In 2019, about 90% of all new startups failed. While the success rate of startups can is low, the fact is that most startups aren’t able to attract enough business to stay alive.
Most companies understand the role that marketing plays in this process. But fewer use a pricing strategy that helps them bring in new customers. If your startup does this, it could be exactly what it needs to boost revenue and grow.
That’s why as you look up sales tips, you should consider implementing a tiered pricing strategy. We’ll tell you how doing that can help your startup below.
What is tiered pricing?
Tiered pricing is the strategy of changing how much you charge for your product based on customer wants or needs.
For example, a streaming service might offer a free version of its product with ads. Customers who want to avoid watching those ads could pay to use the service. And those who want to access even more content from the site might be willing to pay even more.
This also works for physical products. A startup that uses a tiered pricing strategy might offer customers the following options:
- 1 Unit – $100
- 2-4 Units – $70 per unit
- 5-9 Units – $60 per unit
This one is worth paying attention to as far as sales tips go. That’s because it helps your startup appeal to as many different types of buyers as possible. And that could be just what you need to attract new types of customers and grow your company.
Tiered pricing vs. volume pricing
If your startup sells physical products, it’s worth taking a moment to differentiate tiered pricing from volume pricing.
Volume pricing applies a discount to all units purchased, whereas tiered pricing only discounts the purchases made in each discount range.
For example, under a tiered pricing model, someone buying 10 units would pay full price for the first one, then a discounted rate for units 2-4, and a further discounted rate for units 5-9. A volume model would give them the total discount on all 10 units.
You make more profit with a tiered pricing model than you do with a volume-based one. So this is typically a better option for a new company.
Why tiered pricing is particularly effective for startups
Any company can use tiered pricing to attract a broader audience. But this sales strategy can be especially effective for a new business. Here are four reasons why that’s true.
Competitive advantage
The price you set is one of the main factors a potential customer looks at when buying from your brand. If you only have one price, then you’re only going to appeal to people who are okay with paying that amount.
But if you offer multiple price points for potential customers, the number of people you appeal to goes up significantly. This can make your company competitive across multiple price points instead of only a single one – a feature that can be valuable for a new company.
More revenue
When you become competitive across a broader price range, you typically increase your revenue as well. That’s because you give your audience the freedom to pick a pricing option and product offering combination that works for their needs instead of expecting them to accept a static solution.
Higher customer satisfaction
Startups have to build up a solid brand reputation from scratch. To achieve that, you’re going to need to make sure that most of your customers are satisfied to do business with you.
Implementing a tiered pricing model can make this happen. Because with this model, you give your customers more freedom over how they buy from your brand. And when someone can save money by paying for only the features they want, they tend to be pretty happy.
Increased scalability
Using a tiered pricing model can also help your startup scale more effectively. That’s because this strategy lets you appeal to a broader pool of potential customers without creating new services or manufacturing new products.
How to create a winning tiered pricing sales strategy
Are you interested in introducing a tiered pricing strategy into your startup? Here are four steps for implementation:
1. Understand your audience
The first thing you need to do is understand who you will be appealing to with your tiered pricing strategy. Taking a broad look at your total audience will help you determine what they’re looking for when shopping for products like yours.
You need to have good insight into your target audience’s goals and constraints before you can create a compelling tiered pricing model.
2. Map out the services each tier will get access to
Once you’ve done some research into your audience, it’s time to start mapping out the different parts of it that you’ll appeal to in each of your tiers.
You sell tax software. You might offer a low-cost tier to individuals looking for assistance with basic tax problems. Then you could offer a medium-priced option for small businesses. You might even offer a high-priced version of your software that includes live support from experienced tax professionals.
3. Decide on your number of tiers
Consider how many different tiers you’d like to create. You can have as many or as few, as you think are useful. Ultimately, the correct number of tiers for your company will depend on the breadth of your target audience and how much variance there is within it.
4. Create a unique marketing strategy for each tier
Once you’ve decided on several tiers, you can consider how to market.
It’ll be important for your startup to create unique marketing content for consumers that fall within each tier. You need the breadth of your marketing campaigns to match the scope of the audience you’re appealing to. Otherwise, you’re unlikely to attract as many potential customers as you could be, and your results may be limited.
You can vary your marketing strategy based on factors that distinguish your tiers, such as:
- Budget
- Demographic information
- Most-used marketing channel (email, social media, etc.)
- Decision-making process (single buyer versus organizational buyer)
- And any other differentiating features that you believe are relevant to the buying journey
Is there any reason to stick with a flat-rate pricing model?
Tiered pricing is a sales strategy that carries multiple benefits – most of which you can’t get out of using a flat-rate pricing model. That begs the question: Does a startup ever choose flat-rate over tiered?
The main value that flat-rate pricing models offer over tiered ones is simplicity. But that benefit could be valuable enough for some startups to pick this pricing model over a tiered one.
A flat-rate pricing model may be right for you if your company’s audience prefers an easy solution. For example, FedEx offers flat-rate pricing to small businesses. They’ve found that customers value knowing exactly what they’ll pay regardless of what they’re going to ship more than the marginal cost savings they might get from a tiered pricing model.
You can also save on marketing expenses by going with a flat-rate pricing model over a tiered one because you’ll only need a single marketing strategy instead of multiple offerings at multiple different price points.
LeadLander makes it easier to create a winning sales strategy around tiered pricing
Ultimately, the success or failure of your tiered pricing strategy could come down to how effectively you’re able to define your tiers and market to them. That’s why you should look into investing in visitor tracking software from LeadLander.
Our visitor tracking software will give you a wealth of information about the consumers visiting your site. With it, you can discover more about your audience’s content preferences, web-browsing habits, and goals. You can use this information to create more precisely-defined tiers and more targeted marketing campaigns.
But we don’t expect you to take our word for it. Sign up for a free demo of LeadLander today to see the benefits for yourself.
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