GlossaryPricing Strategy

Price Grandfathering

B2B SaaS Pricing Glossary

Price Grandfathering: Price grandfathering is the practice of allowing existing customers to keep their current pricing when a company raises prices, creating a different rate for new versus existing customers. It reduces churn risk from price increases but creates long-term revenue drag.

Definition

When a SaaS company raises prices, it faces a choice: apply new prices to everyone, or grandfather existing customers at their current rate. Grandfathering is the path of least resistance — it avoids the difficult conversation with existing customers and eliminates churn risk from the increase. New customers pay the higher price; existing customers stay at the old rate.

The problem is that grandfathering compounds over time. After several rounds of price increases, you can end up with customers on wildly different rate cards. A customer paying $50/month from 2019 is sitting next to a customer paying $150/month for the same product. This creates operational complexity, perceived unfairness if customers compare notes, and significant revenue drag from your existing base.

Why It Matters for B2B SaaS

Full grandfathering can leave 20-40% of potential revenue on the table over a 3-5 year period. The alternative — migrating existing customers to new pricing over a grace period (60-90 days) — is uncomfortable but significantly more profitable. Best practice is a phased approach: give existing customers advance notice, a modest discount as a loyalty gesture, and a clear explanation of the additional value they have received since their original purchase. Companies that communicate price increases well typically see less than 2% churn from the migration.

FAQs

Should you grandfather existing customers when raising SaaS prices?+

Selective grandfathering can make sense for your highest-value or longest-tenured customers, but blanket grandfathering is usually a mistake. The best approach is a phased migration — notify customers 60-90 days in advance, explain the value improvements, and offer a modest loyalty discount. Most customers expect prices to increase over time; what frustrates them is surprise and poor communication.

How long should price grandfathering last?+

If you do grandfather, set a clear expiration — typically 6-12 months. This gives customers time to adjust budgets while ensuring you eventually capture the new pricing. Indefinite grandfathering is the most common mistake and leads to permanent revenue drag that compounds with each subsequent price change.