As entrepreneurs and businesses, we all want to make more money; however there is an innate dilemma in business that must be weighed up before a rush to increase your prices or change the rules for your customers.
The dilemma is whether to simply increase prices for existing customers or create more value to attract more customers and, in turn, more revenue. Get this wrong, and customers may simply walk away or refuse to pay.
In this article, we look at real-world examples of how lusting after money can drive business away and what entrepreneurs can learn from these examples.
Here goes…
The Extract Money Problem
It’s a simple issue, yet companies both large and small fall foul of it without even realising.
The problem starts with the simple question: how can we increase revenue?
The answer appears innocuous and straightforward: we have X number of customers; if we charge them $5 more each month, we will increase revenue by $5X per month, simple.
However, it’s not that simple. This solution, while mathematically correct, does not take into account how the enforced price increase will be perceived by the customer.
The vital question that needs to be asked is: what is the increased value to the customer to justify the price increase or policy change? If it’s likely that customers will feel exploited rather than appreciated, do not be surprised if they run for the hills.
This does not mean a company should not raise its prices or alter its terms of business; it just means factors outside of the simple accounting solution need to be taken into consideration first.
Years of goodwill can be eroded overnight by pursuing short-term financial gain. Here are five real world examples that highlight the issue:
1. Mailchimp
Mailchimp was built on the premise that email marketing tools should be accessible to small businesses.
Its free plans were a boon to growing small businesses. However, after an acquisition by Intuit in 2021, Mailchimp reduced the free plan limit, reducing the number of emails from 2000 contacts to just 250.
The automated email tool was also taken out of the free plan, making it virtually unusable for most small businesses.
Mailchimp faced significant backlash over the price increases, with many users looking at alternative Software as a Service (SaaS) email tools.
The new pricing structure essentially penalised businesses for growing their email list. The exact opposite of the original premise.
2. Adobe
Adobe built its business on providing creative software to businesses as one-off software purchases.
That model was changed from one-off software purchases to an ongoing subscription model.
However, in 2024, the US Federal Trade Commission announced legal action against Adobe, alleging that they had hidden early termination fees, effectively making it very difficult to cancel subscriptions without penalty.
Some cancellation fees could amount to 50% of the years subscription charges.
The Adobe case is an example of what happens when customer trust is eroded by putting in place systems that trap customers into a recurring revenue model.
Customers are more likely to stay if they feel the product provides value; they are less likely to stay if pricing models are restrictive.
3. Unity
Unity is a video game development platform, or ‘game engine’ that launched in 2005 to make game development more accessible to developers.
The original pricing model ran on a per-seat basis, so developers would pay an annual subscription ($2000 per year) for each developer in the team.
This meant that developers could be certain of their costs should a game ‘take off’.
However, in September 2023, Unity announced that it would be changing the pricing model to a Runtime Fee.
This would essentially mean developers would be charged per install of the game by users ($0.20 per install).
This change meant that as the success of a game grew, so would the costs. The backlash ensued.
Unity eventually backtracked on the new policy, and in September 2024, abandoned the Runtime Fee and reverted back to a seat-based subscription model.
4. Reddit
Reddit is a news aggregation and discussion website that offered API (Application Programming Interface) services to developers for free.
This meant that software developers could develop third-party applications to extract and serve Reddit data to users via software tools.
However, in 2023, Reddit announced that it would be introducing new API pricing, which threatened the viability of many of these third-party applications.
One developer, the Apollo app, stated that the changes could cost up to $20 million a year to maintain.
Apollo eventually announced that it was to shut down services on June 30th 2023.
5. Virgin Media
In 2024, UK consumer publication Which highlighted that Virgin and O2 customers faced a lose-lose scenario. Either pay increased mid-contract fees or get hit by a large exit fee. (Some exit fees could reach almost £700).
These mid-contract price rises included rises linked to inflation.
In January 2025, Ofcom, the UK telecommunications government body, ruled that mid-contract price increases linked to inflation would be banned. All price increases needed to be written in the contract with ‘pounds and pence’ figures.
What Can Entrepreneurs Learn?
These five examples show that entrepreneurs need to think carefully before altering the terms with loyal customers.
Of course, as entrepreneurs, there is a need to make money and profit, but that should not come at the expense of trapping a customer into a subscription or penalising them excessively for wanting to switch.
While aggressive pricing strategies may work in the short term it is likely that there will be backlash and reputational harm in the long run.
When revenue becomes the main objective rather than customer value, that is when a dangerous problem could lie ahead.
It’s important to remember that the biggest mistake is not charging too little but charging so aggressively that customers decide the price is not worth paying.
Final Thoughts
As an entrepreneur, you will of course want to make money and maximise profits.
However, the examples in this article highlight how excessive focus on revenue rather than on customer value can lead to backlash and ironically reduced revenue.
If customers do not perceive any additional value that comes with the price increase or policy change, the danger is that they simply move to a competitor.
Savvy entrepreneurs understand that attempting to lock in a customer via aggressive cancellation fees may lead to customer dissatisfaction and possible backlash.
Entrepreneurs should think very carefully before changing the rules or increasing prices aggressively.
Customer loyalty and trust can be lost rapidly if customers feel they are being extracted for money rather than being provided a valuable service.
Increased revenue should not come at the expense of customer value and trust.
Good luck!
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