4 benefits of tiered pricing for SaaS
We've discussed what the goal of the tiered pricing model is. Now let's take a look at some of the ways the strategy helps to achieve that goal, including some ways that it goes above and beyond simply bringing in new customers.
Expand your customer base
When you only have one tier, customers who don't need everything in that tier will be overpaying, sometimes drastically. This means that many of those customers will choose not to purchase the product at all. Rather than having a customer paying a little less than may eventually pay more, you have no customer at all.
Enables upsell to the next tier
Upselling is a big part of successful SaaS operations. When you have a customer that has very limited needs, and you provide them with a tier that fits those needs, you've got them in your ecosystem. As the needs of that customer grow, it becomes easy to sell them on a higher-priced tier. If they went elsewhere because your prices did not fit their needs at the time, you've simply lost out on that money.
Maximizes revenue potential
With a well-designed tiered pricing structure, there's a plan that fits everyone's budget and needs. Customers won't be leaving your website and looking to competitors because they can't get what they need from you. Instead, they'll sign up for whatever tier fits them best and then change tiers as their needs change. They may move up or down a tier, but regardless of which direction they go, their money is staying with you.
Increases the value of new features
When you have a single tier of pricing, any new feature does little to increase your revenue. Features that set you apart may bring in new customers, but only if they need the feature at the current time. Putting features into an appropriate tier will make that tier more attractive as an upsell, while retaining the ability to draw in users who don't want to pay for that feature.