What is Saas Tiered Pricing?

Tiered pricing is a SaaS monetization model that provides users with different subscription plans, each with a different set of features and price points. 

Through this pricing strategy, SaaS businesses can target different customer segments with diverse budgets and requirements.

Here are the pros and cons of tiered pricing for SaaS brands: 

Advantages

• Wider appeal: With tiered monetization, SaaS brands can target different user profiles with distinct needs and purchasing power. 
• Upselling potential: This SaaS pricing strategy offers users the option to switch to other paid plans. 
• Scalability: All SaaS businesses can use tiered pricing. 

Disadvantages

• Complexity: To effectively use this method, it’s important to review features and create balanced and distinct pricing tiers.
• Additional costs: One plan differentiator is the support provided, which may include supplementary expenses.

Tiered pricing is an option for a SaaS business in any growth stage. However, it can have optimal outcomes when: 

• Your target market is made of different customer segments. 
• Your product features can be clearly classified into different groups. 
• Your SaaS solution can have different pricing plans handling different requirements.

Consider the following aspect when establishing the right SaaS pricing tiers for your business: 

• Have a comprehensive understanding of your customers: Get acquainted with your users’ budget limitations, feature needs, and usage patterns. 
• Conduct a thorough competitor analysis: Assess pricing structure, value points, and feature sets.  
• Calculate your product expenses: When building tiers, it’s important to consider development and maintenance costs, as well as profit expectations. 
• Keep things simple: When starting, it’s advisable to stick to 3-4 plans and continue adding as you grow based on user feedback.

Tiered pricing can be combined with different other SaaS strategies. Here are some examples: 

By combining the freemium strategy with tiers, you can educate your users about your product and make them understand which paid plan they require. Additionally, this strategy matches user groups with pricing tiers.

Another option is to adjust plans with value-based principles. To do this, each tier should clearly reflect the value each customer segment receives. 

Tiered pricing can be combined with both usage and per-user-based monetization, where plans gradually increase based on usage levels or the number of active users.