TL;DR
- Tiered pricing is a strategic approach to offer products or services at various price points, catering to different customer needs and budgets.
- It's particularly beneficial for SaaS companies, allowing them to accommodate a wide range of customer personas with diverse requirements.
- Tiered pricing not only caters to customer budget and needs but also enhances customer satisfaction and loyalty by offering a clear growth path.
- With tiered pricing, customers can start with a basic package and upgrade as their needs grow, without being overwhelmed by too many options.
- Examples include companies like Obsidian, Mailchimp, Slack, and HubSpot, each offering distinct tiers to match varying customer demands.
- Implementing tiered pricing can enhance customer satisfaction by providing flexibility and options, ultimately driving revenue growth.
Pricing is a precise art. You cannot charge too little or too much because both will kill your business. Setting prices too low can result in insufficient revenue to sustain your business, while excessively high prices may lead to significant losses in potential sales. Moreover, it's crucial to avoid pricing strategies that exclude certain customers or give the impression that your company is unable to cater to their specific needs. You want to find the right balance between a competitive price affordable for all your customers and ensure that it does not lower the product or service quality.
Such a pricing dilemma is best handled with a tiered pricing strategy which can especially be helpful for SaaS companies to fulfill the pricing requirements of varying customer personas while accommodating their diverse needs and budgets.
Tiered Pricing Definition & A Brief Introduction
“Differentiate with value or die with price.” Jefferey Gitomer (American author)
Tiered pricing, a multifaceted pricing strategy, is employed by companies to offer their products or services at different price points. The features and functionalities are adjusted according to the price assigned for each tier.
Also known as “Price Tiering,” this strategy allows you to sell your offerings at a particular price range. Once customers complete the offerings in a tier, they can move to the next one, for which they will pay the price as per the number of purchases made in those respective tiers.
What Makes Tiered Pricing An Attractive Strategy?
Tiered pricing is one of the most commonly used methods by most SaaS companies because it allows them to offer their products, features, and benefits at various pricing options. Customers are free to choose whatever option fits their budget and needs and can move from one tier to the next in the course of time.
Giving customers the option to choose the same product at varying price points is an appealing way of opening up your business to a more diverse customer base.
Tiered Pricing: The Process & Its Structure
The standard approach for tiered pricing, especially for SaaS companies, is to operate with three, five, or more differently priced tiers. Each tier will have features, functionalities, or benefits that increase from one tier to the next. For each level, you can choose names like Basic, Advanced, and Enterprise.
For example, the “basic” tier will have only a few features, customer support, and service performance levels. The “advanced” tier may include all or most of the features and benefits. Ultimately, the “enterprise” tier may include the features or benefits, functionalities, and customer services to make it more appealing to large businesses with unique needs. The tiers may also vary to be appealing to different audiences. Some tiers may be suitable for personal use, and some may be more fitting for business use.
While you can go for more than three tiers, it is important not to overwhelm your customers with too many pricing options. It will only confuse your customers and may entirely distort the objective of your strategy. The key is to keep it practical and simple so customers from all walks of life understand your pricing strategy. You can also leverage benefits like memberships and event tickets to make the pricing model more attractive and inclusive for more businesses.
Another way to make your tiered pricing model more appealing is to assign compelling names. Here are some examples:
- Basic, Pro, Enterprise
- Starter, Pro, Teams
- Personal, Professional, Business
- Startup, Growth, Scale, Custom
- Free, Startup, Scaleup, Enterprise
- Basic, Personal, Professional, Business
Here’s a compilation of tiered pricing examples to perfectly understand and implement the tiered pricing concept.
Also Read: A Detailed Handbook on Tiered Pricing Models, Structures, Pros & Cons
Top 10 Tiered Pricing Examples
1. Obsidian
Obsidian’s pricing tiers are Personal, Catalyst, Commercial, Sync, and Publish. These tiers are drafted according to the user type and features. Customers who want more features can buy them at an additional fee for every bundle.
2. Mailchimp
Mailchimp, an email marketing and automation platform, implements a tiered pricing structure. They have plans ranging from Free to Essentials, Standard, and Premium. Each plan offers different features and subscriber limits, allowing businesses to choose the right level of service based on their audience size and marketing requirements.
3. Slack
Slack, a widely-used team collaboration and communication platform, has a tiered pricing model. They offer a free plan for small teams and startups, and then they have three paid plans: Standard, Plus, and Enterprise Grid. Each plan offers additional features and enhanced administrative controls, accommodating businesses of different sizes and collaboration needs.
4. Zendesk
Zendesk’s tier pricing operates with two plans:
- Plan for Everyone
- Plans for Enterprise
It offers the following options:
- Suite Team
- Suite Growth
- Suit Professional
- Suit Enterprise
Each of the plans is priced per agent and utilizing feature-based and user-count strategies.
Also Read: A Detailed Handbook on Tiered Pricing Models, Structures, Pros & Cons
5. Hubspot
HubSpot, a leading inbound marketing and sales software platform, offers tiered pricing plans based on the size and needs of businesses. They have a free plan for small businesses to get started, and then they offer three tiers: Starter, Professional, and Enterprise. Each tier provides additional features and support, catering to the varying requirements of businesses of different sizes. Each level has an extra customizable option, and customers can add more marketing contacts to the package rather than jump a tier before they’re ready. As a result, business owners have even more flexibility in spending only what they need.
6. Drift
Drift is a revenue acceleration platform offering three-tiered pricing under Premium, Advanced, and Enterprise structures. Each tier offers only five items, so customers can easily choose what they want without getting overwhelmed or confused.
7. CartHook
CartHook offers two tiers:
- Scale plan for upcoming companies
- Enterprise plan for established enterprises
CartHook offers a flat monthly fee for every tier and charges additional fees based on the revenue they recover for the organization.
8. ConvertKit
ConvertKit has split its service tiers in two ways- Creator, and Creator Pro. Their webpage offers three options split by features. They are Free, Creator, and Creator Pro. Those tiers are planned for a specific number of subscribers. ConvertKit capitalizes on the tier pricing strategy by offering support for more subscribers and increasing the cost of the two paid tiers, Creator and Creator Pro.
9. DocuSign
There are four different tiers in DocuSign:
- Personal
- Standard
- Business Pro
- Advanced Solutions
Each tier has an annual or monthly pricing option that targets different audiences based on personal or business use of their service. Tiers offered for business usage come with more features.
The Standard option also labeled their “best value” tier, is deemed to align with most businesses and makes for an easy choice.
10. FYI Workspaces
FYI’s Starter, Intermediate, and Pro are based on various features where businesses can pay for the exact number of employees using the service. This tiered pricing model maximizes the revenue for all types of companies.
Conclusion
Tiered pricing is a great way to increase the value of your offerings and make them available to diverse audiences. And, Togai can help you implement any pricing strategy 10x faster! Interested? Schedule a demo to try Togai for free!
