Profit Surge: How a 41% Price Hike Transformed a SaaS Startup

Situation

This new company provided a SaaS service to companies in the oil and gas industry. In order to quickly build market share from launch, the company had initiated sales with a low price. The company quickly built up to about 20,000 customers, but the company was barely profitable.

The challenge

To find a way to increase prices to make the company highly profitable while minimizing the loss of subscribers.

Findings

Buyers in this market did not have a reference to what the service the company provides would or should cost. Meaning that they saw value that generated a willingness to pay that is similar over a wide range of prices. Thus, the company could increase prices by about 50% without losing subscribers.

Results

The company increased prices by an average of 41%, with zero loss of subscribers. The quickly added revenue not only made the company hugely profitable but also increased valuation so that, with the help of PE funds, it could purchase its main competitor.