Pricing Sensitivity Calculator

Frequently Asked Questions

What is price elasticity and what number should I use?

Price elasticity here is how many percent of customers you lose for each 1% price increase. A value of 1.0 means a 10% price rise loses about 10% of customers (unit elastic). Sticky B2B products with switching costs are often 0.3-0.7 (inelastic); commodity or easily-substituted products can be 1.5+ (elastic). If unsure, start at 1.0 and test a range.

How do you find the profit-maximizing price?

The tool applies your elasticity to each price change, recomputes customers, revenue, and gross profit (variable cost per customer held fixed), and highlights the price that produces the highest gross profit. Because cost per customer is roughly fixed, the profit-maximizing price is usually higher than the revenue-maximizing price.

Why does gross margin improve when I raise prices?

The calculator derives your variable cost per customer from your current margin and holds it fixed in dollars. When price rises, that fixed cost is a smaller share of the new price, so gross margin percentage widens. This is realistic for software and most subscription businesses where cost to serve does not scale with price.

What is the break-even loss figure?

It is the percentage of customers you could lose at the new, higher price and still keep the same total MRR you have today. A large break-even cushion means a price increase is low-risk even if churn is worse than your elasticity assumption.

Is a higher price always better?

No. Past a point, elasticity-driven customer loss outweighs the higher price and both revenue and profit fall. Raising prices can also slow new-customer acquisition (not modeled here) and strain retention. Use the optimal-price row as a starting hypothesis, then test with a real cohort.

Keep learning