Strategic Pricing Optimization in PE – Drive Growth & Expand EBITDA Margins

How PE Can Unlock Equity Value Through Strategic Pricing Optimization

Pricing is one of the most powerful levers for value creation. Monetization improvements for PE-backed companies, a disciplined, data-driven approach to pricing can unlock significant equity value by improving unit economics, accelerating growth, and expanding EBITDA margins.

Pricing as a Direct EBITDA and Growth Driver

  • Most portfolio companies focus disproportionately on customer acquisition rather than optimizing monetization
  • Pricing decisions often lack ownership, falling between product, sales, and finance without a clear strategic process
  • Many companies set pricing based on internal costs or competitor benchmarks rather than customer value, leading to lost revenue

For PE firms, building a structured pricing optimization function within portfolio companies can drive immediate improvements in revenue efficiency, LTV/CAC ratios, and overall profitability

Adopt a Value-Based Pricing Model

  • Avoid cost-plus and competitor-based pricing, which fail to capture true customer willingness to pay
  • Conduct pricing research to determine the price sensitivity and value perception of different customer segments
  • Align price points with customer-perceived value rather than legacy structures or internal cost considerations

SaaS businesses that optimize pricing effectively have seen LTV increase by more than twofold while reducing customer payback periods—improving both growth and capital efficiency

Quantify Buyer Personas and Align Pricing Tiers

  • Many portfolio companies fail to develop data-driven buyer segmentation, relying on anecdotal or incomplete customer profiles
  • Buyer personas should be segmented based on:
    • Industry and company size
    • Feature preferences and usage behavior
    • Willingness to pay and expansion potential
  • Pricing tiers should align with these distinct customer segments rather than broad, undifferentiated pricing models

Implement a Scalable Value Metric

  • Pricing should be structured around a value metric that scales with customer usage and growth
  • Many SaaS companies monetize based on clear customer outcomes, such as:
    • HubSpot charging per marketing contact
    • Snowflake pricing based on compute and storage usage
  • A well-defined value metric ensures expansion revenue increases automatically as customers derive more value, improving net revenue retention and long-term profitability

Build a Pricing Optimization Function Within Portfolio Companies

  • PE-backed companies should establish a pricing committee with leaders from finance, sales, marketing, and product
  • Pricing should be reviewed at least every year to optimize packaging, segmentation, and monetization
  • A structured approach should include:
    • Systematic testing of price points for different customer segments
    • Close tracking of churn rates and expansion revenue to refine tier structures
    • Iteration on pricing messaging and positioning to maximize conversion and retention

Reduce Reliance on Discounts and Improve LTV/CAC

  • Aggressive discounting erodes pricing power and devalues the product, leading to higher churn
  • Discounted customers are significantly less likely to renew at full price, reducing LTV and elongating CAC payback periods
  • Instead, companies should focus on:
    • Structuring annual contracts with incentives to improve cash flow and retention
    • Pricing increases tied to clear value enhancements, rather than reactive discounting to win deals

Many companies that implemented a 20% discounting saw CAC payback extend by many months, significantly slowing growth and GTM capital efficiency

Optimize Pricing Page and Market Positioning

  • Each pricing tier should clearly map to a distinct buyer persona
  • Value metrics should be the focal point of the pricing structure, ensuring customers see a logical path to upgrading
  • Avoid A/B testing of prices, as it often lacks statistical significance and creates customer distrust
  • Localize pricing where applicable, optimizing for different geographies based on regional willingness to pay

Private Equity’s Role in Pricing Transformation

For PE firms, pricing strategy represents an immediate and scalable lever for improving portfolio company performance. Pricing improvements can drive near-term revenue growth with minimal incremental costs, making it one of the most capital-efficient paths to EBITDA expansion

Key steps for PE-backed companies:

  • Ensure you have a GTM expert in-house who can help or hire an experienced PE-focused pricing strategy consulting firm
  • Conduct a pricing audit to identify gaps and revenue opportunities
  • Develop a value-based pricing strategy that maximizes expansion potential and monetization efficiency
  • Implement a systematic pricing review cycle to ensure pricing evolves with market conditions and customer demand

Pricing optimization is not a one-time project and it is a core component of long-term value creation. PE firms that instill a structured approach to pricing across their portfolio will generate higher growth, stronger margins, and improved capital efficiency, ultimately leading to higher exit multiples and stronger investment outcomes.