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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 our pricing strategy book, Price to Scale, there isn’t a one‐size‐fits-all “magic number” for the price gap between tiers. Instead, the book emphasizes that a successful gap should be designed around these key principles:
• Value Differentiation: The difference in price should clearly correspond to an increase in functionality or value. For example, if you’re moving from a “good” to a “better” plan, the additional cost must reflect tangible benefits—a concept often captured in the good–better–best framework discussed in our book.
• Customer Segmentation: Rather than using a blanket percentage for all tiers, consider your customer segments. Some segments (like SMBs) might be comfortable with a modest step-up in price if they see an efficient upgrade, while enterprise customers might expect more significant enhancements even if the list price jumps by 2–3x. The idea is to align the price gap with the perceived value and typical usage patterns of each segment.
• Avoiding Shock: Especially for existing customers, a large, sudden jump in price can be jarring. The book discusses the importance of offering alternatives such as upgrades with added value or discount options (with strings attached like commitment length) to help ease them into a higher-tier plan.
• Incremental and Modular Adjustments: Whether you’re leaning toward a modular pricing approach or a graded package structure, the incremental price differences should reflect the incremental value. This helps encourage upgrades as customers recognize that each tier offers a meaningful step up, without feeling that the jump is arbitrary or too steep.
In practical terms, the right gap is one that balances clear value enhancements against the customers’ willingness to pay—ensuring that each tier feels like a natural, justified progression. In summary, focus on tying your price differences to significant, well-communicated enhancements, and tailor your approach for different customer segments to avoid any sticker shock.