tier-structure
2 tiers: Simple, clear choice - Works for: Clear SMB vs.
Tier Structure and Packaging
Contents
- How Many Tiers?
- Good-Better-Best Framework
- Tier Differentiation Strategies
- Example Tier Structure
- Packaging for Personas (Identifying Pricing Personas, Persona-Based Packaging)
- Freemium vs. Free Trial (When to Use Freemium, When to Use Free Trial, Hybrid Approaches)
- Enterprise Pricing (When to Add Custom Pricing, Enterprise Tier Elements, Enterprise Pricing Strategies)
How Many Tiers?
2 tiers: Simple, clear choice
- Works for: Clear SMB vs. Enterprise split
- Risk: May leave money on table
3 tiers: Industry standard
- Good tier = Entry point
- Better tier = Recommended (anchor to best)
- Best tier = High-value customers
4+ tiers: More granularity
- Works for: Wide range of customer sizes
- Risk: Decision paralysis, complexity
Good-Better-Best Framework
Good tier (Entry):
- Purpose: Remove barriers to entry
- Includes: Core features, limited usage
- Price: Low, accessible
- Target: Small teams, try before you buy
Better tier (Recommended):
- Purpose: Where most customers land
- Includes: Full features, reasonable limits
- Price: Your "anchor" price
- Target: Growing teams, serious users
Best tier (Premium):
- Purpose: Capture high-value customers
- Includes: Everything, advanced features, higher limits
- Price: Premium (often 2-3x "Better")
- Target: Larger teams, power users, enterprises
Tier Differentiation Strategies
Feature gating:
- Basic features in all tiers
- Advanced features in higher tiers
- Works when features have clear value differences
Usage limits:
- Same features, different limits
- More users, storage, API calls at higher tiers
- Works when value scales with usage
Support level:
- Email support → Priority support → Dedicated success
- Works for products with implementation complexity
Access and customization:
- API access, SSO, custom branding
- Works for enterprise differentiation
Example Tier Structure
┌────────────────┬─────────────────┬─────────────────┬─────────────────┐
│ │ Starter │ Pro │ Business │
│ │ $29/mo │ $79/mo │ $199/mo │
├────────────────┼─────────────────┼─────────────────┼─────────────────┤
│ Users │ Up to 5 │ Up to 20 │ Unlimited │
│ Projects │ 10 │ Unlimited │ Unlimited │
│ Storage │ 5 GB │ 50 GB │ 500 GB │
│ Integrations │ 3 │ 10 │ Unlimited │
│ Analytics │ Basic │ Advanced │ Custom │
│ Support │ Email │ Priority │ Dedicated │
│ API Access │ ✗ │ ✓ │ ✓ │
│ SSO │ ✗ │ ✗ │ ✓ │
│ Audit logs │ ✗ │ ✗ │ ✓ │
└────────────────┴─────────────────┴─────────────────┴─────────────────┘
Packaging for Personas
Identifying Pricing Personas
Different customers have different:
- Willingness to pay
- Feature needs
- Buying processes
- Value perception
Segment by:
- Company size (solopreneur → SMB → enterprise)
- Use case (marketing vs. sales vs. support)
- Sophistication (beginner → power user)
- Industry (different budget norms)
Persona-Based Packaging
Step 1: Define personas
| Persona | Size | Needs | WTP | Example | |---------|------|-------|-----|---------| | Freelancer | 1 person | Basic features | Low | $19/mo | | Small Team | 2-10 | Collaboration | Medium | $49/mo | | Growing Co | 10-50 | Scale, integrations | Higher | $149/mo | | Enterprise | 50+ | Security, support | High | Custom |
Step 2: Map features to personas
| Feature | Freelancer | Small Team | Growing | Enterprise | |---------|------------|------------|---------|------------| | Core features | ✓ | ✓ | ✓ | ✓ | | Collaboration | — | ✓ | ✓ | ✓ | | Integrations | — | Limited | Full | Full | | API access | — | — | ✓ | ✓ | | SSO/SAML | — | — | — | ✓ | | Audit logs | — | — | — | ✓ | | Custom contract | — | — | — | ✓ |
Step 3: Price to value for each persona
- Research willingness to pay per segment
- Set prices that capture value without blocking adoption
- Consider segment-specific landing pages
Freemium vs. Free Trial
When to Use Freemium
Freemium works when:
- Product has viral/network effects
- Free users provide value (content, data, referrals)
- Large market where % conversion drives volume
- Low marginal cost to serve free users
- Clear feature/usage limits for upgrade trigger
Freemium risks:
- Free users may never convert
- Devalues product perception
- Support costs for non-paying users
- Harder to raise prices later
When to Use Free Trial
Free trial works when:
- Product needs time to demonstrate value
- Onboarding/setup investment required
- B2B with buying committees
- Higher price points
- Product is "sticky" once configured
Trial best practices:
- 7-14 days for simple products
- 14-30 days for complex products
- Full access (not feature-limited)
- Clear countdown and reminders
- Credit card optional vs. required trade-off
Credit card upfront:
- Higher trial-to-paid conversion (40-50% vs. 15-25%)
- Lower trial volume
- Better qualified leads
Hybrid Approaches
Freemium + Trial:
- Free tier with limited features
- Trial of premium features
- Example: Zoom (free 40-min, trial of Pro)
Reverse trial:
- Start with full access
- After trial, downgrade to free tier
- Example: See premium value, live with limitations until ready
Enterprise Pricing
When to Add Custom Pricing
Add "Contact Sales" when:
- Deal sizes exceed $10k+ ARR
- Customers need custom contracts
- Implementation/onboarding required
- Security/compliance requirements
- Procurement processes involved
Enterprise Tier Elements
Table stakes:
- SSO/SAML
- Audit logs
- Admin controls
- Uptime SLA
- Security certifications
Value-adds:
- Dedicated support/success
- Custom onboarding
- Training sessions
- Custom integrations
- Priority roadmap input
Enterprise Pricing Strategies
Per-seat at scale:
- Volume discounts for large teams
- Example: $15/user (standard) → $10/user (100+)
Platform fee + usage:
- Base fee for access
- Usage-based above thresholds
- Example: $500/mo base + $0.01 per API call
Value-based contracts:
- Price tied to customer's revenue/outcomes
- Example: % of transactions, revenue share