Retrospective: We raised prices by 20% in June. What happened?

#Some background

Our annual plan pricing had been unchanged since 2016: We charged $247 / year for the Personal plan, $347 / year for the Plus plan, and $540 / year for the Professional plan.

Beginning in 2022 we started to see a lot of plugin companies increase prices. WP Fusion used to cost more than WooCommerce subscriptions, but the Woo Subs price jumped to $299 / year.

By the middle 2024 it felt like things had settled down a bit and everything (yes, everything 😩) had become 20% more expensive. So we decided to implement a 20% price increase across all our annual plans, while honoring the existing prices in perpetuity for legacy customers.

We launched the new prices on June 1st, 2024, and also changed the pricing layout to feature our free plan more prominently.

#Hypotheses

My intuition was this would result in a few changes:

1. The pricing page conversion rate would go down, and bounce rate would go up.
2. The total number of new customers would go down.
3. The average order value for new customers would go up.
4. The number of free downloads would go up.
5. Revenue from new customers would stay the same or increase slightly.
6. Lifetime sales would increase since they are now a better value compared to annual.

#What happened

Let’s compare the three months before the price change (Mar 1 to May 31) with the three months after the change (June 1 to Aug 31).

#Web traffic

Let’s start with a baseline. New visitors to our pricing page declined 21% in the three months after the pricing change. This is pretty typical for the summer months, so we can assume if the conversion rate remained unchanged, we’d see a corresponding 21% decline in new customers.

The bounce rate on the pricing page (the number of people who saw the page and then immediately left the site) remained basically unchanged at 12%.

The conversion rate (the number of new users who converted into new customers) remained basically the same, at 6.5%.

1. The pricing page conversion rate would go down, and bounce rate would go up.

❌ False.

#Change in new customers

The number of new customers buying annual plans declined 20% from an average of 47 per month to 37 per month. However, when we consider the 21% decline in traffic to the pricing page, this seems to indicate the new prices did not have an overall effect on conversions.

2. The total number of new customers would go down.

❌ False (after accounting for the overall decline in traffic, new customer numbers stayed about the same)

#Change in average order value

The average order value from June to September went up 10% over the previous period, from $329 to $364.

“3. The average order value for new customers would go up.“

✅ True.

However, it’s interesting that we raised prices by 20%, but the average order value only increased by 10%. We did give out a few discounts in June to help folks who’d missed the price increase, but not enough to make this much of an impact.

This points to customers potentially buying lower-priced plans. Let’s take a look.

#Plan breakdown

Before the pricing change, about 50% of customers went with the Personal plan ($247), and the other 50% were split between the higher priced Plus ($347) and Professional ($540) plans.

After the price increase, we can see a strong shift away from Plus ($427) and towards the cheaper Personal ($297) plan. Professional licenses (unlimited sites, $647) remained about the same.

The Plus plan had a larger dollar-value price increase, from $347 to $427. It may be that there’s a point of resistance around the $400 mark for annual plan pricing.

If that’s the case we could consider lowering the Plus plan to $397, but it’s something I’d like to A/B test to see if it makes a difference, before making the commitment.

It’s also possible new customers wanted to get started on the base plan, and then upgrade. Until this point we’ve only been looking at new plan purchases. Let’s see if the number of license upgrades increased from June to August.

#License upgrades

No such luck 👎. The total number of upgrades declined 39% between the two comparison periods, and the revenue from upgrades declined 32%.

This is a good opportunity for us to consider more strongly promoting the features available in the Plus plan to customers who check out with Personal, or offering a special upgrade promotion in the weeks after purchase.

#Free download requests

We started promoting our free download more heavily in May of 2024, and added the free download to the pricing column when the new prices went live in June.

As a result, the number of people requesting a free download increased by 50.3 percent, from an average of 151 per month to 227 per month.

“4. The number of free downloads would go up.”

✅ True

#Revenue from new customers

Revenue from new customers declined 9.4%, from $50,419 to $45,674. This is about in line with expectations, considering we saw a 21% drop in new users on the pricing page, and a 10% increase in average order value, with the bounce rates and conversion rates remaining unchanged.

“5. Revenue from new customers would stay the same or increase slightly.”

⚖️ True and false. Revenue did go down, but when offset against the decrease in traffic, it went up slightly.

#Lifetime sales

Our lifetime plans were originally priced at roughly three times the annual plan price, $999 for a single-site license at the Plus level (including all addons).

My hunch was that with the lifetime price unchanged, it would now be more enticing since it’s only 2.2x the annual Plus price.

We sold 11 lifetime licenses between March and May, and 11 lifetime licenses between June and August.

No change, but considering the drop in traffic, this means lifetime sales did increase slightly relative to the number of new visitors.

“6. Lifetime sales would increase since they are now a better value compared to annual.”

✅ True

We will probably consider raising the lifetime price again before the end of the year 📝

#Conclusion

In summary— the pricing change “worked” in that we increased the average order value from new customers, while maintaining the same conversion rate.

Unfortunately we’ve seen new customers gravitate towards the cheaper Personal plan, away from Plus, which meant we only saw a 10% increase in average order values despite a 20% price increase. This also means customers are missing out on some of our more valuable features, like Enhanced Ecommerce and Abandoned Cart Tracking.

Going into Q4 we’ll have to consider ways we might entice these customers to upgrade, for example maybe a special promo targeted at those users during Black Friday, when our upgrades are discounted by 30%.

Hope y’all found this interesting 🙂. Thanks for reading 🧡. Happy to answer questions in the comments 👇

– Jack

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