of the customer as well. More importantly for Enterprise customers, renewal conversations start time should be driven by part of the strategy for that customer. For example, you are driving an outcome which will result in smooth renewal. Per strategy, you should wait for that event to complete. 

Price increase - focus on ROI, ensure that ROI is justified and customer cannot question the validity.

Increase percentage depends on your revenue model too (consumption / ARR etc). For ARR model, price increase percentage is usually 10 to 20 percent. Give yourself a bit of buffer to come down from initial increase. Use packaging of other SKUs, multi-year options as tools for negotiation. 

Hope this helps.

Javed Maqsood

For 2023, you have to take the macroeconomic conditions into account - forgot to mention that earlier. This year is very different than any other years. 

ryanwhite8991

Thank you, all, for the feedback and suggestions. My apologies for the delayed response - I didn't see the notifications as I received responses to this thread.