# Good-Better-Best Pricing

> A three-tier price architecture in which customers self-select into the right package. The middle tier acts as the anchor, the top tier creates a built-in upgrade path, expansion is part of the architecture, not a negotiation.

- Canonical URL: https://www.convios.com/en/methods/good-better-best
- Language version: https://www.convios.com/de/methodik/good-better-best
- Status: Externally proven
- Method library: https://www.convios.com/en/methods — Markdown: https://www.convios.com/en/methods.md

## Problem

You sell a single package at a single price. Price-sensitive prospects walk away because there is no affordable entry; customers with budget have no way to spend more. All price differentiation runs through one-off discounts, opaque, margin-eroding, and without a systematic upgrade path.

## Approach

1. Cut three tiers: an entry tier with the core value, a middle tier as the standard for the majority, a top tier with the most valuable capabilities for demanding customers.
2. Choose the differentiators along real willingness to pay, do not scatter features arbitrarily, but bundle what specific segments demonstrably pay more for.
3. Design the middle tier as the anchor: it should be the obvious choice for the typical target customer.
4. Build in upgrade triggers: usage limits or capabilities that lead naturally into the next tier as needs grow.

## Example

A typical case: a B2B SaaS company with a single package observes two recurring patterns, small firms drop off at the price, larger ones ask for capabilities like single sign-on and advanced roles that the package lacks. The company cuts three tiers: entry covers the core workflow, the middle tier adds team features, the top tier bundles security and administration capabilities for larger organizations. Prospects now sort themselves in, and upgrades arise from customer growth instead of discount negotiations.

## Limits

Badly cut tiers cannibalize: if too much value sits in the entry tier, the majority stays there. More than three or four tiers create decision paralysis instead of self-selection. The architecture does not replace a price metric, without a scaling unit, even a tiered model stays static.

## Metric

Distribution of new customers across tiers (package mix) and the upgrade rate in the existing base. A healthy model shows a clear majority in the middle and steady movement upward.

## Sources

- Versioning Information Goods — University of California, Berkeley (Hal R. Varian), 1997-03-13 · academic and scholarly literature · supports the underlying mechanism. Shows formally that offering several versions at different prices leads customers to sort themselves by willingness to pay. The extremeness aversion rationale is not part of this paper, which argues throughout from a two-type model. The three-tier argument comes from Shapiro and Varian, Information Rules (1998), which draws on the extremeness aversion research for it. (https://people.ischool.berkeley.edu/~hal/Papers/version.pdf)
- The Good-Better-Best Approach to Pricing — Harvard Business Review (Rafi Mohammed), 2018-09 · academic and scholarly literature · describes the method. Describes the three-tier price architecture as a method in its own right, with rules for the spacing between tiers and for the revenue share of the top tier. (https://hbr.org/2018/09/the-good-better-best-approach-to-pricing)
- Primary source: Versioning Information Goods (https://people.ischool.berkeley.edu/~hal/Papers/version.pdf)
- Adapted from: Carl Shapiro, Hal Varian (Information Rules, 1998)

## Related

- Method: [Value Metric Pricing](https://www.convios.com/en/methods/value-metric-pricing)
- Method: [The Five Animals: ACV-to-GTM Model](https://www.convios.com/en/methods/five-ways-acv-model)
- Method: [Willingness to Pay (Van Westendorp)](https://www.convios.com/en/methods/willingness-to-pay)