Learn How to Win Bigger Contracts by Mastering Tiered Pricing

When it comes to sales there are many methods to help win better and bigger deals. One of the strongest strategies that simplifies the sale process while maximizing profits is implementing three-tiered pricing. This guide will showcase the benefits of tiered pricing, how to implement it correctly, and how to use three tiers to your advantage to effortlessly close more deals and boost revenue.

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The basics of Three-Tiered Pricing

Three-Tiered pricing foundation lies in presenting three distinct service packages at three different price points.

Adding three levels of pricing strategy instead of one, can significantly benefit your business, especially when looking to enhance client engagement and profitability.

This approach benefits productized services, where services are bundled into packages and offered at a fixed price or monthly subscription.

You can see how Microsoft has implemented the three-tiered pricing strategy for their product Microsoft 365.

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Reasons to utilize Tiered Pricing

People need choices (but maximum three)

When offering multiple choices vs a single offering, the conversation shifts. Clients are less likely to say “No” when given the opportunity to compare and contrast options to find the right fit.

Placing buying power in the hands of the client effectively lowers awkward sales friction while supporting a mutually agreeable solution between both parties.

So, the more the merrier?

Not really, deeply ingrained in our DNA the magic lies in the number three. Introducing a fourth option often results in diminishing returns lowering traction and interest across all tiers.

Subjects usually gravitate to the middle option, the sweet spot between the outer two, a phenomenon known as the Goldilocks effect.

Inside the golden rule of three, studies show that 66% of people will select the middle option, 23% will select the basic option and 11% will pick the premium option.

Through this principle businesses will sell 76% more than the lowest priced service offer opening doors for premium tiers.

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Set the stage for Selling Value inside Premium Tiers

Introducing higher-tier services sets the stage for adding higher-value services in the future. 

Once the clients build confidence in your business, purchasing additional outsourced services already primed in past tiered engagements, is a much easier sell. 

Upgrading clients to higher tiers is the quickest way to boost your average revenue per client without the need to branch out and expand your range of services.

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Standardize Service Offerings Streamlines Operations

In today’s competitive market, offering a wide range of services can be tempting to attract customers. 

However, the more variation in services a business provides, the more challenging it becomes to maintain standardized workflows, efficient automations, and consistent team member training.

Streamlining services into clear tiers or packages focuses efforts to deliver consistent value and retaining quality customers.

 As Mark Stovel at Firm Nexus implemented successfully before selling his firm:

“Your efficiency and profitability are built upon a repeatable and dependable system. Once you introduce unique and one-off solutions for your clients, you will have to recreate workflows, technology offerings, team member management and training.”

Supercharge Three-Tiered Pricing with AccountGroove

AccountGroove streamlines the five phases of billing into a single automated flow, starting with simplified proposals and engagements.

Inside of each proposal you can add multiple tier options that automatically collect payments to eliminate accounts receivables and sync accounting workflows inside of Quickbooks.

Let's get started. 

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Setup Tiers That Convert with AccountGroove

When crafting a tiered proposal, start by adding three tiers. Next to each tier option you’ll see a ( + ) button to add an additional tiers.

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Adding additional tiers by clicking the (+), AccountGroove will display additional tiers side by side for an optimal viewing experience. Let's start with creating a set of "Basic", "Essential", and "Premium" tier options.

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Once you set up the tiered pricing and send it to your client, AccountGroove will automate the invoice generation, payment collection and reconciliation inside of Quickbooks. It's that easy to save you XXX amount per week!

Now you can review the proposal and know exactly what will be delivered to your client. 

Drive Unique Value with Each Tier, Not Just a Pricing Table‍

Tiers shouldn't be confused with pricing tables. The key to successful tiered proposals is to show the client how to receive more value for the relationship. Placing clients inside a rigid box, limited by transactions for example, reduces the effectiveness of tiers ultimately offering only one relevant option.

Knowing your clients needs post discovery calls will determine what value to showcase to avoid getting stuck setting non-applicable boundaries between tiers.  

Anchor with the Premium Tier First

In the example below, the premium and most expensive tier is presented first. Although it might seem natural to list tiers in ascending order of value, starting with the highest-priced option creates a beneficial shock factor. Clients will “anchor” themselves to the first price and make purchasing decisions based on that price comparison which in turn makes the lower tiers seem more attractive and easier for the client to consider.

This strategy is referred to as price anchoring because presenting multiple options provides room for contemplation vs. immediate rejection.

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AccountGroove's implementation of a tiered pricing model has demonstrated how such strategies can lead to improved client satisfaction and increased revenue. By offering clients clearly defined service levels and highlighting the value of each tier, firms can better meet client expectations and encourage the uptake of more comprehensive, higher-value services.