Three-Tier Pricing Strategy for SaaS Does It Work? Ideal? -
What's the ideal amount of subscription tiers to the SaaS company?
Study have shown that 3 is the most popular number, however does it really matter?
This isn't what we discovered in our analysis of the pricing strategies of 50 most competitive SaaS companies in our pricing pages for 2022 report.
We studied the pricing webpages of 50 companies that were among the top-rated by G2 and found the number of monthly or annual plans that were offered ranged from no plans up to 23.
From 0 to 23 plans The Best-in-Class SaaS Companies Customize Their Subscription Choices
Their packaging also varied as.
"Keep it simple" is a common stipulation for SaaS businesses when it comes to pricing and plans. But the subscription options offered by the majority of top-of-the-line companies aren't straightforward.
In this piece we'll discuss how best-in-class SaaS companies promote and package their subscription plans, along with many tiered pricing examples.
Three Tiers doesn't have to be a Simple Plan
In the three-tier pricing strategy, we usually find:
- A great option for smaller teams, individuals, or new customers trying out the product.
- The middle tier used for selling upsells. It's usually referred to as the "most popular" or "most cost-effective" option.
- The premium-priced plan for those looking for more.
Although this is the case for the best companies that use the three-tiered pricing system, their packaging isn't always straightforward.
Price Changes based on the number of Users
As an example, Canva uses three tiers and changes the prices of each tier based on the number of users.
Three Main Plans to be a Jumping Off Point
Airbase advertises three primary plans, but their distinct bill payment option leads customers to a completely different set of plans altogether. Customers can select between value-based pricing or volume pricing. This can give potential customers the option of choosing the price they would like to buy.
It is possible that SaaS businesses could begin using a three-tier model however their pricing and packaging are bound to become more complicated as their users need change.
Four is the new Three (But Five Is Popular Too)
Based on our study our research, the median number of pricing plans actually is four. However, there are several typical strategies that companies employ to maintain four or five pricing options.
Three Primary Plans plus an Enterprise Plan
The reason this is effective: You get to promote middle plans, which gives the small and medium-sized customers (i.e., the non-enterprise customers) the ideal sweet spot to aim for.
Three Primary Plans and Two Enterprise Plans
A few companies, like Box are graduating to five plans, including two enterprise tiers. What's wrong with enterprise users having alternatives also?
Free Plan and Three Paid Options
If you are using a freemium model, then four different pricing points may seem reasonable. Paid customers need room for growth to higher levels.
Free Plan Plus Four Paid Options
Again, adding a fifth option will give your customers greater flexibility to increase their prices. When adding additional tiers, it needs to be very clear on what you will gain by switching to a higher cost. This is because TalentLMS differs upon the number of customers.
Think about the idea behind an Idea
While we were looking at price pages to create the guide, it wasn't always straightforward what should be classified as a annual or monthly budget.
One example is that OneTrust Pro uses an A la carte method of creating a monthly plan.
In the same way, Datadog offers a wide range of plans built around their many offerings.
Instead of promoting tiers with price-based plans instead, Rippling only creates customized plans.
The first indication that it's time to rethink a traditional tiered system is when you're receiving feedback from potential customers or users that they're paying for options or functions they don't use. The other is if you're selling multiple products that your existing customer base are paying for independently.
Overall, we're seeing best-in-class SaaS firms think outside the norm when it comes to their pricing and packaging. And if you're struggling to optimize the tiered pricing structure you have, it might be an appropriate time to your to think outside the box, too.
Plan Additions (and/or Pages) as You Target New Markets
A company like ButterCMS covers the market all the way from start-ups to enterprises. Each persona's primary is a different persona with their own strategy. If you're selling to a new target market, make sure they're represented in your pricing pages before making contact with them or launching your marketing campaign.
Think about different pages or tabs for Specific Markets
36% of the companies we studied utilize multiple pricing pages or tabs when they serve several markets or have separate plans for different products.
Tabs, similar to the ones Mailchimp utilizes, makes it easy to still see the entire price on the same page, even though they're promoting three different items. The tabs offer clear differentiation between the three products.
HubSpot takes this a step further by offering two tabs levels: one for different products and plans, as well as another for bundles. Sometimes, it's not necessary to upgrade to the next level. If you're selling several items, when is the right the right time to combine them?
How Else Are Best-in-Class Companies Explaining Their Plans?
Best-in-class companies may use very different pricing tiers, but we discovered a number of popular methods they describe how they calculate their prices.
The most well-known pricing page features include:
- A FAQ section (72 72%)
- Mentioning plan add-ons (42 percent)
- Highlighting the most popular plan (36%)