6 Unforgivable Tiered Pricing Mistakes Everyone Makes

Let me start with an example. Try to imagine you’re at an ice cream parlour. You can see on the board that they offer different sizes of ice cream cones or cups at different prices. The smallest size might cost less, the medium size a bit more, and the most significant size could be the most expensive. This is the easiest way to define tiered pricing.

So, tiered pricing is when you have choices with different things to buy, like ice cream sizes, and each option has its price based on how much you want.

In the same way, when you provide service with different options for your clients to pick from, each option costs an additional amount of money.

In this article, I will talk about tiered pricing and the mistakes. I will help you understand how it helps companies ensure that different people can choose what they want and how much they’re willing to pay for it.

Shall we start?

Neglecting Customer Segmentation:

I would like to continue with the story; imagine if the ice cream parlour only sold one flavour, like only chocolate. Some people might be happy, but others who love vanilla or strawberry would be disappointed. This is similar to the first mistake that some companies make with tiered pricing.

You have to understand that different people have different needs. You are making the mistake of treating all of them in the same way. People have different needs and different budgets. If your company is smart enough, you will divide your customers into groups or segments and create different tiers for each group.

Let me jump to the next point

Misaligned Value Propositions

Have you ever gone to the ice cream shop and noticed that the prices don’t match the sizes? Like, a tiny ice cream costs the same as a much bigger one? That can be confusing and not very fair, right? That’s a bit like the second mistake companies can make with tiered pricing.

Just try to understand that sometimes, you offer different tiers, but the things you give to the customer don’t match the pricing. They paid a lot for a giant ice cream cone but only got a tiny scoop. If your company is smart enough, you will ensure that each tier has the right amount of stuff for the price. I guess you don’t want your customer to feel like they are getting a good deal no matter which tier they choose. Am I clear with my point?

Overcomplicating Tier Structures

Have you ever seen an ice cream shop menu with so many choices that it’s hard to decide what to order? It can be overwhelming, riThat’shat’s similar to the third is that you are making with tiered pricing.

Instead of keeping things simple and easy to understand, you need to create more tiers with many options. This is the point of confusion for the cust, making it difficult for them to choose. For how a clear and straightforward ice cream menu is easier to pick from, If your company is smart enough, ensure their tiered pricing is clear and specific.

Lack of Upsell and Cross-Sell

At the ice cream shop, they might ask if you want toppings on your ice cream, like chocolate chips or sprinkles. Well, imagine if they never offered any toppings or extras — you’d be missing out on making your ice cream even more awesome! This is similar to the fourth mistake you are making with tiered pricing.

Your company focuses only on the basic tiers and needs to remember to give customers opportunities to upgrade or add cool extras. Just like how adding sprinkles can make your ice cream more special If your company is smart enough, you will offer ways for customers to get more value by upgrading or adding things to their chosen tier.

Ignoring Pricing Psychology

Have you ever noticed that some ice cream parlours make their most prominent cones expensive, but the medium-sized ones seem like a better deal? This is a trick they use to make you think the medium size is a good choice. It’s called pricing psychology, similar to the fifth mistake companies can make with tiered pricing.

You ignore how prices make people feel. They might put all their focus on the features of each tier and need to remember to use clever pricing tricks. Like how ice cream shops use psychology to make you want the medium cone, your company can use pricing tricks to make their tiers more appealing.

Failing to Iterate and Adapt

Imagine if the ice cream parlour never introduced new flavours or changed its menu. It might get boring, and people might stop coming. This is similar to the sixth mistake companies can make with tiered pricing.

You create their tiers and never make any changes, even when your customers’ needs or preferences change. It’s as if the ice cream parlour always had the same flavours, even when new ones became popular. If your company is smart enough, you have to keep an eye on what customers like and adjust their tiers to ensure they’re always offering something exciting and valuable.

Conclusion

I am having cravings after mentioning ice cream throughout the article. So just like at the ice cream parlour where they make sure everyone gets the ice cream they want, you have to use tiered pricing to give people choices that match their needs and budgets. You have no excuses after reading my article. Are you ready to avoid these 6 mistakes and change your game? Let me know what you think in the comment sections.

Thanks for reading,
Anirban Das

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