Pricing Strategy Simulator
Models the revenue and margin impact of different pricing strategies. Simulates price changes across tiers, estimates demand elasticity effects, and identifies the price point that maximizes total profit.
Business - Pricing Strategy Simulator.xlsx
Excel (.xlsx) — No macros — Works in Excel, Google Sheets, LibreOffice
What This Spreadsheet Solves
- Guessing at price points without understanding the profit impact
- No way to model how a price change affects demand volume
- Difficulty comparing flat, tiered, and value-based pricing structures
- Inability to find the optimal price that balances margin and volume
- Risk of leaving revenue on the table or pricing out of the market
Who This Is For
- Product managers setting or revising pricing
- SaaS founders choosing between pricing tiers
- E-commerce managers testing price sensitivity
- Marketing directors evaluating promotional pricing
Inputs
- $Current Price
- #Current Unit Volume
- $Variable Cost per Unit
- #Price Elasticity Estimate
- $Proposed Price (or tier prices)
Outputs
- Revenue at Each Price Point
- Estimated Volume at Each Price Point
- Gross Margin at Each Price Point
- Total Profit at Each Price Point
- Optimal Price Point
- Revenue vs. Profit Comparison
How Calculations Work
The model applies the price elasticity of demand formula to estimate how volume changes as price changes. For each candidate price, it calculates expected volume, revenue (price times volume), gross margin (revenue minus variable costs), and total profit. The optimal price is the one that yields maximum total profit. Tiered pricing is handled by modeling each tier independently and summing.
Example Use Case
Scenario: A SaaS product currently at $49/month with 1,000 subscribers, $12 variable cost, and estimated elasticity of -1.5. Testing prices of $39, $49, $59, and $69.
Result: At $39: 1,306 subscribers, $35.2K profit. At $49: 1,000 subscribers, $37K profit. At $59: 776 subscribers, $36.5K profit. At $69: 604 subscribers, $34.4K profit. Optimal price: $49 (current price is already optimal in this scenario).
What You Get — 5 Sheets
Technical Details
Frequently Asked Questions
How do I estimate price elasticity for my product?
Look at historical data: when you last changed the price, how did volume respond? Divide the percentage change in quantity by the percentage change in price. If you have no data, -1.0 to -1.5 is a reasonable starting range for most products.
Does this work for B2B pricing?
Yes, but B2B elasticity is often lower (closer to -0.5 to -1.0) because purchase decisions are less price-sensitive. Adjust accordingly.
Can I model freemium with paid tiers?
Enter each paid tier as a separate price point. The free tier does not generate revenue but can be noted in CONFIG as a conversion rate input.
What if my costs change at different volumes?
Enter the variable cost at your expected volume. For significant volume-dependent cost changes, run the model at multiple volume levels and compare.
Is this a substitute for A/B testing?
No. This is a forecasting model based on assumptions. A/B testing provides real-world data. Use this to narrow down candidate prices before testing.
Download Pricing Strategy Simulator
Ready to use immediately. Enter your data in the INPUT sheet, see results in OUTPUT.