Tiered Pricing Strategies: Maximizing Profits and Delighting Customers

You might have seen tiered pricing in action if you’ve ever signed up for a software tool that offers different plans—like basic, pro, and enterprise. You know, the ones where each level unlocks more features as the price increases. But why do so many businesses use this approach?

In this article, we’ll discuss the psychology behind tiered pricing structure, its pros and cons, and whether it makes sense for your B2B business.

What is Tiered Pricing?

Tiered pricing is a strategy where businesses offer multiple packages or pricing “tiers” to attract different groups of customers. Each tier typically offers different features or benefits, allowing customers to choose the level that fits their needs and budget.

The main advantage of tiered pricing is that it lets you capture a broader audience while giving customers the flexibility to pay for exactly what they want.

Another key benefit is that the more a customer buys, the less they pay per unit. This approach can be a win-win: customers feel like they’re getting more value, while businesses see an increase in sales volume.

For instance,

• Single: 1 seat at $25/seat/month – Total: $25/month
• Team: 10 seats at $18/seat/month – Total: $180/month
• Enterprise: 50 seats at $15/seat/month – Total: $750/month

Although the price per seat decreases, larger volumes significantly raise total monthly revenue across tiers.

Here’s an example of tier-based pricing by Notion:

Here are some common naming structures for tiered pricing packages:

• Basic, Standard, Premium
• Starter, Growth, Enterprise
• Free, Pro
• Essential, Plus, Advanced, Pro

Types of Tiered Pricing Models

Different businesses and customers have different needs, so a tiered pricing model lets you offer options without sacrificing revenue potential.

Let’s look at the types of tiered pricing models:

Feature-Based Tiers

Feature-based pricing tiers are built around the idea of offering more functionality at each level. Each higher tier unlocks additional features, making this model ideal for customers with diverse needs.

Slack’s pricing model exemplifies this approach. The Pro plan caters to small teams that need essential tools like unlimited message history and app integrations. As companies grow, they might need additional security and administrative features available in the Business+ plan.

For large enterprises that require high-level compliance, dedicated support, and extensive user management, Slack’s Enterprise Grid provides a customizable solution.

Pros of Feature-Based Tiers

• Attracts a broad range of customers with different needs and budgets.
• Encourages upgrades by offering valuable features at higher levels.
• Lets customers pay only for the features they actually need.

Cons of Feature-Based Tiers

• It can overwhelm customers with too many options or features they don’t understand.
• Requires careful planning to avoid offering too much at lower tiers.
• This may lead to dissatisfaction if essential features are locked behind higher tiers.
• Harder to set the right balance of features across tiers without impacting sales.

Usage-Based Tiers

Usage-based pricing offers different pricing levels based on specific usage metrics, like the number of users, data storage, or bandwidth limits.

For example, Proton Drive uses usage-based tiers in its cloud storage plans, offering more storage and features as customers move up each level. This allows individual users to start with a basic plan, while those needing more storage or added functionality can opt for higher tiers.

Pros of Usage-Based Tiers

• Encourages small customers to start with a lower plan and scale up as needed.
• Provides flexibility, allowing potential customers to pay for only what they use.
• Increases revenue potential as larger customers consume more resources.
• Easy to communicate value as each tier directly reflects usage limits.

Cons of Usage-Based Tiers

• Customers may feel they’re overpaying if they aren’t fully utilizing their plan’s capacity.
• Requires close monitoring to ensure fair pricing and prevent resource abuse.
• If customers have seasonal or fluctuating needs, they might frequently upgrade or downgrade, leading to higher churn.

Value-Based Tiers

Value-based tiers are structured around the perceived value delivered at each level rather than strictly by usage or features. This model is especially common in services like consulting, where expertise and outcomes are the primary selling points.

For example, a consulting firm might offer three value-based tiers: Starter, Growth, and Expert.

• The Starter plan could provide basic guidance and support for clients just beginning their journey.
• The Growth plan might include more personalized consulting and strategic advice for businesses ready to scale.
• The Expert plan could offer comprehensive, hands-on consulting for clients looking to make a significant impact.

Key Advantages of Tiered Pricing

Tiered pricing is a smart approach to boost both sales and customer satisfaction.

