This is follow-up to my previous question. Inspired by the answers, we did a quick customer survey. We asked the standard question "would you recommend our service to a friend?" and "what is the main reason you pay us?". We got a very positive response and a lot of useful comments. And yes, about 4 times (of 66 answers) customers mentioned low price as a reason and none of them complained that we are too expensive.
So our price is probably too low and this brings in another question - how do you raise a price?
These were some options I thought of, but I'm happy to hear yours.
You have to pre-announce the price change for those potential customers currently trialing. Blind-siding is the worst thing you can do.
Here's the thing about raising prices: The only people who know you raised the price are existing customers. Everyone who comes to your website post-raise doesn't know it was ever lower.
So all you have to do is take care of your existing customers. Easiest way is grandfathering -- make a policy (and proactively send email about it) that they can purchase at the old price for the next 6-12 months (or forever?). They have plenty of time to decide if they want to buy more without feeling pressured or surprised, and everyone understands that sometimes the price goes up.
Said another way, no one cares that the price goes up for someone else.
Finally, it does make sense to combine the price hike with a new release. "New stuff" could imply "more expensive." But if you do the foregoing, that doesn't really matter either.
Idea 3 and 4 don't really solve your issue. If you can get more value from the product itself looking for others ways to generate revenue should not be the thing you try first.
When we have to change our prices our primary concern is to figure out a way to grandfather in the existing customers and if possible the new price affect only the new customers. This gives everyone a benefit in having signed up early and if you give people notice of the price increase it produces a "compelling event" to purchase before the price increase.
The best way I have seen to raise the price is to add additional features that really don't cost you much to implement. This seems to create a natural inflection point for increasing your products price and people perceive that they are getting more value.
The other thing to do would be to create a different terms of service contract that times out everyone at a predefined date. After that date, the terms of service would reflect a new pricing structure.
For your existing customers, it would be best to offer them a discount if they sign up for a longer term contract. Lets say that right now, you do everything monthly with no contacts. People come and go as they please. In the new model, you would require a one year or two year contact for a discounted (albeit higher price) price. This way your customers have the option to continue with no contract or sign up for a longer term of service that would be discounted.
Another approach is the honest straightforward one. Be upfront and say in order for your company to survive and provide the excellent service your customers expect, you have to raise the price. Be fair about it and lay out your case as to why it will still be an excellent value.
First of all definitely charge more, Eric Sink says if no one is complaining about your price you need to charge more, until you start to hear some complains.
Having no experience on the subject whatsoever I think disguise as a feature is a good way to go. Some people just want to pay more, let them have it with some simple yet useful features.
Also you can make make a package with one or more new features and high priority support together. You can keep the investment low by adding simplistic features instead of massive changes and justify the price by adding extra support features.
Advertising may make your site look less professional, at least that's my opinion. But if you think it would fit, you could test the water by simply adding Google Adsense or a similar programme. That costs you max one hour work and within weeks you have a good idea of how many ads are clicked and what the revenue can be.
But as I said, it might appear less professional. Unless you give the users the option, a cheap subscription with ads or a more expensive one without.
Six months notice of the price change for the installed base is good. Grandfathering your early customers in is a good idea, but I would not do it indefinitely. If you have more than a handful of those customers, or a channel sales force, or an unwieldy back-office system, it will become a headache to manage the special pricing for those customers.
Also, don't forget about the impact on support licenses (see Jarie's answer). As your prices go up, you will probably want to raise maintenance fees proportionately. You can offer your existing customers longer-term maintenance licenses at the current rate, so that they continue to benefit from being early adopters after the price increase.
The safest way (not to lose existing customers) is to add a new optional feature, make it free for a (say) two month trial period (so every customers sees and likes it) and charge for this feature then; customers may choose not to use that feature if they are unwilling to spend more than they do already.