Why price increases are high leverage
A price increase lifts revenue immediately, and the compounding effect can be significant. The risk is churn, downgrades, or reduced expansion that can erase the uplift. The goal is to understand how much churn you can tolerate and then design a rollout that keeps you well inside that limit.
Break-even churn (quick intuition)
If churn happens as a one-time shock right after the change, break-even churn is: (1 + increase) * (1 - churn) = 1, so churn_break-even ~ 1 - 1/(1+increase).
Why ongoing churn is different
- A one-time shock is painful but bounded; ongoing churn increase compounds every month.
- Downgrades are revenue churn (not logo churn) and often show up as contraction rather than cancellations.
- Segment behavior matters: high-usage customers may tolerate increases better than low-usage customers.
Best practices for rollout
- Segment: apply increases by plan, usage, tenure, and value delivered.
- Grandfather or offer discounts for a time-bound window for price-sensitive cohorts.
- Communicate value and give notice; reduce surprise cancellations.
- Measure revenue churn and support tickets in the first 2-8 weeks.