FA-301c · Module 2

Tier Design

3 min read

Good tiers create natural upgrade paths. Bad tiers create confusion, negotiation friction, or artificial ceilings. A tier structure should do three things: anchor buyers to the middle tier (where margins are best), create a clear upgrade trigger based on the value metric, and reserve premium features for the top tier without making the lower tiers feel crippled. Three tiers is optimal. Two is too few (no anchor). Four is too many (decision paralysis).

Tier Architecture:
──────────────────────────────────────────────────────
Tier        Purpose           Margin    Mix Target
──────────────────────────────────────────────────────
Starter     Land, prove value   65%        20%
  - Core features, basic support
  - Value metric limit drives upgrade

Professional  Primary revenue    80%        60%
  - Full features, priority support
  - Anchor tier — best value/price ratio
  - Expansion within tier via value metric

Enterprise   Premium capture     75%        20%
  - Custom integrations, SLA guarantees
  - Dedicated CSM, advanced analytics
  - Annual contracts, custom terms
──────────────────────────────────────────────────────

The Professional tier is the target.
Starter exists to land. Enterprise
exists to capture premium willingness
to pay. Design for the middle.

Do This

Design three tiers with clear upgrade triggers tied to the value metric
Make the middle tier the obvious best value — 60% of customers should land there
Price the bottom tier to attract, the middle tier to retain, and the top tier to capture premium

Avoid This

Create tiers based on feature counts instead of value delivery — features are not value
Make the bottom tier so capable that nobody needs to upgrade — you killed your expansion motion
Price the top tier so aggressively that customers game the system to stay on lower tiers