Price increase: the headlong rush – Part 2

In Part 1, we covered the reasons for price increases, the levers to boost bookings, and the impact on the Retention Rate (RR%). In Part 2, we’ll explore other effects of price increases and why they are a headlong rush. 🚀

4. The impact on the number of subscribers 📉

The merchant must show the renewal price next to the acquisition price. When the renewal price goes up:

• either the acquisition price increases by the same amount 💵📈
• or it stays the same, widening the gap between acquisition and renewal prices. ➡️🔄

In both cases, acquiring new subscribers becomes harder, reducing the number of new sign-ups.

The drop in RR% reduces the number of retained subscribers, shrinking future opportunities. The Booking Retention achieved in the year of the increase will be higher than the previous year. On the other hand, the Booking Retention achieved during the following years will be decreasing.

Not convinced? 🤔

Consider this case: my business has been stable for several periods. I raise my annual price from $50 to $55, causing a temporary drop in RR% from 70% to 69% and a permanent 10% drop in acquisitions.

Table #1 : detailed calculation for Total Booking and Total Subscribers

In period 2, I have a growth of 5.6% in booking accompanied by a drop of -4% in the number of subscribers. 📈📉

Over time, the number of subscribers and Booking Retention decline. ⏳⬇️

Even if the price is increased permanently, the growth in booking is only temporary. A decrease follows immediately afterwards. ⚠️

In terms of bookings only, the goal is met, exceeding $500k over several periods.

5. The delayed impact over time for annual subscriptions ⏳📅

Prices are communicated via email alerting you of the upcoming renewal. This email must arrive at least two weeks before the first billing attempt. (see article on the billing window). There is a time lag between the announcement and the actual billing.

Let’s take an example. 📝

My billing window is 2 weeks and I send the renewal alert email 2 weeks before. The email is therefore sent 4 weeks before the subscription expiration date.

The renewal prices emailed today apply to customers whose subscriptions expire in four weeks. If I announce higher prices from December 1st, the new rate applies to subscriptions expiring from December 29th. The chance to boost bookings before year-end is limited to three days.

A last-minute increase to “save the quarter” would not work. 🚫

As for monthly subscriptions, they will be impacted more quickly since all subscriptions will be renewed each month at the new price.

In the third and final part, we will see why price increases are just an escape route and what the alternative solutions are. 🚀🔍