Beginner's Guide: What Are the Essential SaaS Pricing Metrics You Should Know?

July 22, 2025

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In the complex world of SaaS, pricing isn't just about picking a number that feels right. It's a strategic decision that can make or break your business model. Whether you're launching your first SaaS product or looking to optimize your existing pricing strategy, understanding the key metrics that drive pricing decisions is crucial.

This beginner's cheat sheet walks you through the essential SaaS pricing metrics that industry experts monitor to ensure profitability and sustainable growth.

Why SaaS Pricing Metrics Matter

SaaS pricing is fundamentally different from traditional software pricing. With subscription-based models, revenue accrues over time rather than in one upfront payment. This makes tracking the right metrics critical.

According to OpenView Partners' 2022 SaaS Benchmarks report, companies that regularly review and adjust their pricing based on metrics data see 30% higher growth rates than those that don't.

Core SaaS Pricing Metrics Every Beginner Should Track

1. Monthly Recurring Revenue (MRR)

This is the predictable revenue your business generates each month from all active subscriptions.

How to calculate: Sum all of your monthly subscription values.

Why it matters: MRR provides the foundation for many other pricing KPIs and gives you visibility into your company's financial health at a glance.

Example: If you have 100 customers paying $50/month and 50 customers paying $100/month, your MRR is $10,000 ($5,000 + $5,000).

2. Annual Recurring Revenue (ARR)

Similar to MRR but calculated on an annual basis.

How to calculate: MRR × 12, or sum all yearly subscription values.

Why it matters: ARR helps you track yearly growth and is often the metric investors care most about.

3. Average Revenue Per User (ARPU) or Account (ARPA)

This metric shows how much revenue you generate from each customer on average.

How to calculate: MRR ÷ Total number of customers

Why it matters: ARPU helps you understand if your pricing strategy is effective and identifies opportunities for up-selling or cross-selling.

Target range: According to ProfitWell, B2B SaaS companies should aim for an ARPU between $100-$200 for SMB-focused products, and $200-$500+ for enterprise solutions.

4. Customer Acquisition Cost (CAC)

The total cost of acquiring a new customer.

How to calculate: Total sales and marketing costs ÷ Number of new customers acquired

Why it matters: CAC directly impacts your unit economics and helps ensure your pricing can support your go-to-market strategy.

5. Customer Lifetime Value (LTV)

The total revenue you can expect from a customer throughout their relationship with your business.

How to calculate: ARPU × Average customer lifespan (in months)

Why it matters: LTV helps determine how much you can afford to spend on acquiring customers and shapes your pricing tiers.

6. LTV:CAC Ratio

The relationship between what a customer is worth and what it costs to acquire them.

How to calculate: LTV ÷ CAC

Why it matters: This ratio is essential for determining pricing sustainability.

Target range: Most successful SaaS companies maintain an LTV:CAC ratio of 3:1 or higher, according to Bessemer Venture Partners' State of the Cloud report.

7. Churn Rate

The percentage of customers who cancel their subscription during a given time period.

How to calculate: (Number of customers who churned in a period ÷ Total customers at the start of that period) × 100

Why it matters: High churn could indicate your pricing doesn't align with the perceived value of your product.

Target range: According to Baremetrics, healthy SaaS businesses typically aim for monthly churn rates below 2%.

8. Expansion Revenue

Revenue generated from existing customers through upsells, cross-sells, or plan upgrades.

How to calculate: MRR from upgrades and add-ons ÷ Total MRR

Why it matters: This metric shows how effectively your pricing structure encourages customers to spend more over time.

How to Apply These SaaS Pricing KPIs

Check Your Pricing Power

Use your Net Promoter Score (NPS) alongside the above metrics to determine if you have room to increase prices:

  • High NPS (40+) + Low Churn (<2%): You likely have pricing power
  • Average ARPU relative to similar products: Compare to competitors to identify pricing opportunities

Design Better Pricing Tiers

Use feature adoption data alongside these pricing metrics to:

  1. Identify which features drive the most value (correlate with lower churn)
  2. Place high-value features strategically across pricing tiers
  3. Test new pricing structures with cohorts of new customers

Common SaaS Pricing Metric Mistakes to Avoid

  1. Focusing only on revenue metrics while ignoring customer satisfaction measures
  • Solution: Balance pricing KPIs with NPS and customer satisfaction scores
  1. Misaligning pricing with customer acquisition costs
  • Solution: Ensure your LTV:CAC ratio stays above 3:1
  1. Setting prices too low initially
  • Solution: Based on data from Price Intelligently, SaaS companies typically underprice their products by 30-40%
  1. Not differentiating pricing tiers effectively
  • Solution: Use value metrics specific to your industry (e.g., seats, storage, transactions) rather than just features

Next Steps for Optimizing Your SaaS Pricing Strategy

Now that you understand the essential SaaS pricing metrics, here are practical next steps:

  1. Implement tracking for these key metrics in your analytics platform
  2. Schedule regular (quarterly) pricing reviews based on metric performance
  3. Run controlled pricing experiments with new customer segments
  4. Develop a value-based pricing model that aligns with how customers measure success

Remember that pricing is never "set and forget" in SaaS. The most successful companies revisit their pricing strategy every 6-9 months, using these metrics as their guide.

By mastering these fundamental SaaS pricing metrics, you'll be equipped to make data-driven decisions that boost revenue while delivering value to customers—the perfect recipe for sustainable growth.

Get Started with Pricing Strategy Consulting

Join companies like Zoom, DocuSign, and Twilio using our systematic pricing approach to increase revenue by 12-40% year-over-year.

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