Many Australian SMEs struggle to maximise revenue from existing customers. A well-structured product tiering strategy isn’t just about offering ‘good, better, best’ options; it’s about deliberately engineering pathways that naturally encourage customers to upgrade. We see businesses leaving money on the table by not strategically designing these tiers to address evolving customer needs and value perceptions.
The key is to move beyond simply adding features. Think about solving increasingly complex problems for your customers as they move up the tiers. Here’s how we approach it:
- Value-Based Tiering: Don’t base tiers on cost plus a margin. Instead, identify the core value your product delivers. The lowest tier should offer a functional solution to a specific pain point. Subsequent tiers should unlock additional value – perhaps through time savings, increased efficiency, or reduced risk. For example, a bookkeeping software might offer ‘Basic’ for sole traders, ‘Growth’ for small businesses needing payroll, and ‘Enterprise’ for multi-location operations requiring advanced reporting.
- Feature Gating with a Purpose: Restricting features isn’t about being stingy. It’s about creating a clear incentive to upgrade. However, the gated features must be genuinely valuable to the target audience of the higher tier. Avoid gating features that are ‘nice to have’ but not essential.
- Usage Limits as Upgrade Triggers: Consider incorporating usage limits into lower tiers – number of users, storage capacity, transactions processed, etc. As customers hit these limits, the upgrade path becomes a logical solution to their growing needs. This is particularly effective for SaaS businesses.
- Behavioural Nudging: Integrate subtle prompts within the product itself. For example, if a customer frequently uses a feature only available in a higher tier, display a message highlighting the benefits of upgrading. Personalised recommendations based on usage patterns are also powerful.
Remember, Australian consumers value fairness and transparency. Clearly articulate the benefits of each tier and avoid creating artificial barriers to entry. We often advise clients to A/B test different tier structures and pricing models to optimise conversion rates. Looking ahead, analysing customer behaviour data throughout 2026 will be crucial to refine these tiers and ensure they continue to drive growth.
To get started, map out your ideal customer journey and identify the key pain points at each stage. Then, design your product tiers to address those pain points in a progressive and compelling way. A well-engineered tiering strategy isn’t just about upselling; it’s about building long-term customer relationships and maximising lifetime value.
