How do you price a SaaS product? Most successful subscription businesses use multi-tier pricing—offering Basic, Pro, and Enterprise plans at different price points to serve different customer segments. But getting the pricing right is complex. Price too low and you leave money on the table; price too high and you lose customers. The tiers need to be strategically positioned to encourage upgrades while maximizing revenue per customer.

Whether you're a SaaS founder designing your first pricing page, a product manager optimizing existing tiers, a finance professional modeling revenue scenarios, or a business student learning subscription economics, understanding how pricing tiers affect MRR, ARR, and ARPU is essential. This simulator helps you model different pricing structures and see the financial impact before you commit.

Multi-tier pricing works because it segments customers by willingness to pay and feature needs. The Basic tier captures price-sensitive customers, Pro targets the majority of businesses, and Enterprise serves large organizations with custom requirements. The key is finding the right price gaps and feature differentiation that encourage upgrades without cannibalizing higher tiers.

Our Multi-Tier Pricing Plan Simulator lets you model three pricing tiers with monthly and annual billing options, set customer counts and gross margins per tier, then instantly see your MRR, ARR, ARPU, and gross profit breakdown. Run sensitivity analysis to understand how customer growth affects revenue and profitability.

What is Multi-Tier Pricing?

Multi-tier pricing is a SaaS pricing strategy where companies offer multiple subscription levels at different price points, each with increasing features, limits, or support levels. The most common structure is three tiers: Basic, Pro, and Enterprise.

Key SaaS Revenue Metrics

How MRR is Calculated with Monthly and Annual Plans

When you offer both monthly and annual billing, MRR normalizes annual subscriptions to monthly equivalents:

Example: 100 Basic customers at $29/month = $2,900 MRR. 50 Pro customers at $600/year = ($600 ÷ 12) × 50 = $2,500 MRR. Total MRR = $5,400.

Understanding Gross Profit by Tier

Different tiers often have different gross margins due to varying costs:

• Support Costs: Enterprise tiers include dedicated support, onboarding, and account management—higher costs.
• Infrastructure: Higher tiers may use more computing resources, API calls, or storage—increasing variable costs.
• Third-Party Integrations: Premium features may require costly third-party APIs or services.
• Service Delivery: Enterprise may include custom integrations, training, or professional services.

Follow these steps to model your multi-tier pricing structure:

1. Set Basic Tier Pricing: Enter monthly and annual prices for your entry-level tier. Annual prices are typically 15-20% discounted (e.g., $29/month = $290/year instead of $348).
2. Set Basic Tier Customers: Enter how many customers you have (or expect) on the Basic tier, split between monthly and annual billing.
3. Set Basic Tier Gross Margin: Enter the gross margin percentage for Basic tier (typically 70-85% for SaaS).
4. Repeat for Pro Tier: Enter Pro tier pricing, customer counts, and gross margin. Pro typically has slightly lower margins (65-80%) due to more support.
5. Repeat for Enterprise Tier: Enter Enterprise pricing, customer counts, and gross margin. Enterprise margins may be lower (50-70%) due to dedicated support and custom work.
6. Click "Calculate" and Review: The calculator displays:
   • Total MRR and ARR
   • ARPU (average revenue per user)
   • MRR breakdown by tier
   • Gross profit by tier
   • Customer distribution
   • Sensitivity analysis showing revenue at different growth levels

MRR Calculation by Tier

ARR and ARPU Calculations

Gross Profit Calculation

Full Example Calculation

• Pricing Tiers Too Close Together: If Basic is $29 and Pro is $39, customers see little value in upgrading. Price gaps should be meaningful (typically 2-3× between tiers) to encourage upgrades.
• Making Lower Tiers Too Feature-Rich: If Basic includes everything most customers need, they won't upgrade. Strategically limit key features in lower tiers to create upgrade incentives.
• Ignoring Gross Margin Differences: Enterprise tiers often have lower margins due to support costs. Don't assume all tiers have the same profitability—model them separately.
• Setting Prices Based on Cost, Not Value: Price based on customer value and willingness to pay, not your costs. A feature that costs you $1/month might be worth $50/month to customers.
• Not Offering Annual Billing: Annual billing improves cash flow, reduces churn, and lowers payment processing costs. The 15-20% discount is usually worth it.
• Forgetting About Expansion Revenue: This calculator shows base subscription revenue. In reality, customers may add seats, upgrade tiers, or purchase add-ons—increasing ARPU over time.
• Not Testing Pricing Changes: Pricing is a hypothesis. Use A/B tests or limited market tests before rolling out major pricing changes globally.

• Use Psychological Pricing: $99 feels significantly cheaper than $100, even though it's only $1 difference. Use prices ending in 9 for lower tiers, round numbers for enterprise.
• Anchor with Enterprise Tier: Display Enterprise tier first (even if few buy it) to make Pro tier look like a great value. This is the "decoy effect" in pricing psychology.
• Monitor MRR Share by Tier: Aim for 40-60% of MRR from Enterprise tier. If Basic dominates, your pricing may be too low or feature differentiation too weak.
• Implement Usage-Based Add-Ons: Beyond tiered pricing, offer usage-based add-ons (API calls, storage, seats) that increase ARPU as customers grow.
• Create Annual Discount Incentives: Offer 2 months free (17% discount) for annual prepayment. This improves cash flow and reduces churn risk.
• Test Price Increases Gradually: Instead of raising all prices at once, grandfather existing customers and raise prices for new customers only. Monitor churn impact.
• Use Competitor Pricing as Reference, Not Rule:Competitor pricing provides context, but your value proposition and cost structure determine optimal pricing. Don't blindly match.

These are general industry guidelines. Your optimal pricing depends on your specific value proposition, market, and cost structure.

• Static Customer Counts: This calculator uses fixed customer counts. In reality, churn, new acquisitions, and upgrades change these numbers monthly.
• No Expansion Revenue: The model shows base subscription revenue only. It doesn't account for seat additions, usage overages, or add-on purchases that increase ARPU over time.
• Constant Gross Margins: Gross margins are assumed constant per tier. In reality, margins may vary with volume, customer mix, or cost changes.
• No Churn Modeling: The calculator doesn't model customer churn or its impact on MRR. Churn is a critical factor in SaaS economics.
• Educational Purpose: This tool provides estimates for learning and planning. Actual pricing decisions should consider market research, competitive analysis, and professional guidance.

The information in this guide is based on established SaaS pricing principles and authoritative sources:

• U.S. Small Business Administration (SBA) - Business pricing strategies: sba.gov
• Federal Trade Commission (FTC) - Pricing transparency requirements: ftc.gov
• Financial Accounting Standards Board (FASB) - Revenue recognition for subscription services: fasb.org
• U.S. Securities and Exchange Commission (SEC) - SaaS metrics disclosure: sec.gov