Calculate how a price change affects demand and revenue based on price elasticity — see whether raising your price will increase or decrease total revenue.
Price elasticity of demand measures how sensitive your customers are to price changes.
It's the ratio of the percentage change in demand to the percentage change in price.
Elasticity = % Change in Demand ÷ % Change in Price
A price elasticity of −1.5 means a 10% price increase reduces demand by 15%.
Elastic vs inelastic demand
Elasticity
Type
Revenue effect of price increase
E
< 0.5
0.5 <
E
< 1
E
= 1
1 <
E
< 2
E
> 2
Typical elasticity values by market
Most B2B SaaS products have elasticity between −0.5 and −1.2 — meaning pricing power
is moderate to strong. This is why SaaS companies can raise prices by 10–20% and
retain most customers.
Market
Typical elasticity
Necessity software (payroll, accounting)
−0.3 to −0.6
B2B SaaS (tools)
−0.6 to −1.2
Consumer subscription
−1.0 to −2.0
Physical commodities
−1.5 to −4.0
Luxury goods
−0.3 to −0.8
When to use this calculator
Before a price increase: enter your current elasticity estimate to see the
demand drop and net revenue change. If revenue increases despite some churn,
the price increase is financially rational.
Modeling a discount: a price decrease increases demand but may reduce revenue
if demand is inelastic. This calculator shows when discounts are self-defeating.
Comparing pricing tiers: compare revenue at $49, $79, and $99 under different
elasticity assumptions to find the revenue-maximizing price.
Estimating your own elasticity
The best approach: A/B test pricing. Show 50% of new visitors price A and 50% price B.
Measure conversion rates. Elasticity ≈ (CR_B/CR_A − 1) / (Price_B/Price_A − 1).
If you can't A/B test: survey customers using Van Westendorp Price Sensitivity Meter
(ask: "too cheap", "bargain", "expensive", "too expensive") to estimate the price range
where demand is inelastic.
Frequently asked questions
What does this calculator do?
Calculate how a price change affects demand and revenue based on price elasticity.
How to Estimate Price Elasticity for Your SaaS Product
Practical methods to estimate price elasticity of demand for SaaS — from A/B testing to Van Westendorp surveys — without a PhD in economics.
Price elasticity is the most important unknown in any SaaS pricing decision.
You can't raise prices confidently without knowing how customers will respond.
Here are the practical methods for estimating elasticity without a large academic study.
Method 1: A/B test your pricing page (most reliable)
Show 50% of new visitors price A and 50% price B. Measure trial conversion rates.
Run for at least 2 weeks and 500+ visitors per variant.
This elasticity of −0.74 means a 10% price increase reduces demand by ~7.4% —
inelastic demand, price increase is revenue-positive.
Prerequisite: at least 1,000 visitors/month to get statistically reliable results.
Use a sample size calculator to determine test duration.
Method 2: Van Westendorp Price Sensitivity Meter
Survey 100+ customers with four questions:
1. At what price is this product too cheap (poor quality)?
2. At what price is it a bargain (great value)?
3. At what price is it expensive but still worth it?
4. At what price is it too expensive (you'd stop buying)?
Plot the cumulative distributions. The intersection of "too cheap" and "too expensive"
defines your acceptable price range. The intersection of "expensive" and "bargain"
is the price point of marginal cheapness (PMC) — your optimal price.
Method 3: Analyze churn after a price increase
If you've raised prices before, look at the churn data:
- How many customers cancelled within 60 days of the increase?
- What % of your customer base churned specifically citing price?
This is a retrospective method — useful for calibrating future decisions.
Method 4: Competitor price comparison
If competitors are priced above you and growing, that's evidence your market is
relatively inelastic. If you're priced above competitors and seeing churn to
lower-priced alternatives, that's evidence of elastic demand.
What elasticity to assume when you have no data
If you have no data and can't run tests:
- B2B SaaS with significant switching costs: assume −0.7 to −0.9
- B2B SaaS without lock-in: assume −1.0 to −1.3
- B2C subscription (consumer): assume −1.5 to −2.0
- E-commerce / physical goods: assume −1.5 to −3.0
Use the Pricing Elasticity Calculator to
model revenue impact at different elasticity assumptions before running a live test.
When to Raise SaaS Prices: The Data-Driven Framework
A framework for deciding when and how much to raise SaaS prices — with the financial signals, elasticity tests, and implementation tactics that minimize churn.
Most SaaS founders underprice — and most know it. The difficulty isn't knowing that
prices should be higher; it's knowing when, by how much, and how to do it without
triggering mass churn.
5 signals that you're ready to raise prices
1. Customers rarely object to price
If fewer than 10% of sales conversations mention price as a concern, you almost
certainly have room to raise prices. Price objections are the market telling you
you're at the ceiling.
2. Net Revenue Retention is above 100%
If NRR is above 100%, customers are expanding. This is evidence of perceived value
well above your current price. Raise prices on new customers first.
3. You're converting more customers than you can serve well
If support burden is high and new customer quality is declining, a price increase
is a natural filter for higher-value customers.
4. Competitors are priced higher
If direct competitors charge 30–50% more without losing, your pricing is below market.
You have pricing power you're not using.
5. Your value proposition has strengthened
New features, integrations, customer outcomes, case studies — if the product is
meaningfully more valuable than 12 months ago, price should reflect it.
