Price increase
DEFINITION
A price increase is a deliberate change that raises the amount an existing customer is charged for a subscription, applied immediately, at renewal, or on a specified future date, and requires notice, communication, and often a grandfathering decision.
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A price increase is a deliberate change that raises the amount a customer is charged for a product or subscription, applied either immediately, at the customer's next renewal, or on a specified future date. For subscription businesses, a price increase on existing subscribers is a distinct exercise from setting a new list price for future customers, because existing subscribers are already under an established billing relationship and often a contract, which means the change has to account for notice periods, grandfathering decisions, and clear customer communication rather than simply updating a number on a pricing page.
Executing a price increase well is as much an operational and communication challenge as a pricing one. The business has to decide who the new price applies to, when it takes effect, and how customers find out, all while keeping active subscriptions running without billing errors. A subscription platform such as Recurly stores the plan and pricing data that a price increase touches. In Recurly, updating a plan's price only affects new subscribers immediately. Existing subscribers stay at their current price until they're explicitly migrated, which is what makes grandfathering by cohort possible, and Recurly's Subscription Change email notifies subscribers automatically whenever that migration happens. These built-in behaviors can reduce the operational risk of rolling a new price out to an active subscriber base.
Why price increases matter for subscription businesses
A price increase is one of the highest-leverage levers a subscription business has for improving revenue and margin, because it applies to the entire existing customer base at once rather than requiring new customer acquisition. If churn stays low, even a modest price increase can add more revenue than an equivalent increase in new customer volume, without any additional cost to serve those customers. The risk runs the other way too: a poorly executed price increase, with insufficient notice, unclear communication, or billing errors, is a common trigger for a spike in voluntary cancellations and support complaints, sometimes referred to as price increase churn. Getting the process right matters as much as getting the number right.
How to plan and execute a price increase
Most subscription businesses follow a similar sequence when raising prices on an existing customer base:
Determine the scope of the price change, meaning exactly who it applies to, such as all customers, only new cohorts, specific plans or tiers, or specific regions, and consider migrating a smaller cohort first to validate churn impact with real renewal data before a full rollout.
Check contractual and legal notice requirements. Many subscription agreements, and consumer protection rules in some jurisdictions, require a minimum advance notice period before a price increase takes effect for existing customers; the exact requirement depends on the contract and jurisdiction. As a general best practice independent of specific legal requirements, Recurly recommends sending the initial announcement 30 to 90 days before the change, a follow-up reminder around day 14 for subscribers who haven't engaged, and a final notice close to each subscriber's individual renewal date.
Decide on a grandfathering policy, meaning whether some existing customers keep their original price, for example long-tenured customers or annual contract holders until their next renewal, or whether everyone moves to the new price on the same effective date.
Communicate the increase to customers in advance, typically by email and account or in-app notices, explaining what is changing, when it takes effect, and why.
Update the plan price in the billing system, then explicitly migrate existing subscribers to the new price at the correct point, whether that's the next renewal, the next invoice, or a specific calendar date. Updating a plan's price alone only affects new subscribers; existing subscribers stay on their current price indefinitely until they're migrated.
Monitor cancellations and downgrades closely after the change takes effect, comparing MRR, churn rate, and cancellation volume against a pre-change baseline at 30, 60, and 90 days, and be prepared to field customer service inquiries or offer retention terms where appropriate.
Benefits and examples
A well-planned price increase delivers revenue growth without the cost and lead time of acquiring new customers, and it can also correct pricing that has fallen behind the value a product now delivers.
Increases revenue and margin across the existing customer base without any additional acquisition spend.
Aligns price with product value that has grown since the original price was set, such as new features or expanded capability.
Improves long-term unit economics by raising average revenue per account.
Can be paired with repackaging or new plan tiers so customers see added value alongside the higher price, softening the perceived impact.
Illustrative example: imagine a subscription business with 10,000 customers on a $40 per month plan, generating $400,000 in monthly recurring revenue. The company raises the price to $44 per month, a 10% increase, with 60 days' notice. If 3% of customers cancel in response but the remaining 9,700 customers pay the new price, monthly recurring revenue becomes 9,700 x $44 = $426,800, a net increase of $26,800 per month, or about 6.7%, even after accounting for the churn the increase caused.
Common mistakes with price increases
Giving customers little or no advance notice, which can violate contract terms and damages trust even when it does not.
Communicating the change poorly or not explaining the reason, leaving customers to assume the worst.
Applying the increase inconsistently across the customer base due to billing system errors, creating confusion and support burden.
Failing to prepare customer support and retention teams for an expected increase in cancellation requests and questions.
Raising price without also demonstrating added value, which increases the perceived unfairness of the change.
Frequently asked questions
What is a price increase in a subscription business? A price increase is a change that raises the amount a customer pays for their subscription, applied at a defined point such as their next renewal or a specific future date, as distinct from simply setting a higher list price for new customers.
How much notice do subscription businesses typically give before a price increase? Notice requirements vary by contract and jurisdiction, but many subscription agreements require a minimum advance notice period before an existing customer's price can change. As a general best practice, Recurly recommends sending the initial announcement 30 to 90 days before the change, a reminder around day 14, and a final notice close to each subscriber's renewal date.
What is grandfathering in the context of a price increase? Grandfathering means allowing some existing customers, often long-tenured customers or those on annual contracts, to keep their original price for a period of time or until their next renewal, rather than moving every customer to the new price immediately.
Does raising prices always increase churn? Not necessarily. Some churn is common after a price increase, but the net effect on revenue depends on how much churn occurs relative to the size of the increase, and clear communication and fair notice tend to reduce the churn impact.
How can Recurly help manage a subscription price increase? Updating a plan's price in Recurly affects only new subscribers immediately; existing subscribers stay at their current price until they're explicitly migrated, which makes grandfathering by cohort possible, and Recurly's Subscription Change email notifies subscribers automatically when a migration happens.
