Glossary

Pricing Glossary

Definitions of key pricing, valuation and finance terms — with examples and formulas.

B

Break-Even Point (BEP)

The sales level at which revenue equals total costs — neither profit nor loss

C

Customer Acquisition Cost

Average cost of acquiring one new customer

Cost of Goods Sold

Direct costs of producing goods that were sold

Percentage of customers who cancel in a given period

Customer Lifetime Value

Total revenue a customer generates over their relationship

I–M

Internal Rate of Return

Discount rate at which NPV equals zero

Profit as a percentage of selling price

Profit as a percentage of cost — different from margin

Monthly Recurring Revenue

Monthly subscription revenue — key SaaS metric

N–R

Net Present Value

Sum of discounted future cash flows minus initial investment

Return on Investment

Profit as a percentage of investment cost

P–W

Price Elasticity of Demand

Measure of how demand responds to price changes

High entry price strategy, gradually reduced over time

Penetration Pricing

Low entry price strategy to gain market share

Weighted Average Cost of Capital — discount rate

Willingness to Pay

Maximum amount a customer is willing to pay