The safe way to raise prices
Apply immediately to new customers only — test with no risk to revenue
Grandfather existing customers for 6–12 months — reduces churn dramatically
Announce the change 60–90 days early — customers appreciate transparency
Lead with value, not apology — announce new features alongside the increase
Model the revenue math before committing. Use the Pricing Elasticity Calculator
with your estimated elasticity to see whether the revenue uplift justifies expected churn.
Price Elasticity vs Willingness to Pay: What's the Difference?
Understand the difference between price elasticity and willingness to pay — and how each concept should guide your SaaS pricing strategy.
Price elasticity and willingness to pay (WTP) are two related but distinct pricing concepts
that SaaS founders often conflate. Understanding both — and how they interact — leads to
better pricing decisions.
Willingness to Pay (WTP)
Willingness to pay is the maximum price a specific customer or customer segment would
pay for your product before declining to purchase. It's a threshold, not a rate.
WTP varies by customer:
- A 500-person enterprise company might have WTP of $10,000/year for a collaboration tool
- A solo founder might have WTP of $29/month for the same tool
WTP is measured with surveys (Van Westendorp, Gabor-Granger, conjoint analysis) and
is the basis for segmented pricing — charging different customer segments different prices.
Price Elasticity
Price elasticity measures the aggregate sensitivity of your entire customer base to
price changes. It's a population-level measure, not an individual one.
Elasticity is measured with A/B tests or by observing demand changes after price changes.
How they interact
If your WTP research shows high variance across customers (some will pay $50/month,
others $500/month), that's an opportunity for tiered pricing — not a single price that
tries to serve all segments.
If your elasticity data shows inelastic demand overall, that tells you the entire market
is relatively price-insensitive — you can raise prices across all tiers.
Practical implications
When WTP research shows you're underpriced: raise list prices without needing
elasticity data. The surveys tell you directly where the price ceiling is.
When elasticity research shows inelastic demand: raise prices confidently.
Demand will fall less than proportionally.
When elasticity shows elastic demand: focus on WTP to find which customer segment
is price-sensitive, and consider whether you're selling to the wrong segment.
Use the Pricing Elasticity Calculator to
model revenue outcomes at different price points given your elasticity estimate.
Price Elasticity in SaaS: How to Test Before You Raise Prices
How to estimate price elasticity for your SaaS product before raising prices — A/B testing methods, cohort analysis, and interpreting the results.
Most SaaS companies don't know their price elasticity. Here is how to estimate it
before committing to a price increase.
Method 1: New customer A/B test
The cleanest approach: run two cohorts of new prospects at different price points.
Split incoming leads randomly — 50% see the current price, 50% see the higher price.
Measure: trial-to-paid conversion rate and time-to-close.
If conversion rate drops < 15% for a 20% price increase, you are inelastic.
Method 2: Cohort analysis (retrospective)
Look at customers who were grandfathered at old prices vs. customers who started
at the current price. If retention rates are similar, willingness to pay is higher
than current pricing.
Method 3: Willingness-to-pay surveys
Van Westendorp Price Sensitivity Meter: ask 4 questions:
1. At what price is this product too cheap (low quality)?
2. At what price is it a bargain?
3. At what price is it expensive but worth considering?
4. At what price is it too expensive to buy?
The optimal price range falls between the intersection of "too cheap" and "too expensive."
Signals of inelastic SaaS pricing
High NPS (customers who love the product rarely price-compare)
Low churn (switching cost > price sensitivity)
Deep workflow integration (embedded in daily operations)
Clear ROI (customer can quantify what they get back)
If any three apply, you likely have inelastic demand and can raise prices by 15–25%
with minimal churn impact.
Elastic vs Inelastic Demand: Real-World Business Examples
Practical examples of elastic and inelastic demand across B2B SaaS, e-commerce, and consumer products — and what they mean for pricing strategy.
Understanding whether your product has elastic or inelastic demand is the first
step to any pricing decision.
Inelastic demand examples (|PED| < 1)
Salesforce CRM: after 3 years of integration, switching cost is enormous.
Price increases of 5–10% annually have little demand impact.
Enterprise software with deep integrations: ERP systems like SAP or Oracle
are deeply embedded in operations. Users have no practical substitute.
Utility-like services: payroll software (ADP, Gusto) processes every
paycheck. A 20% price increase is cheaper than the friction of switching.
Pharmaceuticals (branded drugs): doctors prescribe by brand; patients
rarely price-shop; demand is inelastic until a generic appears.
Elastic demand examples (|PED| > 1)
Commodity SaaS (e.g. basic project management): many alternatives
at similar price points. A 30% price increase triggers comparison shopping.
Consumer e-commerce (non-brand): shoppers compare prices on Google
Shopping; any price above the market cheapest leads to cart abandonment.
Freelancer platforms: if you raise platform fees, freelancers shift to
competitors. The switching cost is low and the alternatives are plentiful.
The key driver: switching cost
The biggest determinant of elasticity for B2B products is switching cost.
The higher your switching cost (data lock-in, integrations, training), the
more inelastic your demand.
Subscription management and revenue analytics for SaaS. Track how pricing changes affect MRR, NRR, and churn — essential for validating your elasticity assumptions.