What’s the optimal way to structure tiered usage pricing (e.g., offering packages or volume-based discounts at higher usage levels) so that it’s clear and appealing?

Based on our SaaS pricing book, Price to Scale, there are two primary approaches to structuring tiered usage pricing that ensure clarity and appeal:

Good-Better-Best Packaging

This method involves creating 2–3 distinct packages (often termed as “good,” “better,” and “best”) where each tier bundles a set of features tailored to meet the specific needs and willingness to pay of different customer segments.
It works well when deal velocity is critical—as is common with SMB and Mid-Market segments—and when customers naturally expect a simplified structure.
The key is to name and position each tier in a way that resonates with the customer, sometimes even opting for alternative terms (like “Premium” or “Advanced”) to avoid direct comparisons that can lead to discounting.

Modular or Usage-Based Pricing

This structure is more flexible and involves designing pricing based on discrete units of value or “usage blocks” (similar in concept to cell-phone plans or t-shirt sizes such as M, L, XL).
It is best used when the underlying usage metric is predictable and easily measured. In this model, customers pay for exactly what they use with incentives built into higher tiers.
The predictability of the metric is crucial—if the measurement is less straightforward, larger pricing buckets might be a better option to maintain clarity and predictability for purchasing groups.

Additional Best Practices:

Focus on the value metric: Recognize what customers are accustomed to and ensure that the pricing model aligns with their expectations.
Avoid unnecessary complexity that can confuse the customer. Even when discounting or upselling to higher tiers, make the distinctions clear by altering feature sets or the tier names to maintain an appealing structure.

In summary, the optimal tiered structure is one where the method (either a package-based or modular approach) is chosen based on how predictable and measurable your usage metrics are. This clarity in pricing not only enhances customer understanding but also supports a strategy that can be easily scaled with your growing customer segments.