.png)
Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.
Are you struggling to make sense of your SaaS pricing strategy? You're not alone. Many executives find themselves drowning in complex metrics and analytics dashboards without truly understanding which numbers actually matter for business growth.
This simple report breaks down essential SaaS pricing metrics into digestible insights that even a complete beginner can understand and act upon. No complicated jargon—just straightforward analysis of the numbers that will make or break your SaaS business.
Why SaaS Pricing Metrics Matter More Than You Think
SaaS pricing isn't just about setting a monthly subscription fee. It's the strategic foundation that impacts everything from customer acquisition to long-term profitability. According to OpenView Partners' 2022 SaaS Benchmarks report, companies that regularly optimize their pricing see 25% higher growth rates than those who set and forget their pricing structure.
The problem? Many executives treat pricing as a one-time decision rather than an ongoing optimization opportunity that requires careful tracking and analysis.
The Only 5 SaaS Pricing Metrics Beginners Need to Track
Rather than overwhelming you with dozens of complex KPIs, let's focus on the five pricing metrics that deliver the most value for your analysis efforts:
1. Average Revenue Per User (ARPU)
What it is: The average amount of revenue generated by each customer.
How to calculate it: Total monthly recurring revenue ÷ Total number of customers
Why it matters: ARPU helps you understand how much each customer is worth to your business. If your ARPU is trending downward, it might indicate you're attracting too many low-value customers or that your pricing tiers need adjustment.
According to Price Intelligently, a mere 1% improvement in ARPU can translate to an 11% increase in bottom-line results. That's more impact than similar improvements in acquisition or retention metrics.
2. Customer Acquisition Cost (CAC)
What it is: The total cost of acquiring a new customer.
How to calculate it: Total sales and marketing expenses ÷ Number of new customers acquired
Why it matters: Your pricing strategy directly impacts how quickly you recover CAC. If your pricing is too low, you'll struggle to achieve profitability regardless of how many customers you acquire.
A healthy business typically recovers CAC within 12 months. If yours is longer, your pricing may need reconsideration.
3. Customer Lifetime Value (LTV)
What it is: The total revenue you can expect from a customer throughout their relationship with your company.
How to calculate it (simple version): ARPU × Average customer lifespan (in months)
Why it matters: LTV helps you understand how much you can afford to spend on acquiring customers. The ideal LTV:CAC ratio is 3:1, meaning each customer generates three times more revenue than what it cost to acquire them.
4. Revenue Churn Rate
What it is: The percentage of recurring revenue lost over a specific period.
How to calculate it: (MRR lost in a period - Expansion MRR) ÷ MRR at the beginning of the period
Why it matters: Revenue churn directly impacts your growth rate and company valuation. According to SaaS Capital, a mere 1% difference in churn can impact your company's valuation by more than 12% when raising capital or preparing for acquisition.
High churn often indicates pricing-value misalignment—customers aren't getting enough value to justify what they're paying.
5. Expansion Revenue Rate
What it is: The percentage of additional revenue generated from existing customers.
How to calculate it: Expansion MRR ÷ MRR at the beginning of the period
Why it matters: This metric reveals how effectively your pricing structure encourages customers to upgrade or purchase additional services. A strong expansion rate can offset churn and drive significant growth without requiring new customer acquisition.
According to SaaS analytics firm ProfitWell, companies with successful expansion revenue strategies grow 34% faster than those focusing solely on acquisition.
How to Create Your First Basic SaaS Pricing Analytics Dashboard
You don't need complex tools to get started with pricing analytics. Begin with these simple steps:
- Create a spreadsheet tracking the five metrics above on a monthly basis
- Set up simple line graphs to visualize trends over time
- Segment your metrics by pricing tier to identify which customer segments deliver the most value
- Establish benchmark targets based on industry standards for your company size and growth stage
Many SaaS businesses begin their pricing analysis using Excel before graduating to specialized analytics tools. What matters most is consistent tracking—not the sophistication of your tools.
Common Pricing Metric Mistakes Beginners Make
Even a straightforward beginner analysis can go wrong. Here are the most common pitfalls to avoid:
Looking at averages only: Aggregate metrics can hide important segment-specific insights. Always break down metrics by customer segments.
Ignoring indirect pricing impacts: Pricing changes affect acquisition, conversion rates, and support costs. Track these alongside direct revenue metrics.
Focusing on revenue but ignoring profits: Lower prices might increase revenue but destroy margins. Track contribution margins alongside pricing metrics.
Measuring too infrequently: Pricing KPIs should be reviewed monthly, not quarterly or annually, to catch problematic trends early.
How to Actually Use These Metrics to Improve Your Pricing
Understanding metrics is one thing; applying them is another. Here's a simple action plan:
- If your LTV:CAC ratio is below 3:1, consider raising prices or creating higher-value tiers
- If expansion revenue is low, evaluate your upsell opportunities and value-based pricing tiers
- If revenue churn exceeds 5% monthly, interview churned customers to identify value-price misalignment
- If ARPU is trending downward, evaluate your customer acquisition channels to ensure you're targeting the right market segments
According to a study by Simon-Kucher & Partners, companies that conduct data-driven pricing optimization at least yearly achieve profit improvements of 3-8% within the first year.
When to Graduate from Beginner Metrics to Advanced SaaS Analytics
These basic pricing KPIs provide an excellent foundation, but as your company grows, you'll want to incorporate more sophisticated analyses:
- Price sensitivity testing
- Feature value analysis
- Cohort-based pricing performance
- Price localization performance
- Willingness-to-pay research
Most companies should consider advancing their pricing analytics when they reach $1-5M in ARR, depending on market competitiveness and pricing complexity.
Conclusion: Simple Doesn't Mean Ineffective
You don't need a team of data scientists to gain valuable insights from your SaaS pricing metrics. This simple report framework provides the essential KPIs even beginners can track to make more informed pricing decisions.
The key is consistency—track these metrics regularly, look for trends rather than fixating on single data points, and use the insights to drive incremental improvements to your pricing strategy.
Remember that pricing optimization is a continuous process, not a one-time event. Even modest improvements in these key metrics can dramatically impact your company's growth trajectory and valuation over time.