In this article Iām going to demonstrate why having more tiers is a must for your product launch.
But lets first start with the definition of what tiered pricing is.
What is tiered pricing?
Tiered pricing or also know as tier-based pricing is a strategy used to offer different prices for the same product or service based on different levels of service.
Like when you go to the movies and you can choose between a small popcorn for $3.5 or a large popcorn for $6. The large popcorn is double in size but less than double the price which makes it a better deal, especially if youāre hungry lol.
And yes, this can also be applied when selling digital products or even for a SaaS.
Why does it matter?
The idea behind this strategy is to increase the LTV (Life Time Value) of your customers - aka, make more money (on average) from your customers.
By offering multiple pricing options, you give them more flexibility to choose what best fits their needs.
This strategy helps capture more revenue from top-tier customers who are willing to pay for premium features.
Lets dive into a few real examples.
Example 1: Catalin Pit - Technical Writting Course
My friend Catalin recently did a pre-launch for his new course and I urged him (heād say annoyed but donāt listen to him lol) to figure out a way to have 3 tiers for his course.
He did that and the results were amazing!
This is how the 3 tiers looked like:
- Base Course - $30 (just the course)
- Full Course - $60 (course + community + bonus content)
- Full Course + Mentorship - $150 (course + community + bonus content + mentorship)
And this is the breakdown of his sales for each tier:
- Base Course - 3 sales totaling $90
- Full Course - 16 sales totaling $960
- Full Course + Mentorship - 3 sales totaling $450
So a total of $1,500 from the pre-sale of his course so far from 22 sales.
And hereās the very interesting part:
If he only had the base tier, he would have made only $660 (22 sales x $30) instead of $1,500.
So tiered pricing made him 127% more revenue! š¤Æ
Also, if you look at the last tier, accounting for 30% of the total sales by just selling 3 copies. Wow! š„³
Now letās look at a SaaS example using this strategy.
Example 2: Florin Pop - iCodeThis
Yes, this one is yours truly, Mr. Captain Purple š
(ok, nobody calls me like that but hey! Itās my blog and I can do whatever I want lol).
Anywhoā¦
Back in 2022, I created iCodeThis to help people improve their coding skills by actually building stuff.
And a few months after launch I added 3 PRO tiers to the product to allow people access to more features.
I experimented with different prices and options during this time, including offering PPP (Purchasing Power Parity) but this is roughly the summary of how the tiers were structured:
- PRO Basic - between $15-25 - access to extra features (but limited)
- PRO Gold - between $50-90 - access to all extra features
- PRO Platinum - between $120-200 - access to all extra features + group mentorship
When I mean extra features Iām talking about things like access to Coding Challenges (500+), all Video Tutorials, Project-Based Roadmaps, Private community, etc.
And this is the breakdown of the sales for each tier:
- PRO Basic - 48 sales totaling $1,040
- PRO Gold - 626 sales totaling $37,665
- PRO Platinum - 106 sales totaling $18,549
In all fairness the basic tier was more often turned off, so thatās why it didnāt contribute to the sales much, and later on Iāve added a subscription model, but letās focus on the other 2 tiers for now.
While the Platinum tier accounted for āonlyā 1/6th of the sales of the Gold tier (106 sales vs 626 sales), it had almost half of the revenue ($18,549 vs $37,665) of it, which is just insane!
And the fun part about it? It wasnāt 6 times harder to manage. People were joining, asking questions and I was helping them out, but also often they were helping each other out.
Plus, they were more engaged and stayed longer on the platform and then they shared it with their friends which also joined the group!
So how does it sound to make more revenue with way less work?
More examples
Check out Adamās $61,392 Book Launch and Nathanās Authority Book Launch and how tiered pricing played a huge role in their massive success. This is where Iāve first seen the power of it and wanted to try it out myself. Too bad I didnāt do it for my book launch back in 2020! š
How to implement tiered pricing
Now that you see the power of tiered pricing, you might be wondering how to implement it for your product.
Well, there are a few things you need to consider:
What type of product do you have? Is it an ebook, a video course, a SaaS? What type of SaaS? How much are people usually willing to pay for something like this?
These are questions that will set the baseline for your product.
Look around and see what competitors are doing and what they are charging for something similar.
What extra features can you offer that complement the main product? It can be access to a extra content, a private community, personal mentorship or group mentorship, live Q&A with yourself, etc.
Start with the basic tier that covers the essentials and then progressively add more features and value to the higher tiers.
Very important to consider the resources involved in the higher tiers. Do you have the time to manage a group? Do you have time to hop on a live Q&A call? Or is your time better spent doing other things to help more customers.
You can always outsource the work to someone else, but that will of course cost you money, so consider your options carefully.
In an ideal scenario the higher tier should bring in significantly more revenue for less work.
And last but not least, test, test, test!
You can always change the prices, tiers, features, etc. Note down what works and what doesnāt and optimize from there.
Hope this was helpful!
Cya in the next article! š