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Estd 4.22.2023
Based on the principles laid out in Price to Scale, it is generally more effective to limit features rather than impose usage quotas in your lower-tier plan to drive upgrades.
Key points from our book include:
• When you limit features in a lower-tier plan, you clearly delineate the value proposition between tiers. Customers on the lite plan quickly see what additional functionality is available in higher tiers, making the upgrade decision more compelling.
• Usage-based restrictions can be trickier. As discussed in our book, usage quotas work best when your usage metric is predictable and measurable. However, if the measurement isn’t as clear—or if customers feel penalized by arbitrary limits—it can create friction rather than a seamless incentive to upgrade.
• The approach of limiting features allows you to maintain a clear differentiation between plans. Customers who begin with a simplified set of functionalities are often motivated to move to higher tiers once they see the added value that comes with extra features, a dynamic the book emphasizes when discussing packaging strategies.
In summary, our SaaS pricing book "Price to Scale" suggests that restricting features in a lower-tier plan is generally a more effective driver for upgrades compared to imposing usage quotas. This strategy clarifies the value gap between tiers and makes the benefits of upgrading much more tangible for your customers.