In the short but insightful video "When to Raise Your SaaS Prices in 60 Seconds" by Monetizely, viewers are presented with clear guidelines on the optimal timing for SaaS price increases. The video outlines several strategic scenarios when raising prices makes sense, along with cautionary situations when founders should hold back, drawing on examples from successful companies like Notion and HubSpot.
The Fear of Price Increases
Most SaaS founders approach price increases with trepidation. As the video bluntly states, "Most SaaS founders are terrified of raising prices." This fear is understandable—no one wants to drive away customers or damage hard-earned relationships. However, strategic price increases are essential for sustainable growth and properly valuing your product in the market.
Clear Signals It's Time to Raise Prices
1. When Demand Exceeds Capacity
One of the most obvious indicators that your pricing is too low comes when you're turning away business.
"Raise prices when you have more demand than you can handle, obviously. If you are turning away customers or have a waiting list, you are clearly underpriced."
This "Overflow Signal" represents a market validation of your product's value. The video points to Notion as a case study of a company that didn't capitalize quickly enough on this signal:
"Notion learned this the hard way during their explosive growth."
When customers are lining up for your product at current prices, the market is telling you something important about your value proposition.
2. After Adding Significant Value
Product improvements create natural opportunities for price adjustments:
"Raise prices when you add significant value. New features, integrations, or capabilities justify higher prices."
The video highlights how one major player implements this strategy:
"HubSpot regularly increases prices after major product updates."
This approach ties price increases directly to enhanced customer value, making the increase easier for customers to accept and understand. It creates a natural narrative around "you get more, so you pay more" that aligns with customers' expectations of fairness.
3. The Annual New-Customer Approach
A more gradual strategy involves implementing price increases only for new customers:
"Raise prices annually for new customers. Existing customers keep their rates, new ones pay more. This gradual approach reduces churn while increasing revenue."
This method rewards customer loyalty while still allowing your pricing to evolve with the market. It's particularly effective for SaaS companies concerned about disrupting existing customer relationships.
When Not to Raise Prices
The video is equally clear about situations when price increases should be avoided:
"Never raise prices when churn is high, you are struggling to acquire customers or you have not added value in months."
These red flags indicate potential issues with your product-market fit or value proposition that should be addressed before considering a price increase. Raising prices during these periods could exacerbate existing problems.
The Pattern of Successful Price Increases
Most thriving SaaS businesses follow a consistent pattern with pricing:
"Most successful SaaS companies raise their prices 2-3 times in their first 5 years."
This suggests that price evolution should be a planned part of your growth strategy, not a reactive measure when revenue pressures mount.
The video also provides practical guidance on the scale of increases:
"Start small with 15-20% increase and measure the [impact]."
This incremental approach allows companies to test pricing sensitivity without risking dramatic customer reactions.
Implementing Your Pricing Strategy
When approaching price increases, consider these implementation steps:
- Monitor your demand signals closely—waitlists and capacity constraints are golden opportunities
- Document and communicate value additions when using them to justify price increases
- Consider grandfathering existing customers to maintain loyalty
- Test increases with small segments before rolling out broadly
- Measure the impact of increases on acquisition, retention, and overall revenue
Conclusion
Price increases shouldn't be feared but strategically planned as part of your company's growth journey. By watching for the right signals and avoiding increases during vulnerable periods, SaaS founders can implement pricing changes that reflect their product's true market value while minimizing customer pushback.
Remember that most successful SaaS companies adjust their prices multiple times during their early years. Start with modest increases in the 15-20% range, measure the results carefully, and use these insights to refine your pricing strategy as your product and market position evolve.