What is Tiered Pricing?
Definition
A pricing strategy where a service offers multiple plan levels with different feature sets and price points to serve different customer segments.
Understanding Tiered Pricing
Tiered pricing is the most common pricing model for subscription services. Typically, services offer 2-4 tiers: a free or basic tier, a mid-range tier for most users, and a premium or enterprise tier. Each tier adds more features, storage, users, or capabilities.
Examples: Spotify (Free, Individual, Family), Notion (Free, Plus, Business, Enterprise). The goal is price discrimination — capturing value from users with different willingness to pay. When choosing a tier, evaluate which features you actually use to avoid overpaying.
Related Terms
Freemium
A pricing model that offers basic features for free while charging for premium features, storage, or usage beyond free tier limits.
Subscription
A recurring payment arrangement where a customer pays at regular intervals to access a product or service.
Upsell
A sales technique where a subscription service encourages existing users to upgrade to a higher-priced plan with more features.
Pricing Model
The strategy a subscription service uses to structure its pricing, including flat-rate, tiered, usage-based, or hybrid approaches.