How many tiers should you have for a consumer SaaS product?
Hussein Yahfoufi
7 replies
We are building a consumer SaaS product, our business model is paid subscription. Since it will cost us money every time we have a user (paid to 3rd party API providers), we can't really do free plans. Question is, should we try to have multiple tiers and plans? or is it better to have just one price? I've been researching this on Google but have not really found an ultimate resource or answer. Any insights?
Current plan is to have 4 plans:
A - $99
B - $29
C - $19
D - $9
The main differences is the higher you go the more users you can have as well as more history, more accounts, etc.
Replies
If to talk about subscriptions I think that firstly there should be a separation between personal and corporate accounts (if there is such need, of course). Regarding plans - you need to remember about the phenomenon of overchoice, it may stop from making a decision at all. I would advise to ask a few people if they see a difference and benefits from each of 4 plans - is it clear enough from the first seconds.
In my opinion, and from my own research, you need 3:
1- bare minimum: covers your expenses+a little profit
3-Full Access: covers all your expenses + maximum profit
2- The decoy: price closer to 3 than 1 and coverage closer to 1 than 3 (you'll have to find the correct balance). It's called the decoy effect
if you want 4, then you use that one as the enterprise one, with no price, where you ask them to contact sales. That price will depend on the number of users and usage. You set the price and you provide a limited time discount on the phone.
The difference between A slab and the rest of the slabs are more than B,C,D combined. This might put your users to a position to choose the option B as that's relatively higher but not astronomically high compared to A. This is just based out of monetary spending understanding of the user and your A offer, if exquisite, might have high attraction.
I think if you have some alpha/beta users or potential customers, they can give you the answer about pricing. Send a small survey having the questions what price range is better and also the plans with descriptions what they would like to choose.
In my opinion having 4 plans creates confusion to users when they are trying a new product, unless you have defined your Buyer Persona really well with each pricing plan
As many personas as you have
That totally should depend on the buyer personas (and their needs) your product has
Have you analyzed the current users yet?
Based on your personas, you should tailor the pricing. And also check out the Starbucks model, or the decoy model. It's one of the tried and tested pricing strategies and works perfect with SaaS products.