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How to introduce lower pricing for a recurring service

Marketing, social media, advertising

MartijnS

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Hey all,

Apologies if this is not the correct forum, but I was looking or advice on pricing strategy and how it relates to existing customers, so I assumed that falls under Marketing questions.

We have a software-as-a-service product, with both monthly and annual recurring subscriptions.
Pricing has been the same for a long period of time, however we've gotten some competition lately that is significantly lower in price and it's costing us too many customers. It's a fairly niche market, so it's basically us and them.

Since - unfortunately - we're not yet beating them in feature richness, the least we can do for now is not to be more expensive than them while we play catch-up on the feature front.

My main question is, how do we introduce lower pricing and deal with our existing customer base?
We've run promotions before to attract customers, however that's not what we're trying to do now, we really need to lower our regular pricing to remain competitive and not just get short term members.

Is it acceptable to keep existing customers at the old higher pricing while new customers are charged less?
Is there any way around having to lower prices for all existing customers?

Thanks
Martijn
 
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MJ DeMarco

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Turn the problem into a win? I don't think there is nothing wrong with messaging customers of a new lower price. Or, you can lower prices for new customers and give older customers a "15% loyalty discount" which any customer gets who has been with you longer than a year.

I would just make the "loyalty discount" slightly cheaper than the new rates, perhaps by just 1 or 5%. That way, it truly is a discount for loyalty, and not an equity measure on the new rates.

Inflation? Not at XYZ, starting April 1st, Your Bill Will Go Down 14%.
 

Andy Black

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I like MJ's suggestion.


Along different lines... Is there anything you can add to the current offer that increases the perceived value? Free training courses, etc?
 

Andy Black

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Dominik_M

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I’m here with @Andy Black
Are you sure your customers know about the price differences and if so, even care?
Did your customers tell you that your competitor is cheaper or did you notice yourself?
 

MartijnS

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Yes, most of our customers are aware, their name comes up often enough when people do not continue with the trial.

We ask them for feedback if they cancel. And since we tend to be very generous - no hassle, no problem - with refunding within the first 60 days, that positive gesture makes them more likely to feel they "owe" us an explanation..
So yeah, we do get enough mention of that competitor in feedback, at least enough to make us realize we are missing a significant piece of the pie.
 
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woken

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Be careful of lowering too much your prices. You don’t want to create an anchor effect between your service and theirs since they have more features.

Even if you’d be cheaper, some customers could only see the small difference in price = more features.

What I would do is :

Manufacture a competitor. Undercut both yours and their prices.

See what happens.

But then again, I don’t know much so hey..
 
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