Subscription Pricing Calculator

Subscription Pricing Strategy Guide

Setting the right price for a subscription product is one of the most impactful decisions a SaaS business can make. Price too low and you leave money on the table while struggling to cover acquisition costs. Price too high and you limit your addressable market and increase churn. The optimal price balances customer value perception with sustainable unit economics.

Cost-Plus vs. Value-Based Pricing

Cost-plus pricing starts with your costs and adds a margin. While this ensures profitability, it often underprices your product. Value-based pricing starts with the value your product delivers to customers and prices accordingly. Most successful SaaS companies use a blend of both approaches.

The LTV:CAC Ratio

The lifetime value to customer acquisition cost ratio is the single most important metric in subscription economics. A healthy ratio is 3:1 or higher, meaning each customer generates three times more value than it costs to acquire them.

• Below 1:1 - You are losing money on every customer. Urgent action needed.
• 1:1 to 3:1 - Sustainable but tight. Focus on reducing churn or CAC.
• 3:1 to 5:1 - Healthy and sustainable. This is the sweet spot.
• Above 5:1 - You may be underinvesting in growth. Consider spending more on acquisition.

CAC Payback Period

The CAC payback period tells you how many months it takes to recover your customer acquisition investment. For SaaS businesses, a payback period under 12 months is considered healthy. Longer payback periods strain cash flow and increase the risk of customers churning before you break even.

Annual Plan Strategy

Offering an annual plan at a discount (typically 15-20%, or "two months free") benefits both you and your customers. Customers save money, and you get upfront cash and significantly reduced churn. Annual customers churn at roughly half the rate of monthly subscribers because the switching cost is higher.

Tiered Pricing Best Practices

Most successful SaaS products offer three tiers. The entry tier captures price-sensitive customers and serves as a gateway. The mid tier (often called Pro) is where most revenue comes from and should be your recommended plan. The enterprise tier captures high-value customers willing to pay a premium for advanced features and dedicated support.