Introduction

Companies using this model will usually offer around 2-4 different tiers, each one getting progressively more expensive and unlocking more features. This type of pricing is frequently combined with a metric to create a Step based model where tiers are based on the quantity of a specific tracked metric such as users.

Overview

PROS
  • Upselling Capabilities
  • Target Multiple Buyer Personas
CONS
  • Formulating what features should be tier-gated is tricky
  • Tiers may confuse customers

Breakdown of the Pros

Upselling Capabilities

Get a foot in the door with a low-price or free tier, and show customers the value they will gain if they upgrade to unlock more features. Many companies have creative ways of upselling, such as Zapier, which prompts users to upgrade when they try to use gated features. 

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Target Multiple Buyer Personas

Another benefit of feature gates is being able to tailor each tier for a specific persona. Wordpress does a great job doing this with their pricing. They offer basic blogging functionality with the "Personal" plan, advanced features such as plugins/themes for the "Business" plan, and finally, provide an online store under the most expensive "eCommerce" plan. Each of these plans targets an entirely separate buyer persona.

Breakdown of the Cons

Formulating what features should be tier-gated is tricky

One of the critical steps to implementing a feature-based pricing model is deciding what features you want to gate for each plan. A good strategy is to look at your buyer personas and cater to each tier's features to that persona.

Tiers may confuse customers

Having a large number of tiers can lead to analysis paralysis. Make sure to think very carefully about adding new tiers as each one adds another decision point for a potential customer.


WHO SHOULD USE IT

Feature-based billing is a very versatile type of strategy. The best-case scenario is when you have a clear delineation of feature to buyer persona, for example having your enterprise features such as SSO, Netsuite/Salesforce integrations, and SLAs locked behind an enterprise tier. If your product's features are all beneficial to everybody, it becomes challenging to utilize tiers correctly, and you may alienate potential customers.

Implementation

Feature-based billing is straightforward from an implementation point of view, each tier can be represented by a different plan in Stripe Billing, and moving between tiers is just a matter of changing the plan on their subscriptions.

The User Interface

Feature-based billing is straightforward from an implementation point of view, each tier can be represented by a different plan in Stripe Billing, and moving between tiers is just a matter of changing the plan on their subscriptions.

SUBSCRIPTION MANAGEMENT
See Live Example

Examples

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