Pros and Cons of Grandfathering a User's Pricing

Jevon MacDonald's photo
Jevon MacDonald
·Sep 10, 2022·

4 min read

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When a company decides to change what they charge for their services, there are many ways they can go about this. One popular option is to grandfather in the old price for one or more years for anyone who was subscribed before the new price went into effect.

Pros: The main pro of grandfathered pricing is that it creates an incentive to subscribe sooner rather than later. This not only benefits current customers by giving them a discounted rate but also helps you retain your customer base longer because it would be cheaper if they were to wait until next year. It also makes it easier on you since all of your marketing and advertising will mention the discount so people know what's up when they see your ads online or on TV or anywhere else where you may advertise. You also won't have to worry about people canceling their subscription when the price goes up because they were subscribed before you raised prices, so it will make your life easier in terms of the customer service aspect of things. Grandfathering customers in is also beneficial to you in that it can cause some people who might otherwise not subscribe to become a paying customer, and it is possible that those customers may even stick around longer because they were upsold on your new premium features or became a customer at a discount.

Pros: If you're going to grandfather in some people then you also have to grandfather some out as well. This means that there will be people who subscribed before the price change date who will still pay the old price even though they could be paying less if they were to subscribe now. If you only let some people keep their discounted rates then it can come off as unfair and insulting to those who don't get the discount. This also means that your current customers may feel like there is no incentive for them to upgrade since they'll just have to pay the new price sooner or later. There is also a risk that your revenue won't be as high as it should because you're giving a discount out to some people and not others, so there is a chance you could lose money if you don't make up for it by gaining more subscriptions from those who aren't grandfathered in.

Pros: There are many pros of grandfathering users when you change your prices. One big pro is that you will retain customers who were subscribed before the price changes went into effect, so you won't have to worry about people canceling their subscription because they're not getting the discount anymore. It's also possible that retaining some subscribers will increase sales in general, so you might gain more money than if you had made everyone pay full price immediately after changing your prices. You can still give out discounts through things like loyalty programs and special offers, so you're not completely taking away the incentive to subscribe sooner rather than later.

Cons: One con of grandfathering users is that it can also come off as a bit unfair to those who subscribe after the price change goes into effect. This means you can't give honest feedback to people about what your service costs because others are getting different rates based on when they signed up, and this could cause some people who should upgrade to not do so because they think it's too expensive. Someone subscribing after the price hikes also won't be able to get as much value out of your service since their rate is higher than what other people are paying, and this might cause them to say you're overpriced even if you aren't since they can't get the lower rate.

Cons: The main con of not grandfathering users is that you'll lose money by being more strict with your price changes. By not grandfathering people in then you're basically saying that there is no incentive to subscribe sooner rather than later, and this can cause people to wait until the last minute to sign up which means you'll have less income on a monthly basis. You also risk losing customers who would be willing to pay full price but won't subscribe because the discount isn't worth it to them, and some people may even cancel their subscription if they think your service is overpriced.

Grandfathering users can also be a way of showing that you appreciate your loyal customers, and this can help increase brand loyalty if done right. Grandfathering some people into your new prices is a way of rewarding those who have been subscribing from the beginning, and this can be good for your business as long as you only do it to some people and not everyone.

Conclusion: There are many pros and cons of grandfathering users when prices change, but it's possible that the benefits outweigh the negative effects. If you're planning on changing your company's pricing then it might be a good idea to think about what other companies have done in the past, and decide from there.

 
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