I'm pricing my SaaS version 2.0 software in preparation for launch in Q1 and I'm wondering why so many pricing pages have 3 options.
For v1 we just had 1 pricing plan and we definitely left money on the table in the form of prospects who almost laughed at how low the price was compared to the competition. So for v2 I'm putting a bit more effort into pricing and I've been looking at a lot of pricing pages lately. One thing that I've noticed is the proliferation of 3-plan pricing pages. They all seem to have the "cheap" plan, the "best value so we made it bigger than the other 2 rectangles" plan, and the "so expensive that only people who don't pay attention to cost will choose it" plan (sometimes 2X - 3X the price of #2).
Is there any scientific or business reason why 3-plan pricing is so prolific? Or is it simply a coincidence/mimicry that comes out of people having no idea how to price their product? Right now we are deciding whether we should go with 2-plans or 3-plans, and I just want to make sure we're not, again, leaving money on the table if we choose the 2 over the 3.
Yes, there is a scientific basis for this. There is a reason why a company like Proctor and Gamble makes so many kinds of soap.
Remember that at the top end essentially "money is no object" in that some people want the best, no matter the cost. People don't buy a $2,000 watch because they did some sort of value calculation and decided it was 100 times better than a $20 Casio watch.
Also remember that what seems of little value to you may be worth big bucks to a major customer. For example 24/7 telephone access to second tier support.
Having several options lets you capture more consumer surplus by allowing price discrimination, similar to how airlines have coach and first class. Both get you to where you're going, but coach has a lower price point to target consumers who might be thinking about taking the bus, while first class has a higher price point to make nervous travelers feel more at ease. This allows airlines to fill their seats with those who are cheap and also those who live lavishly.
Three seems to be the magic number that lets you segment customers by level of need, without introducing too much complexity into their buying decision.
The more options you provide, the more overwhelming the buying decision is for your potential consumers. Having three options is a very familiar concept for most people.
Small, medium, large. Too hot, too cold, just right. Too cheap, worth it, too lavish.
Usually as the prices double, the features or limits for each tier MORE than doubles.
Here are some great resources
Concerning the higher end part of the pricing options, this is a means to encourage users to choose the middle plan, following the contrast principle.
Say you have 3 pricing alternatives :
Actually, in this kind of pricing strategy, the top of the range princing option is mostly present as a reference, an anchor, which makes users feel like the regular plan is not that expensive. Furthermore, there is still a chance that some customers won't care about the price and choose the most expensive plan, which is always good for you (guess you always have to provide a solution for customers willing to pay more :))
And I second Mike concerning the "Don't just roll the dice " reading, definitely worth it.