Legacy Customers and Pricing Increases in Startups

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Image by IceNineJon via Flickr

Recently I received an email from a sales rep for a service we’ve been paying a couple thousand dollars a year for over three years. He politely informed me that we’ve been going over our monthly allotment resulting in overage fees, but more importantly, our current pricing is significantly out of date and the plan we’re on now, even when adding in overages, is more than twice as much for new customers. Since we were one of their first paying customers they are offering to cut their published price in half in exchange for us signing their new terms of service, which are more strict and less desirable (changes to SLA, number of items that can be used, etc).

So, a summary of the situation:

  • Early adopter customer of three years paying slightly less than half the new pricing
  • Vendor desires the customer to be on the current pricing plan with more strict terms of service and pricing model but better support hours
  • Vendor offers customer 50% off published pricing to move to current plan so as to standardize contracts, pricing, and lock in rates for future customer growth

This is a fair approach and we’ll go with the new pricing. My recommendation is to grandfather in existing customers letting them keep their pricing as long as they want. If a legacy customer requires a serious change to their plan, the new pricing should take effect with a long-standing customer discount. It is time consuming to have customers on different plans but the goodwill and continuity of consistent pricing helps keep happy customers, which are the lifeblood of a business.

What else? What are your thoughts on legacy customers and pricing increases in startups?

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