Great post Jens. This is a very interesting subject for many companies. Weighing transparency vs impact to the business. Question for you. Do you have any examples of companies that have been completely transparent and customer response was positive, resulting in less churn?
Thanks for the question and I'm glad you liked the article!
Most companies will have an inverse relationship between price and demand. If price goes up, demand goes down (or in the case of existing customers, churn increases). The extent to which this happens will depend on price elasticity; some products will be highly sensitive to price (e.g. petrol) and others much less so (e.g. food staples). For these type of companies and especially those of the larger kind, I think the fall-out from price increases will often be more about optimising CX to minimise churn rather than expecting a sustained reduction in churn as a result of the price increase.
Although there are also companies that operate in an industry and market where there is a positive relationship between price and demand. This sounds a bit odd but it means that when the price of a product goes up, demand also increases (or in the case of existing customers, churn decreases). Companies in the luxury and fashion industry might be an example of such pricing / churn dynamics.
It also goes back to the point I was raising in the article about "why" the price increases are happening in the first place. If the price increase is happening for a clear reason and for arguments sake linked to a "good cause", such as environment and sustainability initiatives. For example, there is a PwC survey from 2024 that shows that consumers are willing to pay a 9.7% sustainability premium.
Some interesting points. I think for entrepreneurs it depends on your business model, your offerings, and your financial condition. So if you have many customers for a low cost product, any potential customer loss may well be exceeded by the increased revenues of the remaining ones. So Netflix knew they would lose some customers (I was one and I’m a shareholder) but they could estimate the customers dropping out or migrating to a lower priced tier (especially the ad level that is just taking off). However they are in a dominant and stable customer & financial position. Is an entrepreneur?
Services, especially bigger ticket items with fewer customers - like consulting - pricing changes are different and sometimes trickier
The size and financial success of a company should place higher demands on the quality of communications and the customer experience, although the reality might be the opposite in some cases.
You can still be a large corporation and take a data-driven approach to initiatives, whilst still caring deeply about the customer. Amazon is a great example of this!
Great post Jens. This is a very interesting subject for many companies. Weighing transparency vs impact to the business. Question for you. Do you have any examples of companies that have been completely transparent and customer response was positive, resulting in less churn?
Thanks for the question and I'm glad you liked the article!
Most companies will have an inverse relationship between price and demand. If price goes up, demand goes down (or in the case of existing customers, churn increases). The extent to which this happens will depend on price elasticity; some products will be highly sensitive to price (e.g. petrol) and others much less so (e.g. food staples). For these type of companies and especially those of the larger kind, I think the fall-out from price increases will often be more about optimising CX to minimise churn rather than expecting a sustained reduction in churn as a result of the price increase.
Although there are also companies that operate in an industry and market where there is a positive relationship between price and demand. This sounds a bit odd but it means that when the price of a product goes up, demand also increases (or in the case of existing customers, churn decreases). Companies in the luxury and fashion industry might be an example of such pricing / churn dynamics.
It also goes back to the point I was raising in the article about "why" the price increases are happening in the first place. If the price increase is happening for a clear reason and for arguments sake linked to a "good cause", such as environment and sustainability initiatives. For example, there is a PwC survey from 2024 that shows that consumers are willing to pay a 9.7% sustainability premium.
https://www.pwc.com/gx/en/news-room/press-releases/2024/pwc-2024-voice-of-consumer-survey.html
Some interesting points. I think for entrepreneurs it depends on your business model, your offerings, and your financial condition. So if you have many customers for a low cost product, any potential customer loss may well be exceeded by the increased revenues of the remaining ones. So Netflix knew they would lose some customers (I was one and I’m a shareholder) but they could estimate the customers dropping out or migrating to a lower priced tier (especially the ad level that is just taking off). However they are in a dominant and stable customer & financial position. Is an entrepreneur?
Services, especially bigger ticket items with fewer customers - like consulting - pricing changes are different and sometimes trickier
I like you bringing these topics up
The size and financial success of a company should place higher demands on the quality of communications and the customer experience, although the reality might be the opposite in some cases.
You can still be a large corporation and take a data-driven approach to initiatives, whilst still caring deeply about the customer. Amazon is a great example of this!