Pricing model
Tiered pricing model
Tiered pricing offers 2-4 paid plans at increasing price points, with each tier including more features, more usage, or both. It is the most common B2B SaaS pricing model and works well at scale — but requires real understanding of customer cohorts to design well.
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How the model works
Multiple tiers at different price points. Customer self-selects based on need or constraint. Tier differentiation is some mix of features, usage limits, support level, and access to advanced functionality. Upgrades happen as customers grow.
Best for
Products with clear customer cohorts that have measurably different needs. Products at $50+/month where pricing flexibility matters. Mature SaaS with data on which features drive upgrades.
Worst for
Pre-product-market-fit SaaS without clear cohort data. Indie SaaS at the experimentation stage (designing tiers without data is guesswork). Products where the difference between tiers is artificial (gating features that should be in every tier).
Unit-economics implications
- ARPU rises as customers upgrade through tiers — natural expansion revenue.
- The middle tier usually carries the most customers (decoy effect; people anchor on the cheap and the expensive, then choose the middle).
- The cheapest tier exists partly to make the middle tier feel reasonable.
- The premium tier exists partly to anchor and partly to capture high-value customers willing to pay for full access.
Common implementation mistakes
- Too many tiers (5+). Customers cannot decide. Three is the sweet spot.
- Gating obvious features behind upgrade. 'You have to pay $50/mo for export to CSV' triggers refund-rage.
- Tier differentiation by feature when the customer cares about usage. Usage limits are more honest than feature gating.
- Cheapest tier too expensive for the smallest cohort. The bottom tier should let the smallest paying customer in.
Positioning trap to watch
Tiered pricing without cohort data hides a 'we are guessing' problem. The right tier structure emerges from data on actual customer needs; designing it pre-data produces tiers that feel arbitrary and convert poorly.
Pricing teardowns of products using this model
Frequently asked
- How many tiers should an indie SaaS have?
- Three tiers for most products. Two if you are early-stage and the difference between tiers is small. Four-plus rarely converts better than three; complexity is the cost.
Other pricing models
Diagnose the page, then pick the model
Pricing model is downstream of positioning. The free diagnostic labels which Brunson failure mode your page hits; the right pricing model follows from the positioning.