Is inflation killing your GTM?
Is inflation killing your GTM?
Why if you’re not raising prices, you’ll be left behind
👋 Hey, Toni from Growblocks here! Welcome to another Revenue Letter! Every week, I share cases, personal stories and frameworks for GTM leaders and RevOps.
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“Oh my god, you’re really writing about inflation? I’m so bored already…”
I assume most of you who read the title of this article are reacting right now - and I don’t blame you.
But I guarantee your GTM is being affected by it right now. So it’s time to pay attention.
Yes, inflation has begun to slow down, but we’re feeling the effects of its climb.
CPC on Google ads is up 9% compared to last year. So that means our marketing departments are being forced to raise their budget to just stay flat.
Sales, Product and Engineering wages are up (even if they’re not keeping up with inflation).
And things are just generally more expensive than they used to be.
Let’s take a step back to Econ 101: What generally happens with inflation?
Prices go up → Wages go up → Costs go up → Prices go up → Wages go up… etc.
It’s super common in any place that produces physical goods.
Your cost of goods goes up, so your price goes up. Because you have to protect your margins.
Nobody questions it.
But we don’t necessarily see the same thing happening in SaaS… at least not on pricing pages.
Everyone is talking about how we need to improve our winrates, CVR, CPC, etc.
But at the end of the day, some of us are running a business. And it needs to be paid for.
If the cost of everything around us is going up, so should the cost of your product.
And to be completely clear, I’m not talking about proposing new pricing and packaging (though you can obviously explore that and read what folks like
say about it).I’m simply talking about raising prices by 2-3% to account for inflation.
The cost of doing nothing
If you just read that last line and had a visceral reaction, I totally get it.
I still remember that, in 2018 and 2019, we had cute clauses in our contracts that stated, based on the Consumer Price Index, we were allowed to change prices.
We all laughed at it.
Because come on! 2%?
We’re not going to be those people.
But a lot of things have changed since 2018. Now we have to be those people.
Yes, we’ve come back from that massive 8% inflation in 2022, but we’re still talking about a steady 2-3% inflation every year.
And if we look at it over the last 3-4 years, even if we stayed at 3%, because it all compounds we’re really still dealing with about 15% inflation overall.
On top of that winrates/ACVs are down, so that means we’re running sooo much less efficiently.
So we have to start asking ourselves: Why aren’t we raising prices?
Check your Terms and Conditions
I think before you can start going down this thought process, you need to figure out if it’s even possible to do.
If you want to raise prices on current customers, you need to have the ability to do so contractually.
Do you actually have a clause in there that allows you to make price adjustments for whatever reason?
For example, our old contracts were tied to the CPI but also said we could not raise price by 5% or more.
But 4%? We could make that change without informing users beforehand.
If you don’t have it in your contract, you obviously can’t make that move.
Worst case? You can always use the clause as a bargaining chip for deals going forward.
Use it wisely, carefully, and not as much
I think it’s safe to say you need to strike a balance when it comes to raising prices.
Do it more than once a year and you’re going to have angry customers threatening to churn.
But wait 5 years? And all of a sudden, you might have to raise prices if you want to catch up to inflation.
And yes, while you can pinpoint it on inflation, you should expect a lot of pushback internally (I’ll come back to the external question a bit later).
So how do you sell it to your team?
This is how I pitched pricing increases at another company where we didn’t raise prices in 5 years.
I simply asked, do we internally believe that our product is 3% better than it was 5 years ago?
Once that was said out loud, a lot of objections inside the company dropped away.
Breaking it to customers
So you’ve decided that you need to raise prices, and you have the entire company behind you. Now comes the actual work.
The customer comms piece will always be the most difficult part to get right.
It’s tricky because if you make a bigger thing out of it, you’ll get much more pushback.
But if you keep it under wraps and try to just sneak it in, you might land on the wrong side morally.
How did we do it in the past?
First, we were very clear on our invoice that there will be a 3% rise (and attached it to our T’s and C’s, like I mentioned earlier). So there were no surprises - at least for the customers that read their contracts.
Second, we set up a taskforce that would immediately work through any issues that came up with that price jump. So if we had any complaints, we could address them right away.
Out of 1500 customers that were affected? We got 3 negative responses.
Now, admittedly, that tactic works a lot easier when you have SMBs. Smaller customers on credit cards.
If you’re working enterprise deals of $100k or more, a 3% jump is a lot harder to add after the fact.
But at the end of the day you need to address inflation one way or another. That means we either raise the price of our product or lower our costs - and I think the boat has already left when it comes to the latter.
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