Ask HN: Which is a better pricing model - Tiered vs. Pay-As-You-Go • Hacker News Board

Ask HN: Which is a better pricing model - Tiered vs. Pay-As-You-Go

#1

Post by sharan » Thu, Apr 07, 2011, 12:12 AM UTC

I see a lot of consumer startups going for the tiered pricing models whereas B2B SAAS seems to prefer a pay-as-you-go model.

Does anyone have any thoughts on the benefits of either?

Re: Ask HN: Which is a better pricing model - Tiered vs. Pay-As-You-Go

#2

Post by kgermino » Thu, Apr 07, 2011, 1:41 AM UTC

Consumers IME prefer the predictability that tiered plans offer. That is, many people would rather pay $40 for 400 minutes when they usually use 300 - 375 than $.11/min even though on average the PAYGO plan would be cheaper.

Re: Ask HN: Which is a better pricing model - Tiered vs. Pay-As-You-Go

#3

Post by HerraBRE » Thu, Apr 07, 2011, 10:19 AM UTC

I would love to hear some discussions on this. For example, I wonder how much it matters how tech-savvy users are? I'm currently looking at a mixed model at http://pagekite.net/, pay-as-you-go for bandwidth usage OR tiered monthly subscriptions for heavier users and businesses.

I had kind of assumed that the average joe would prefer pay-as-you-go and companies would go for a subscription - your comment suggests I may have it backwards... :-P

Re: Ask HN: Which is a better pricing model - Tiered vs. Pay-As-You-Go

#4

Post by raquo » Thu, Apr 07, 2011, 2:39 PM UTC

Pay-as-you-go can quickly become complex unless you have a very simple, one-dimensional utility service without any premium features. Otherwise your pricing will look like that of AWS (i.e. may be cheaper, but less predictable). Tiered pricing is simpler, lets you define a minimum monthly cashflow from each paying customer, and most importantly lets you discriminate e.g. enterprise customers by offering features only they would want at a much higher price.

Re: Ask HN: Which is a better pricing model - Tiered vs. Pay-As-You-Go

#5

Post by JonLim » Thu, Apr 07, 2011, 8:09 PM UTC

Product Manager of PostageApp (http://www.postageapp.com) here, we are B2B SaaS and we used a tiered model.

We chose to go in this direction because it allowed for a few things: better predictability in terms of cash flow and better predictability in the amount of resources needed. Having those two is somewhat critical to our success, hence why the tiered subscription model works best for us.