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Three tier pricing – sounds fancy, what the heck is it for?

I love stealing ideas from other industries and applying it to ones no one expects would fit.

When we had an office in Victoria, BC we ushered clients into our conference room, and presented them with a leather-bound menu. As in a high-end restaurant.

We offered large, organic lattes, and expressos. Organic teas, and organic snacks from the Cascadia bakery up the street. Oh, and fresh squeezed orange juice.

In an accounting office??

Yes! And it blew people away. We had clients who would stop in, order a latte, and ask if they could work in our conference room. They loved it, and so did we…

Okay, back to the topic at hand – 3-Tier pricing.

Which industry are we “stealing” this concept from?

3 Tier Pricing in The Software Industry

The pioneers of 3 tier pricing are software companies. Precisely, companies offering software as a service online, in the cloud.

They did it for 2 exceptionally good reasons.

First, let us define it…

3 Tier pricing (we have all seen it by now) is where a software company offers 3 levels of pricing. The levels can be called anything.

Examples are – Core (level 1), Professional (level 2), and Pro Plus (level 3).

Or, Bronze, Silver, Gold.

I have seen a gazillion labels being used. The labels are less relevant as the simplicity of seeing quickly what is included in each level.

By the way, I have never seen 2 tier pricing, nor have I seen 4 level and above.

Two tier is too basic, and anything above 3 levels is too complex.

Simple choices lead people to decide.

Complex choices stop people from deciding (even when they want what you are offering).

What is The Purpose of 3 Tier Pricing?

First, it gets more people try out what you are offering because they can start at a basic, cost-effective level with your core service.

Second, and most important, it gives people real value and does not mean you reject good, potential new customers or clients.

Third, by giving people a choice you do not need to go into hard negotiations on discounting. You have done the discounting for them.

How to Implement 3 Tier Pricing?

Number one, come up some creative and relevant labels for the 3 tiers you want to create.

Start with your basic level and add features that you are offering in a language that your customers/clients will understand.

Make sure they are benefit driven and what they really want.

In the basic level, do not include too much.

Why not?

Because if you include too many features there will be zero motivation for your clientele to move up to the next level.

Make Sure Level 1 is Profitable

Offer enough features in level one that will delight your clients. (Do not leave them starving for more!)

Set the pricing at a level that will encourage people who cannot afford the higher levels to buy.

Set the price of level 1 at the value you feel your clients/customers will pay.

Do not think of your costs.

Now Reverse Engineer Your Offering

Now that you have tentatively set your price, look at what your costs will be for delivering this bundle of products and services.

Make sure you are profitable.

The beauty of 3 tier pricing is that, even at the basic level you will have clearly defined what is included in your offering.

If your clientele demand more, they have simply moved up to the next level of services.

If they do not want the next level, you simply can add some features and add additional pricing for them.

How to Setup Level 2 of Your 3 Tier Pricing?

For level 2, add new features, unavailable in level 1, that you know many of your clients want and will value.

Many of your customers/clients will choose the middle level.

It has to do with core psychology of us humans.

Many of us, do not want to be in the Basic level. Yet, we may have sticker shock with the premium level. The mid tier level will fit most of your clients.

Therefore, spend more time at this level to get it exactly right.

Include more features than the Basic Level, yet not too much more, or it will cost you too much to deliver the total package.

Your Top or Gold Level Package

For the Gold level, add all the features that will offer a white-glove level of service, and will be priced accordingly.

Once done, you will end up with a kind of bell curve of new clients. 20% may choose level 1, 70% level 2, and 10% the Gold or top tier level.

Once you have set your included features, sharpen your pencil, and see if you can profitably offer the Gold package.

It will do you little good to offer so much and find out it will be costing you even more to deliver to your Gold clientele!

How to Present your 3 Tier Pricing?

If you are doing presentations to your customers or clients either online or in person, then here is how it should proceed…

Start with your Gold level. Go through your Ultimate, Level 3 package with all your bells and whistles.


In order to create some sticker shock!

If you see your client having difficulty breathing after showing level 3, you are doing good! 😊

Once the sticker shock has passed and your client is breathing again, you can present the other 2 tiers.

Many will choose the Silver Package or Level 2.

It will occur as more affordable and just the right amount of features.

For those with tighter budgets, or just wanting to check you out, they will go with Level 1, or Bronze.

In Summary

If you only offer one size pricing, you force your clients/customers into a negotiating stance.

They may want you to strip out features and reduce the price.

By offering the tiers, you leave your customers with the opportunity to simply choose for themselves.

This leads to more customers, and happier customers, who are getting exactly what you promised.

Last bit of advice – do not offer too much in the lowest package, or all of your prospects will choose that level.

And, also, do not offer too much in the middle package or your costs will be driven up.

Thanks for reading….