The Forecast

Is Grandfathering Good or Bad For Business

Man wearing bling.

 

MSP’s, IT Solution Providers, and Vendors have been providing customers with automatic grandfathering when facing service, solution, and pricing changes for years. Grandfathering, which can be explained as keeping customers locked in to their prior pricing when raising prices, has been seen as a requirement to keep customers happy and from leaving services; but is it necessary?

It may be that there is a lot of money being left on the table by automatically grandfathering customers with old pricing. It never seems to amaze me how customers are so understanding of price increases. A good example of this is annual hourly price increases. If you haven’t already begun this practice you really should. Though it is never a good idea to drastically increase any prices, small changes are normally acceptable.

This goes for possible grandfathered solutions as well. My current take on this is, only grandfather when necessary. This means you should implement a pricing change company wide and maintain control of whom you provide grandfathering for. If a customer is upset about the price increase, offer a discount or grandfather them in. The nice thing about doing it this way is you determine your own fate without giving up unnecessary revenue or leaving money on the table.

Often times your solution is going up in price because your costs are going up. This is another good argument for why you may want to rethink grandfathering customers into the new solution pricing. Give it a shot on your next revision and see what the feedback is. You may be surprised at how understanding the majority of your customers are. Just don’t notify them with the actual price change. Provide adequate notice with a short but concise reasoning behind the increase.

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