Ask Steve: How to deal with tiered pricing
A2A: In a typical tiered pricing scenario, buying 101 seats in Tier 2 is cheaper than buying 100 seats in Tier 1. How do you deal with the edges on pricing tiers?
Yes, there is always some way to game a pricing system. A tiered scheme is fairly common—and encourages people to move to the next tier. The best approach is to have functionality at the next tier that isn’t available at the earlier tier.
As an illustration, for Under10 Playbook we'll have a single user price which is lower per person than the team price. The team license however includes the ability to share documents; for example, one product manager can use another product manager’s persona definition. So sure, you could save money buying 3 individual licenses but you wouldn’t have the consolidated info that you’d get in a team price.
For enterprise, your pricing decisions should be heavily influenced by “is it easy to sell?” In my experience, enterprise sales teams have amazingly poor negotiation skills so your pricing (and discounting) methods must be VERY simple.
About Steve Johnson
Steve Johnson is a product management process coach, author, speaker, and advisor. His approach is based on the belief that minimal process and simple templates result in a nimble product marketing and management team. Before founding Under10, Steve was a Pragmatic Marketing instructor for over 15 years and personally trained thousands of product managers and hundreds of company senior executive teams. Learn more at www.under10playbook.com
In his spare time, Steve enjoys making music, and has an album available on iTunes. Check out Steve’s music at notExactlySteve.com