44 min
Three-Tier Pricing Strategy Resourceful Designer: Strategies for running a graphic design business
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- Design
Try this pricing strategy for your design business. I learned of the three-tier pricing strategy many years ago, but I never gave it much thought in regards to the design industry. Until recently that is. A few months ago I came across it again while reading a business book. A day or two later I was watching a YouTube video, and a designer mentioned using a three-tier pricing strategy in his design proposals.
Maybe there's something to this I thought and I decided to give it a try. And you know what? It works. I’ve used it on several proposals recently with great results.
What is a three-tier pricing strategy? A three-tier pricing strategy is when you offer three different pricing choices for essentially the same service or product but with different options which increases the value for each one.
Look at this example of a fictional web hosting company using a three-tier pricing strategy.
A web host may offer three different hosting package.
A $4.99/mo package that is good for 1 site and offers basic security
A $9.99/mo package that is good for 3 sites, offers advanced security and monthly site backups and a free Basic SSL Certificate.
A $49.99/mo package that is good for unlimited sites, offers Super advanced security including daily malware monitoring, plus daily backups and the free Wildcard SSL Certificate.
I know you’ve seen this type of pricing strategy before. You’ve probably also noticed that companies usually highlight the middle price as the “recommended” or “most popular” one according to the seller. That’s because it’s the option they are hoping you will choose. The other two are there to help you come to that decision.
Why a three-tier pricing strategy works There are two main reasons why this type of pricing strategy works.
It gives the purchaser options to choose from, which makes them feel more in control of what they are buying. It showcases the value of what the purchaser is buying making their choice easier. In the above web host example, the buyer sees three options.
One that’s good for one website, another for three websites and a third for unlimited sites.
It also shows escalating value options at each tier. Tier 2 offers more advanced security plus backups and an SSL Certificate where Tier 1 doesn’t. Tier 3 offers super advanced security PLUS daily malware monitoring. It also provides daily backups instead of only monthly and a Wildcard SSL Certificate over a standard SSL Certificate.
By offering these three options to a potential client, the hosting company is altering the purchaser's mindset. Instead of giving the client one option and having them ponder “is this a good value for me?” they are given three options and instead ask themselves “which one of these is the best value for me?”
A single pricing option requires a yes or no decision. But by introducing the variables in three-tier pricing, you force the client to contemplate their decision making them feel more in control of their buying choice. And when a client feels in control of their buying choice there's less chance of them deciding to shop elsewhere.
The other benefit of the three-tier pricing strategy is how it educates the client on the value of what it is they are buying. They see what their money is getting them.
The client came to the website looking for web hosting for their one site. But now they are shown that there are different values available to choose from when it comes to hosting a website. Even though tier 2 allows up to three websites, the added value included with that option may persuade the client to choose it even though they only have one site to host.
You can almost predict the outcome The great thing about a three-tier tier pricing strategy is that you can practically guarantee what option a client will choose. Why do you think so many sites highlight the “recommended” or “Best Value” option? It's because they made it the most tempting of the three
Try this pricing strategy for your design business. I learned of the three-tier pricing strategy many years ago, but I never gave it much thought in regards to the design industry. Until recently that is. A few months ago I came across it again while reading a business book. A day or two later I was watching a YouTube video, and a designer mentioned using a three-tier pricing strategy in his design proposals.
Maybe there's something to this I thought and I decided to give it a try. And you know what? It works. I’ve used it on several proposals recently with great results.
What is a three-tier pricing strategy? A three-tier pricing strategy is when you offer three different pricing choices for essentially the same service or product but with different options which increases the value for each one.
Look at this example of a fictional web hosting company using a three-tier pricing strategy.
A web host may offer three different hosting package.
A $4.99/mo package that is good for 1 site and offers basic security
A $9.99/mo package that is good for 3 sites, offers advanced security and monthly site backups and a free Basic SSL Certificate.
A $49.99/mo package that is good for unlimited sites, offers Super advanced security including daily malware monitoring, plus daily backups and the free Wildcard SSL Certificate.
I know you’ve seen this type of pricing strategy before. You’ve probably also noticed that companies usually highlight the middle price as the “recommended” or “most popular” one according to the seller. That’s because it’s the option they are hoping you will choose. The other two are there to help you come to that decision.
Why a three-tier pricing strategy works There are two main reasons why this type of pricing strategy works.
It gives the purchaser options to choose from, which makes them feel more in control of what they are buying. It showcases the value of what the purchaser is buying making their choice easier. In the above web host example, the buyer sees three options.
One that’s good for one website, another for three websites and a third for unlimited sites.
It also shows escalating value options at each tier. Tier 2 offers more advanced security plus backups and an SSL Certificate where Tier 1 doesn’t. Tier 3 offers super advanced security PLUS daily malware monitoring. It also provides daily backups instead of only monthly and a Wildcard SSL Certificate over a standard SSL Certificate.
By offering these three options to a potential client, the hosting company is altering the purchaser's mindset. Instead of giving the client one option and having them ponder “is this a good value for me?” they are given three options and instead ask themselves “which one of these is the best value for me?”
A single pricing option requires a yes or no decision. But by introducing the variables in three-tier pricing, you force the client to contemplate their decision making them feel more in control of their buying choice. And when a client feels in control of their buying choice there's less chance of them deciding to shop elsewhere.
The other benefit of the three-tier pricing strategy is how it educates the client on the value of what it is they are buying. They see what their money is getting them.
The client came to the website looking for web hosting for their one site. But now they are shown that there are different values available to choose from when it comes to hosting a website. Even though tier 2 allows up to three websites, the added value included with that option may persuade the client to choose it even though they only have one site to host.
You can almost predict the outcome The great thing about a three-tier tier pricing strategy is that you can practically guarantee what option a client will choose. Why do you think so many sites highlight the “recommended” or “Best Value” option? It's because they made it the most tempting of the three
44 min