How can we prevent our middle tier from cannibalizing sales of the highest tier (by offering too much value for the price), while still making the middle option attractive enough so that the lowest tier isn’t the only one people choose?

Below is a direct answer based on our saas pricing book, Price to Scale:

• Make clear distinctions in value between tiers. The key is to reserve unique, premium features or benefits for the highest tier so that the extra value is unmistakable. In our book, we emphasize that packaging isn’t just about bundling – it’s about designing offers that resonate with specific customer segments.

• Adjust your feature placement. If the middle tier is too similar in value to the highest tier, customers will gravitate toward it, which can lead to cannibalization. Instead, ensure that the highest tier includes functionalities or benefits that the middle tier does not. This creates an attractive premium option that appeals to customers who need more than what the middle tier provides.

• Position your tiers intentionally. As discussed in Chapter 11 of Price to Scale, you can proactively offer alternatives and even create upgrade pathways or add-ons. For instance, offer incentives or flexible upgrade options that encourage customers to step up when their needs evolve, rather than settling permanently on the middle tier.

• Segment your audience. Consider that your customer base is not homogeneous—some use the product heavily while others have minimal needs. Tailor the tiers so that each segment sees a clear benefit in choosing the option that fits them best. This segmentation strategy helps prevent the middle option from overpowering the highest tier.

In summary, by differentiating features, aligning each tier with specific customer needs, and creating a clear upgrade path, you can prevent the middle tier from cannibalizing the highest tier while still making it an attractive option compared to the lowest tier.