How do you raise prices without losing existing customers?

Raise the price for new customers first, and tell the existing ones in writing, with the reason. The people already using your product chose it at the old price. Changing it under them changes a deal they agreed to, and on a small product trust is most of what you have.

The time I did it badly

My holiday lets product had been losing money on its keenest customers for 4 months while I told myself it was marketing. When I finally raised the price, I raised it for everybody, at once, by a short email, because I wanted the losses to stop that month.

Most of them left. That included people who'd never cost me much, who read my email as a man changing the deal because it suited him. They were right. I'd made a mistake in the price and charged the people who trusted me for it.

The time I did it properly

On my document product, longer documents had started arriving from a new kind of member, and the cost line had been telling me for a month. The new price applied to anybody who signed up from the following month. Everybody already there kept theirs.

I wrote to the existing customers anyway, in a proper letter. I told them the price was going up for new members and why: longer documents, higher model fees, and a preference for charging new people the right price over making the product worse for everybody. I told them their own price wasn't changing. I didn't say it would never change, because I don't make promises I can't see the end of.

Nobody complained. A couple wrote to thank me for telling them.

The cost, and when it fails

For a while your oldest customers are your least profitable. That's fine when the heavy use comes from new people. If your heaviest customers are also your oldest, new-customers-first won't stop the bleeding, and you have a harder conversation coming.

The test before any rise: can you write the letter in 5 sentences, with a date and a reason? If not, you're not ready to send it.

Who Pays for the AI? has the chapter.