Canva's 300% Price Hike: A Masterclass in Backtracking

In 2024, Canva, the all-in-one graphic design tool, made a big pricing change. They increased prices by 300%, pointing to the new AI features.

People got very upset. Many users voiced their anger. Some even left Canva after a decade. This bold move drew attention, to say the least.

Canva quietly introduced the teams plan in April 2024. They first talked about the changes via email in August 2024.

But because of the loud disapproval, they quickly backtracked on October 10, 2024.

They introduced a Pricing Promise to show they listened to their community.

They decided to keep the grandfather their old users. New customers, however, now pay a premium. Grandfathered pricing refers to a pricing model where existing customers are allowed to continue paying the same rate for a product or service, while new customers pay a higher rate. This approach is commonly used in SaaS when a company raises its prices, either due to inflation or to reflect increased costs. For Canva, the increase in costs was due to AI Image Generation.

This allows them to acquire new users while boosting their monthly recurring revenue (MRR).

Canva’s approach shows they considered things carefully. They waited to see how the changes would impact them. They evaluated what price is fair for users.

Alex Hormozi says the fastest way to scale a business is just to increase its prices.

Gumroad increased its fees to a flat 10% from a variable 2.9% to 9%. This resulted in the highest revenue in the company's history. It went from unprofitable to making 10s of millions of dollars per year.

With its Pricing Promise, Canva is now positioned to increase prices in the future to boost MRR. Their strategy follows a common playbook: start with low prices to gain market share, and then gradually increase prices once you dominate the market.

Canva's initial price hike was likely too aggressive, which they subsequently corrected but they can and will 100% try again.

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Remember, most people use your product for only 2 to 4 features they need. And they can now make those features with AI 10x faster.

The only products that won’t get replaced are the ones that are extremely complex (Zapier/Gumloop/CopyAI) or the ones that have network effects (Beehiiv/Kit).

Rabbit Holes

1. 4 Perspective Shifts Dr.Kashey Taught Me That Keep Me Going by Alex Hormozi

2. Model Context Protocol (MCP) Quickstart by Glamma AI

3. Going global: How and why to hire remotely by Jaryd Hermann and Bill Kerr

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