# Tier Structure and Packaging

## Contents
- How Many Tiers?
- Good-Better-Best Framework
- Tier Differentiation Strategies
- Example Tier Structure
- Packaging for Personas (Identifying Pricing Personas, Persona-Based Packaging)
- Freemium vs. Free Trial (When to Use Freemium, When to Use Free Trial, Hybrid Approaches)
- Enterprise Pricing (When to Add Custom Pricing, Enterprise Tier Elements, Enterprise Pricing Strategies)

## How Many Tiers?

**2 tiers:** Simple, clear choice
- Works for: Clear SMB vs. Enterprise split
- Risk: May leave money on table

**3 tiers:** Industry standard
- Good tier = Entry point
- Better tier = Recommended (anchor to best)
- Best tier = High-value customers

**4+ tiers:** More granularity
- Works for: Wide range of customer sizes
- Risk: Decision paralysis, complexity

---

## Good-Better-Best Framework

**Good tier (Entry):**
- Purpose: Remove barriers to entry
- Includes: Core features, limited usage
- Price: Low, accessible
- Target: Small teams, try before you buy

**Better tier (Recommended):**
- Purpose: Where most customers land
- Includes: Full features, reasonable limits
- Price: Your "anchor" price
- Target: Growing teams, serious users

**Best tier (Premium):**
- Purpose: Capture high-value customers
- Includes: Everything, advanced features, higher limits
- Price: Premium (often 2-3x "Better")
- Target: Larger teams, power users, enterprises

---

## Tier Differentiation Strategies

**Feature gating:**
- Basic features in all tiers
- Advanced features in higher tiers
- Works when features have clear value differences

**Usage limits:**
- Same features, different limits
- More users, storage, API calls at higher tiers
- Works when value scales with usage

**Support level:**
- Email support → Priority support → Dedicated success
- Works for products with implementation complexity

**Access and customization:**
- API access, SSO, custom branding
- Works for enterprise differentiation

---

## Example Tier Structure

```
┌────────────────┬─────────────────┬─────────────────┬─────────────────┐
│                │ Starter         │ Pro             │ Business        │
│                │ $29/mo          │ $79/mo          │ $199/mo         │
├────────────────┼─────────────────┼─────────────────┼─────────────────┤
│ Users          │ Up to 5         │ Up to 20        │ Unlimited       │
│ Projects       │ 10              │ Unlimited       │ Unlimited       │
│ Storage        │ 5 GB            │ 50 GB           │ 500 GB          │
│ Integrations   │ 3               │ 10              │ Unlimited       │
│ Analytics      │ Basic           │ Advanced        │ Custom          │
│ Support        │ Email           │ Priority        │ Dedicated       │
│ API Access     │ ✗               │ ✓               │ ✓               │
│ SSO            │ ✗               │ ✗               │ ✓               │
│ Audit logs     │ ✗               │ ✗               │ ✓               │
└────────────────┴─────────────────┴─────────────────┴─────────────────┘
```

---

## Packaging for Personas

### Identifying Pricing Personas

Different customers have different:
- Willingness to pay
- Feature needs
- Buying processes
- Value perception

**Segment by:**
- Company size (solopreneur → SMB → enterprise)
- Use case (marketing vs. sales vs. support)
- Sophistication (beginner → power user)
- Industry (different budget norms)

### Persona-Based Packaging

**Step 1: Define personas**

| Persona | Size | Needs | WTP | Example |
|---------|------|-------|-----|---------|
| Freelancer | 1 person | Basic features | Low | $19/mo |
| Small Team | 2-10 | Collaboration | Medium | $49/mo |
| Growing Co | 10-50 | Scale, integrations | Higher | $149/mo |
| Enterprise | 50+ | Security, support | High | Custom |

**Step 2: Map features to personas**

| Feature | Freelancer | Small Team | Growing | Enterprise |
|---------|------------|------------|---------|------------|
| Core features | ✓ | ✓ | ✓ | ✓ |
| Collaboration | — | ✓ | ✓ | ✓ |
| Integrations | — | Limited | Full | Full |
| API access | — | — | ✓ | ✓ |
| SSO/SAML | — | — | — | ✓ |
| Audit logs | — | — | — | ✓ |
| Custom contract | — | — | — | ✓ |

**Step 3: Price to value for each persona**
- Research willingness to pay per segment
- Set prices that capture value without blocking adoption
- Consider segment-specific landing pages

---

## Freemium vs. Free Trial

### When to Use Freemium

**Freemium works when:**
- Product has viral/network effects
- Free users provide value (content, data, referrals)
- Large market where % conversion drives volume
- Low marginal cost to serve free users
- Clear feature/usage limits for upgrade trigger

**Freemium risks:**
- Free users may never convert
- Devalues product perception
- Support costs for non-paying users
- Harder to raise prices later

### When to Use Free Trial

**Free trial works when:**
- Product needs time to demonstrate value
- Onboarding/setup investment required
- B2B with buying committees
- Higher price points
- Product is "sticky" once configured

**Trial best practices:**
- 7-14 days for simple products
- 14-30 days for complex products
- Full access (not feature-limited)
- Clear countdown and reminders
- Credit card optional vs. required trade-off

**Credit card upfront:**
- Higher trial-to-paid conversion (40-50% vs. 15-25%)
- Lower trial volume
- Better qualified leads

### Hybrid Approaches

**Freemium + Trial:**
- Free tier with limited features
- Trial of premium features
- Example: Zoom (free 40-min, trial of Pro)

**Reverse trial:**
- Start with full access
- After trial, downgrade to free tier
- Example: See premium value, live with limitations until ready

---

## Enterprise Pricing

### When to Add Custom Pricing

Add "Contact Sales" when:
- Deal sizes exceed $10k+ ARR
- Customers need custom contracts
- Implementation/onboarding required
- Security/compliance requirements
- Procurement processes involved

### Enterprise Tier Elements

**Table stakes:**
- SSO/SAML
- Audit logs
- Admin controls
- Uptime SLA
- Security certifications

**Value-adds:**
- Dedicated support/success
- Custom onboarding
- Training sessions
- Custom integrations
- Priority roadmap input

### Enterprise Pricing Strategies

**Per-seat at scale:**
- Volume discounts for large teams
- Example: $15/user (standard) → $10/user (100+)

**Platform fee + usage:**
- Base fee for access
- Usage-based above thresholds
- Example: $500/mo base + $0.01 per API call

**Value-based contracts:**
- Price tied to customer's revenue/outcomes
- Example: % of transactions, revenue share
