Price increase: the headlong rush – Part 3

In Part 2, we explored the effects of price increases. In Part 3, we’ll examine why price increases are a headlong rush and explore alternatives. 🚀🔍

6. Price increases are just a headlong rush ⚠️💸

a. Limited-duration growth ⏳

As shown in the previous table, price changes lead to booking growth but also subscriber loss. The following year, reduced retention opportunities will cause booking retention to decrease annually.

When price increases aim to meet growth targets, they meet immediate needs but set the stage for future declines.

Growth without effort or investment creates the illusion of a thriving, sustainable business. This creates an expectation of future sustainable growth. 🌱📈

b. The price increase spiral 📉📈🔄

In reality, the price increase has impacted the RR% as well as the Acquisition. Let’s go back to the equations presented in the first part of the article. To show growth the following year, which parameter should we adjust?

With decreasing subscribers, we must increase RR% or ASP. As explained previously, the best option to show growth is the price increase.

Price increases that reduce opportunities create a headlong rush into a price inflation spiral.

7. Alternatives to price increases

a. Up-selling and cross-selling 🔝

Up-selling and cross-selling can increase ASP. Subscribers choose these options instead of facing price increases. Therefore, the impact on RR% is lower.

b. Retention Rate 📉

Remember, initial growth in a subscription business comes from subscribers. A retained subscriber doesn’t need to be re-acquired.

c. Acquire more subscribers 🆕📈

To grow Acquisition business while considering retention and up-selling, an acquisition strategy is essential.

This strategy must address:

• Encouraging initial purchases 🛒
• Offering more entry points 🚪
• Creating conditions for future up-sells and cross-sells 🔝
• Targeting likely loyal customers 🎯

👉 Key Takeaways 👈

1. Price increases boost bookings with minimal dependence on subscriber behavior. 📈📉
2. They meet immediate growth needs but create conditions for future decline. ⚠️📉
3. Price increases reducing opportunities (number of subscribers) create a headlong rush into price inflation. 🔄💸📉