Glossary
Quick definitions and links to the calculators and guides where each term shows up in practice.
Terms
A/B Test Experiment comparing two variants; used for pricing pages and packaging. Activation The moment a user experiences core value; the hinge point between signup and habit. ACV (Annual Contract Value) Annualized contract value; often used for sales performance and enterprise pricing. Add-on Optional feature or capacity sold separately, often used for expansion revenue. Annual Plan A plan billed yearly; often includes discounts and changes cash timing. Annual Prepay Discount Discount for annual commitment; trades revenue for cash flow and retention. API Call A request to an API endpoint; can be priced per call or per 1,000 calls. ARPA / ARPU Average revenue per account (or user) used in LTV and payback models. ARPU Average revenue per user; used more in consumer apps than B2B accounts. ARR Annual recurring revenue; MRR x 12 run-rate for subscriptions. ARRR Funnel Acquisition, Activation, Retention, Revenue, Referral; a lifecycle view for growth and pricing. Backups Data copies for recovery; often adds storage overhead and retrieval costs. Bandwidth Data transferred per time, typically priced per GB with tiered rates. Bill Shock Unexpectedly high invoices in usage pricing; reduces retention and trust. Billing Cycle How often you invoice (monthly, annual); affects churn measurement and cash flow. Blended Cost Weighted average unit cost across regions, tiers, and discounts. Bookings Contracted revenue (often annual) that may differ from recognized revenue and ARR. Break-even Churn Churn rate where a price increase produces no net revenue gain. Burst Traffic Spiky usage patterns; increases risk in usage-based pricing and capacity planning. CAC (Customer Acquisition Cost) Cost to acquire a customer; use with gross profit to estimate payback. CAC Payback Period How many months of gross profit it takes to recover CAC. CDN Content Delivery Network; reduces origin load but can introduce request fees. Churn (Customer & Revenue) Loss of customers or recurring revenue over time (logo vs revenue churn). Churn Cohort Churn measured by cohort to avoid misleading period-over-period comparisons. Churn Mitigation Tactics to reduce churn, from onboarding and guardrails to pricing and packaging. COGS (Cost of Goods Sold) Direct costs to deliver your product (infra + vendor costs for SaaS). Cohort Group of customers sharing a start date or trait; used to measure retention and churn. Cohort Retention Retention measured by customer cohorts over time; helps interpret churn correctly. Contract Value Value of a contract over its term; commonly expressed as TCV or ACV. Contribution Margin Margin after variable costs (often gross profit minus variable S&M/support). Cross-sell Selling a different product or add-on to an existing customer; can improve ARPA. Discount Reducing price to drive conversion or commitment; must be modeled for margin impact. Downgrade Reduction in recurring revenue from a customer due to lower plan or usage. Effective Monthly Rate Annual price normalized to a monthly equivalent for comparison. Egress Outbound data transfer; often a significant variable cost for infra products. Expansion Revenue Revenue gained from existing customers via upsells, usage growth, or add-ons. Fair Use Reasonable usage expectation for plans; prevents abuse and cost spikes. Feature Gating Restricting features by plan; shifts value capture beyond pure usage. Fixed Cost Costs that do not scale with usage; should be recovered via base fees. GB-Month Storage measured as average GB stored over a month (GB times time). Grace Period Time window before enforcing limits after payment failure or overage; impacts churn and support. Grandfathering Keeping existing customers on old pricing to reduce churn risk during increases. Gross Margin The percent of revenue left after COGS; a core constraint for pricing. GRR (Gross Revenue Retention) Revenue retention excluding expansions; isolates churn and downgrades. Included Usage Usage bundled into a plan or platform fee before overages apply. Logo Churn Percent of customers who cancel in a period (customer churn). LTV (Customer Lifetime Value) Expected gross profit over a customer's lifetime and key assumptions. LTV:CAC Ratio of lifetime gross profit to CAC; a common unit economics health check. Marginal Cost Incremental cost to serve one more unit or customer; key for usage pricing. Minimum Commitment A minimum monthly or annual spend requirement, often paired with usage pricing. MRR Monthly recurring revenue; normalized subscription revenue per month. Net New MRR New + expansion MRR minus churn and contraction; core growth metric. NRR (Net Revenue Retention) Revenue retention including expansions; key for growth and pricing impact. On-call Operational coverage for incidents; a key driver of support cost and SLA pricing. Origin Fetch Traffic from CDN to origin; can affect egress and cost structure. Overage Charges applied when a customer exceeds included usage or plan limits. P50 (Median) Usage Typical usage level; useful for designing included usage, tiers, and limits. P90 Usage Heavy usage level; use to protect gross margin and avoid subsidizing power users. Packaging How you bundle features and limits into plans; shapes value perception and conversion. Payback Period Time required to recover CAC from gross profit; key unit economics metric. Per Active User Charging based on active users instead of total seats; aligns price with usage intensity. Per Seat Charging per user seat; simple to explain but can misalign with cost for automation-heavy customers. Platform Fee A base fee charged regardless of usage; recovers fixed costs. Price Increase Raising prices; evaluate break-even churn and rollout strategy. Pricing Metric The unit you charge on; should be buyer-friendly and align with value/cost. Pricing Page Your plan and unit definitions; must be clear to avoid sales/support friction. Ramp How quickly customers grow into paid usage after signing up; affects payback and tier design. Rate Card A list of unit prices for usage, add-ons, and services; useful for enterprise quoting. Rate Limit Limits on requests per time window; can protect cost and plan fairness. Renewal A customer continuing their subscription at the end of a billing term. Replication Storing multiple copies for durability/availability; increases GB-month cost. Request A single operation sent to a service (API request, storage request, etc.). Request Pricing Pricing based on API or storage requests; requires clear unit definitions. Retention Curve Retention plotted over time; highlights early churn vs long-term stickiness. Retrieval Fees Fees to read data back from cold storage; important for archival products. Revenue Churn Percent of recurring revenue lost in a period (gross or net). Revenue per Seat Average recurring revenue per seat and how it changes under pricing models. Revenue Recognition Accounting treatment of revenue over time; differs from cash collected. Run Rate A normalized revenue pace (e.g., MRR) used to project annualized performance. Scenario Modeling Best/base/worst cases (p50 vs p90) used to stress-test pricing. Seat-Based Pricing Charging by number of users; simple but can break when costs scale with usage. Storage Costs Costs to store data plus requests, replication, backups, and overhead. Support Costs Support effort that may scale with accounts or usage; influences COGS decisions. TCV (Total Contract Value) Total value over the full contract term (including multi-year commitments). Throttling Delaying or rejecting requests when usage exceeds limits; impacts user experience. Tiers Pricing levels with different limits or features; used to segment customers. Time to Value How quickly a customer reaches value; affects churn risk and pricing tolerance. Token Pricing Pricing based on tokens (common for LLM/AI usage); requires careful unit definitions. Unit Cost Cost per unit of usage (call, event, GB, minute) used to set margin-safe prices. Unit Economics Profitability per customer or unit; core input for pricing decisions. Upsell Selling a higher plan or add-on to an existing customer; contributes to expansion revenue. Usage Cap A maximum usage limit; prevents extreme bills and protects margins. Usage Forecast Projected customer usage over time; used to design tiers and commitments. Usage-Based Pricing Charging based on consumption (calls, events, GB, minutes) instead of seats alone. Value Metric The metric that best correlates with value delivered (seat, call, GB, etc.). Variable Cost Cost that scales with usage (calls, GB, minutes); drives unit economics and margin.