Tiered pricing can be a real boon for companies that are looking to generate new revenue, particularly in ultra-competitive or crowded sectors. Yet, flexible pricing often introduces a level of complexity that can slow you down come month- and quarter-end. The solution: Utilize a unified SaaS automation solution that’s capable of streamlining all types of billing plans.
Tiered pricing (e.g., “Good, Better, Best”) in theory and reality
As busy executives and consumers, we run up against examples of flexible or multi-tiered pricing throughout our days. From the fuel we pump into our commuter vehicles, to the credit cards we use to pay for that fuel, to the vehicles we choose for our commutes… Even the SaaS solutions we invest in to help us run our businesses more efficiently are often based on a type of “Good, Better, Best” (GBB) pricing model, where a company creates several tiered packages that vary in price, amount and quality of features, services, usage levels, and more.
The following companies’ pricing pages offer good examples of the GBB model:
- Hubspot’s Marketing HubTM
- Dropbox Business’s data and file storage plans
- Salesforce’s four levels of Sales Cloud pricing
Whether you call it “differential,” “tiered” or “flexible,” the value of this type of pricing cannot be undersold: According to Culture of Profit founder Rafi Mohammed, GBB pricing can “simultaneously attract new high-spending customers and price-conscious ones, dramatically boosting revenue and profits.”
Yet, though tiered pricing strategies are often reasonably straightforward in concept, they can be tricky to implement successfully. This is especially the case if your IT systems don’t offer the same innate flexibility that you’re trying to deliver with your tiers themselves.
Inflexible recurring billing systems lead to lost business when expectations are not met
Not all IT systems are designed with flexibility in mind. Rather, many legacy systems—and even some of the newer solutions that were architected to enhance the user experience—simply aren’t set up to support billing and revenue recognition of complex packages with multiple variations and contract terms. This is especially the case when enterprise sales teams have to offer unique pricing and terms to get the deal across the finish line. What’s more, when you try to reap the best benefits from multiple systems or platforms at the same time, you often run into incompatibilities that only work to undercut your business’s revenue potential.
If you’ve set your sights on creating a tiered pricing structure that offers value for all customers—current segments as well as newcomers to your customer mix—your best bet is to work towards balancing pricing flexibility and value for customers on one hand, with system functionality and versatility on the other.
Take the case of ListReports, a Los Angeles–based company that ran into similar issues with the multi-tiered contracts they offer on their SaaS platform for real estate agents and financial lenders across the United States.
Many moving parts of tiered pricing can be tricky to implement—just ask ListReports
ListReports’ SaaS billing had to account for multiple pricing tiers, varying terms, and a combination of enterprise and individual subscription offers—a veritable smorgasbord of variable pricing criteria that only served to magnify the complex and time-consuming nature of their billing. And ultimately, it made it so that inefficient billing was slowing them down.
They were forced to make trade-offs, shifting focus from supporting their core SaaS platform (where they make their money) to building and refactoring internal billing systems to accommodate the number of permutations and reconcile contracts stored on multiple systems.
The solution: After first working with Ordway to streamline their billing architecture and processes, ListReports was able to consolidate its contracts into a unified system that’s built to manage the varying complexities of their business. Now, with fully automated, accurate and controlled invoicing, ListReports is moving forward with new services and training for their growing customer base—a win-win in their books and ours!
Read the full case study on ListReport’s multi-tiered billing strategy
Flexible business models require flexible infrastructure
Flexible pricing strategies hold innumerable benefits for forward-thinking businesses if their IT systems can support the many complexities of variable pricing. Without quote-to-revenue processes and infrastructure that can absorb these complexities, you’ll experience significant drains on your billing and revenue recognition processes at month- and quarter-end—leading to manual inputting, invoicing and reconciliation that only serves to waste your staff’s valuable time.
If you’re planning on launching a tiered pricing model, be sure that you’re backing this new strategy up with the right technological solutions to support the diversity of new business you’ll be raking in in the months and years to come.
Are you looking for ways to save time and energy on developing, invoicing and tracking complex contracts? Let’s talk! Our billing and revenue automation platform can handle the complexity, while you get to the work of growing your business.