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Understanding pricing models
Understanding pricing models

Get to know your pricing model

Updated over a week ago

There are a range of different pricing models you can use when configuring your plans, including flat fee, price per unit, volume based, tiered and ranged.

Flat fee

Flat fee pricing is for plans that have a fixed recurring charge each cycle.

For example, if your product is tiered using the conventional Basic, Standard, and Premium structure, you would use a flat fee pricing model with three plans available for each product that is marketed to a different location.

Here's an example of a flat fee pricing model that a video streaming service might use for their Video Streaming UK product:

Plan

Unit Cost

Frequency of Charge

Bronze

$5.99 / month

  1. Monthly

  2. Annual

Silver

$9.99 / month

  1. Monthly

  2. Annual

Gold

$13.99 / month

  1. Monthly

  2. Annual

Tiered

With tiered plans, a customer can buy multiples of a specific plan.

So, let's say you sell user accounts to use a software product - you could create a tiered structure that looks like this:


Plan A: 1st to 5th account - $20 each
Plan B: 6th to 10th account - $15 each
Plan C: 11th account and after - $10 each

Then, the system will calculate the total price from each tier. Here's an example of a tiered plan system:

User and Accounts

Total Price of Plan

Name of Plan

User with 4 accounts

$80

Plan A

User with 7 accounts

$130

Plan B

User with 20 accounts

$275

Plan C

In effect, the customer buys accounts from each tier, starting with the lowest and working their way up.

Per unit

A per unit plan is based on the quantity of units the customer has signed up for and is charged on a price per unit basis.

So, let’s say you run a coffee subscription business - you would have a per unit pricing model, charging $8 per bag of coffee every two weeks. Each additional bag of coffee would also be charged at $8. So, if your customer signed up to 2 bags of coffee every two weeks, they’d be charged $16.

Volume

A volume based pricing model charges customers based on the quantity of units they wish to purchase, but the price per unit is discounted based on volume.

For example, if your coffee subscription company wanted to use a volume pricing model, it could look something like this:

  • $8 per bag (for 1-3 bags)

  • $6 per bag (for 4-6 bags)

  • $5 per bag (for 6 bags and more)

As you can see, the price is reduced dependent on the quantity of bags that the customer wishes to purchase. The price of the plan will be discounted in accordance with the amount of units (bags) that the customer wishes to purchase on your plan.

So, if your customer wanted to sign up for $5 they would fall into the third tier and be charged $5 x 6 bags = $30 total.

Ranged

The ranged pricing model also uses tiers to define brackets, but the prices of these tiers are set at a flat price.

So, let's say you want to sell user accounts to use a software product - you could create a pricing structure that looks like this:


Plan A: 1 to 5 user accounts - $20
Plan B: 6 to 10 user accounts - $30
Plan C: 11 to 20 user accounts - $60
Plan D: unlimited user accounts - $100

So, if your customer wanted to sign up with 18 users accounts they would fall into the third tier and be charged a flat fee of $60. Simple.

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