IMPORTED FROM SKOOL
Original Post was posted by Steven Meyer on Sep '24
Hey folks. I’m currently working on optimizing price increases which has me re-evaluating how we’ve structured our commercial agreements. Right now most of our customers sign a one year contract term then ~3 months before the term ends our reps start their outreach to engage in renewal conversations asking for another one year contract. Also, most of our contracts have price increase language that states we’ll increase their price at the greater of CPI or 5% at renewal. We have a lot of these ag… See more
Jesper Bang-Olsen • Sep '24
Automatic yearly renewal + consumer price index adjustment (legal jurisdiction) + 60 days mutual termination prior to renewal (where larger price adjustments can be launched if needed) … this is what I have used and it has worked well. Then you have two months to advocate for new pricing. You need a balanced model towards large b2b customers as they will otherwise create problems. With smaller b2b and b2c you can probably get away with unbalanced terms very much in your favour.
Nadeem Bhanji • Sep '24
I think there is some danger in the 30 day pricing notice. Overtime CSMs or reps will get lazy in enforcing the price increase and customers will try to forgo the price increase as a negotiation begins.
Here is an example at my company, where we have employed the 30 day notice:
A customer is due a price increase but the sales rep waives the increase in exchange for purchasing an additional product.
Steven Meyer • Sep '24
@Nadeem Bhanji
Thanks. We have reps that do this all the time - buy an upsell and we’ll waive the annual price increase.
Martin Millard • Sep '24
What you are talking about with the annual renewal and need to refund e.g. 9 months if they cancel after 3 is also a T&C issue. In this case, it sounds like you want to have offer monthly(/quarterly) contract that is paid on an annual basis, or put differently: they pay for a full year but have flexibility to cancel with ~30 day notice at any time. Depending on the # of customers you have, this risks becoming a pretty significant manual operation if you don’t have the right systems managing your… See more
Zaid Mohideen • Sep '24
Pricing is a myth. Prove me wrong.
Christine Carragee • Oct '24
cpi and Ppi are measured/published monthly. One thing to define carefully is how your will apply them - eg 3 month rolling avg or avg for the full previous period or last data point before negotiation.
If inflation is high and growing quickly the longer look back period in the calc can have a lag effect in being able to keep up with costs.
Most often CPI and PPI are not closely tied with your own production and deliver costs so there is a risk there too.
People choose to tie to indexes for inflatio… See more
Coach Mahgul Nikolo • Oct '24
You’re on the right track with evergreen contracts.
- Initial Term: One-year commitment with a 30-day cancellation makes sense.
- Refunds: Pro-rata refunds for early cancellations could simplify things.
- Price Changes: A 30-day notice for price hikes is way more flexible.
- Look Around: Check out what other SaaS companies are doing—there’s often good insight there.
Let us know what you find out!