Tiered Pricing Calculator
Model revenue across pricing tiers, calculate blended ARPA, and see how customer distribution between tiers affects total revenue and upgrade potential.
Formula & Reference
| Variable | Symbol | Formula | Units |
|---|---|---|---|
| Tiered Pricing Calculator | — | Blended ARPA = Σ(tier price × tier customers) / total customers | currency |
Step-by-Step Examples
Tier 1 at 29 with 1,200 customers, Tier 2 at 79 with 480, Tier 3 at 199 with 95.
- Revenue = 34,800 + 37,920 + 18,905 = 91,625
- Total customers = 1,775
- Blended ARPA = 91,625 / 1,775 = 51.62
- Tier 1 is 67.6% of customers but only 38.0% of revenue
Same tiers with 8% moving up one tier.
- 96 move from T1 to T2, 38.4 from T2 to T3
- New revenue = 32,016 + 42,470 + 26,547 = 101,033
- Gain of 9,408, a 10.27% revenue increase from 8% upgrading
Tier 1 at 29 with 200, Tier 2 at 79 with 400, Tier 3 at 199 with 350.
- Revenue = 5,800 + 31,600 + 69,650 = 107,050
- Total customers = 950, ARPA = 112.68
- Tier 3 is 37% of customers and 65% of revenue
Real-World Applications
Common Mistakes to Avoid
Tiers need distinct value, not just feature counts. Poorly differentiated tiers cause decision paralysis rather than upgrades.
The largest tier by customer count is frequently not the largest by revenue. Support and product effort should follow revenue, not headcount.
Tier pricing should reflect the value each segment receives. Cost-based tier pricing typically leaves substantial revenue uncaptured at the top.