We have a long list of features – how do we package them into tiers without cannibalizing our higher-priced plans?

Based on the methodologies in our pricing strategy book, Price to Scale, here are key guidelines to package your features into tiers without cannibalizing your higher-priced plans:

Direct answer:
• Group features into three (or four) distinct packages that provide a clear, gradual upgrade in capability. By ensuring each tier is aligned with a specific customer segment’s needs, you can prevent lower-priced tiers from offering too much of the value reserved for premium plans.
Following the book’s recommendations:
• Gradation: Ensure each package escalates in complexity or functionality. One tier should not be so feature-rich that it encroaches on what higher-priced plans offer.
• Package <> Segment Fit: Design tiers that clearly map to target segments. For example, a “lite” package might help retain price-sensitive customers, while the higher tiers are aimed at those willing to pay for added capabilities. This segmentation ensures customers self-select the plan that best fits their needs, avoiding cannibalization.
• Use a Feature Grid: As shown in Price to Scale, developing a clear grid with features across tiers (including geographic or integration constraints) can clarify what’s included in each plan. This document acts as the source of truth for sales teams and minimizes off-hand questions that might lead to inadvertent shifts between tiers.
Practical strategies from the book:
• Consider upsell menus that allow customers to add on critical features which are only available in the highest tiers. This ensures that customers on lower-priced plans aren’t tempted to upgrade simply because they can pick up the feature elsewhere.
• If your pricing adjustments encompass company-wide customer migrations, treat the process as a project in itself. For larger customer bases, for instance, companies with >$100M ARR, map customer sizes to your tier changes and offer tailored incentives that ease the transition without compromising higher-tier value.

Summary:
By creating tiers with a clear gradation of features matched to distinct market segments and maintaining rigorous clarity regarding what each tier offers, you can effectively avoid cannibalizing higher-priced plans. This approach not only safeguards margin integrity but also ensures that each customer finds a plan that best fits their evolving needs, echoing the key principles laid out in Price to Scale.