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Frameworks, core principles and top case studies for SaaS pricing, learnt and refined over 28+ years of SaaS-monetization experience.
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Based on the information I've gathered, here's my answer about the optimal number of pricing tiers for most SaaS products:
Optimal Number of Pricing Tiers for SaaS Products
The ideal number of pricing tiers for a SaaS product depends significantly on your go-to-market strategy, customer segmentation, and product complexity. While there isn't a universal "perfect number," our pricing frameworks generally recommend between 2-4 tiers for most SaaS products.
From our case studies, we've seen success with both simplified and more complex approaches:
Two-tier approach: In one case study with a $10M ARR IT Infrastructure Management Software company, we "rationalized four packages to two, with remapped feature-sets." This simplification created a more consistent pricing model that aligned better with their enterprise-focused GTM strategy.
Three-tier approach: Many SaaS companies find success with the classic "Good-Better-Best" model, which provides clear differentiation while remaining simple enough for customers to understand.
Four-tier approach: Some companies benefit from adding an entry-level or free tier to drive adoption, followed by three paid tiers.
The optimal tier structure depends on several factors:
- Customer segmentation: How distinct are your customer segments' needs and willingness to pay?
- GTM fit: Your pricing tiers should align with your sales motion (self-serve vs. sales-led)
- Upsell potential: Effective tiers create natural upgrade paths as customer needs evolve
- Market positioning: Tiers should reflect your strategic market position and competitive landscape
When determining your pricing structure, we recommend conducting tier/package performance analysis to evaluate metrics like average deal size, upsell rates, discounting, and feature utilization. This empirical pricing research ensures your tier structure optimizes for both customer value and business goals.
Remember that the right number of tiers is less important than having tiers that effectively communicate value and align with your customers' buying journey.