👉 Background: Xero is the accounting software that was created in New Zealand in 2006. It was one of the OG accounting platforms to launch in the cloud while the MYOBs and Quickens of the world were still malfunctioning on scratched CD-ROMs. Since then, it has grown to a global accounting giant with over 4.4 million subscribers.

👉 What happened: Xero has trumpeted its revenue for the full-year ended in March with its revenue increasing by 23% to $1.9 billion. But it was Xero’s net profit after tax (NPAT) that really got investors licking their lips - it was up 30%. And the secret sauce? Xero jacked up the price of its services, meaning the average revenue per user rose by 15%. Despite this, its customer base still grew by 6%.  

👉 What else: And now, Xero’s plan is to push more aggressively into the US for its next phase of growth despite already trying for the last 10 years. But with its strong and sticky product, it seems that even its increased pricing isn’t holding back customers these days.

What's the key learning?

💡Product stickiness refers to how likely customers are to keep using a product over time and how difficult it is for them to stop. It becomes so embedded in your life or business that you’re unlikely to switch - even when alternatives exist or prices go up.

💡Accounting software is one of the stickiest products out there. Once a business is set up on a platform like Xero, switching to a new one is a massive pain. You’ve got to move over your data, retrain staff, change workflows.

💡That’s why Xero has been able to push through a 15% price hike and still grow its subscriber base by 6% because most businesses would rather absorb the cost than go through the hassle of switching.