Flexibility for Customers

Some of your customers will be value-oriented, some will be feature-oriented, and some will be convenience-oriented. Tiered pricing makes sure each type finds an option that feels right, reducing the chance they’ll leave your site without making a purchase.

This approach gives customers freedom and choice, letting them pick a plan that suits their goals and budget.

Increased Customer Satisfaction

Customers appreciate pricing options that grow with them. Scalable tiers allow them to start small and upgrade as their needs expand.

The “ladder” approach lets your customers feel in control, knowing they can move up without switching providers. Loyalty builds organically as they climb through the tiers and get more value.

Maximizing Revenue Potential

Tiered pricing opens up opportunities for upselling and cross-selling without being pushy. Customers see the added value in the next level and are more likely to move up when they’re ready.

A study by Price Intelligently found that companies using tiered pricing saw their revenue jump by an average of 98% compared to those sticking with a single price.

How to Develop an Effective Tiered Pricing Strategy

Tiered pricing is a psychology game where you show your customers different options, guiding them toward the choice that benefits both them and your business.

Identify Target Customer Segments

Start by understanding the types of customers you’re trying to reach. Who are they, and what do they need? This step is about grouping customers based on their needs, budgets, and usage patterns. Use tools like:

• Surveys
• Customer feedback & interviews
• Website analytics
• Purchase history analysis

Let’s say you’re offering a project management tool. Your segments might look like this:

• Solo freelancers who need basic tracking.
• Small businesses looking for collaboration tools.
• Large companies that need advanced analytics and custom integrations.

Examples of customer segmentation:

• Budget-conscious startups
• Growing small businesses
• Large enterprises needing scalability
• Teams focused on premium features
• Businesses needing strict security and compliance

Design Compelling Tiers

In tiered pricing, the middle option is usually the one you’re trying to push. Here’s how it works: the middle tier should feel like the “sweet spot” for most customers. It offers a balance of value and price, making it look like the best deal compared to the other options.

The lowest tier is priced higher per unit to cover your basics but keeps the commitment low—think of it as the “starter pack” that’s convenient but not the best value.

Then there’s the high tier, which is the best deal per unit but has a high enough commitment that only a few big buyers will go for it. This tier rarely gets picked, but it makes the middle tier look more attractive.

The setup doesn’t mean the price scales evenly with the number of seats or users. Instead, it’s more like a curve: as the number of seats goes up, the price per seat drops, but only slightly.

Test and Optimize Pricing Levels

Your B2B company won’t nail the perfect pricing on the day of product launch. Finding that ideal price point takes phases of testing, gathering data, and tweaking to understand what really works.

Testing shows you which tier is most popular, which features drive upgrades, and how customers respond to price changes.

For example, if data shows a surprising number of customers choosing the lowest tier, it might signal that the middle option isn’t offering enough value. With this insight, you could enhance the middle tier’s features to make it more appealing.

KPIs to track:

• Which pricing levels are converting best?
• Where are customers dropping off?
• Are customers naturally moving up to premium plans?
• Which tiers are driving the most value over time?
• Are certain features being underused?

Examples of Successful Tiered Pricing Strategies

Here are some successful tiered pricing strategies used by B2B companies:

Zoom

Zoom has a free version for quick calls, followed by Pro, Business, and Enterprise levels for more options and users. The free version gets people in the door, and as their needs grow, they naturally upgrade. This makes Zoom sticky since people get hooked on the basics and then want more.

QuickBooks

QuickBooks has tiers for everyone, from freelancers to big businesses with complex accounting needs. Each level offers more tools, so as a business’s finances get more complex, they can upgrade to premium tiers without switching systems.

Salesforce

Salesforce offers different levels, from essential tools to advanced AI-driven features. This setup lets small companies start simple with basic tiers and add more as they grow, keeping customers loyal as their needs expand. It’s a flexible approach that matches what businesses need at each stage.

Conclusion

Now that you know tiered pricing could be the best fit for your business, it’s time to get serious about implementing it.

Setting up an effective tiered pricing strategy isn’t easy—it requires careful planning, data analysis, and a deep understanding of your customer segments. This is where professional marketing can make all the difference.A marketing agency like Aventi knows how to design, test, and refine tiered pricing to drive real results. We’ll make sure your pricing strategy maximizes both profits and customer satisfaction. Ready to get started? Let Aventi handle the heavy lifting so you can focus on what you do best.