How To Implement Tiered Pricing To Drive Revenue

Saturday, December 09, 2023

Do you want to learn how to not just land high-ticket clients but expand them fast?

In enterprise sales, there's one pricing tweak I've made that has helped me expand clients by literally 10x in just a few weeks. And do you know it came down to? Tiered pricing.

If you really think about it, every buying decision comes down to incentives.

Specifically with big clients or enterprise clients, the stakes are high; I mean a client could pay you from $100K a year to several million of dollars per year.

One enterprise client doesn't just drive your revenue but it gives you a logo that you can leverage to get other big clients and be that spark that lights the fire for growth in your business.

And beyond just landing a big name client and getting in the door with them it goes further than that it’s also about unlocking the full revenue potential of each client.

I learned this through starting Order Solutions which was a fast-growing restaurant call center outsourcing firm that centralized and streamlined phone orders for large chains like Denny’s, Outback Steakhouse, and TGI Friday. But landing there is a big difference from getting in the door to scaling the client to its full potential. So for us, since we charged per order we placed we wanted to expand from handling calls for 10 locations to handling calls for 100 or even 1,000 and do it as fast as possible. Not months but do it in just a matter of weeks and we did this through tiered pricing.

So what is tiered pricing and how can you apply it in your business? Basically, tiered pricing is a pricing strategy where you offer clients different pricing options related to the volume or amount they buy, with the price decreasing as they purchase more. It creates a win/win for the business and the client because you get more revenue and the client feels like they are getting a deal. It's a powerful tool to incentivize expansion from your customers.

For a marketing agency, it might be you discount the percentage of spend fee as their clients' ad spend increases. For a hedge fund, it might be a discount on management fees at a certain point. It might be for a software company if they buy more licenses they get a discount on a per license basis.

So what are the pitfalls of tiered pricing and how can you apply it to your business?

1. Prioritize Your Margins:

This isn't just about pricing; it's about ensuring profitability. Every single pricing level has to be carefully thought out.

Remember, while giving discounts may earn you more clients, if it’s eating too much into your profits, then you're on a slippery slope.

I once made this mistake and it was a complete pain to fix. Ensure that you’re staying profitable as you expand. Here's a pro tip: start with higher pricing at lower volumes. That way, even as discounts kick in with more considerable volumes, you're still keeping your target profit margins in check.

2. Design Simple Tiers:

The more complex your pricing structure, the harder it'll be for potential clients to understand – and for your team to explain. A confused client rarely commits. Keeping it to 4-5 pricing tiers at most can make a world of difference. The easier your system is to grasp, the easier it'll be to sell.

3. Offer Retroactive Pricing:

Now, this can be a game-changer. Once a client commits more resources or business, reward them by applying the new discounted rate to their entire commitment. This strategy isn’t just about giving them a better deal; it’s about showing them that their commitment and trust in your business is valued. It's an appreciation gesture, and trust me, they'll remember it.

4. Set Clear Minimums:

Especially when you’re charging on a per transaction or service basis, having a set floor price or minimum commitment becomes vital. This not only ensures consistent revenue for you but also helps in better planning and allocation of resources. It gives you the cushion of guaranteed revenue and steady cash flow, which is crucial for business stability. Now hopefully you found this helpful. If you did and you want to get more help implementing this. I have a free worksheet for you that can help you with this. It’s free and my gift to you. You can get instant access to it by clicking the link below and telling me where to send it.

When To Visit A Lead In Person & What To Do

Hook: Do you want to get an almost unfair advantage over your competition and win big enterprise clients? Here’s the secret that can help you gain that huge advantage and it’s by Meeting clients in person. And this is a big tip. It's not just about getting clients; it's about building relationships.

Bridge: The size of an enterprise deal at the low end is going to be bare minimum $100K per year per client all the way to a few million per year per client.

So it goes beyond phone calls and emails. When you get to meet clients in person whether that's lunch, dinner, golf, tennis, it helps you build friendships.

And as the old saying goes, people buy from people they like. So if you become friends with your prospects you’ll win more clients.

Context: I learned this as I was building my company Order Solutions and trying to land big restaurant brands as clients.

I will never forget how powerful that first meeting was when I flew out and met them in person.

After that it completely accelerated the sales and priortized the sales process and got their whole team excited.

So how can you start doing this in your business? And how should you think about it?

#1 Relationships Trump Competitors: When you have a relationship with a prospect it builds trust.

Even if you’re company is smaller than a competitors if you can form a relationship with the client then you have the edge.

Taking a prospect out for dinner, playing a round of golf or a game of tennis, or just by having a coffee in person can be the bridge to building friendships.

These moments don't just build client relationships; they build friendships.I've seen so many deals, not won by a superior product or service, but simply because of the strength of a relationship between the vendor and the client.

This is why you see a lot of GEO sales teams with reps in different territories. So they can meet potential customers in person. #2 Go When You’re Close: When you’ve sent a pilot agreement or SOW draft and the client is big it’s worth visiting them. Especially if you’re in the early days of winning big customers. And if you live close by there is no excuse. Meet them ASAP.

#3 Gain A Competitive Advantage: Many competitors might hesitate to book that flight, but that's where your opportunity lies.

Especially when a contract or a pilot agreement is on the horizon. That face-to-face interaction might be the gentle push needed to clinch the deal.

#4 Think About The Big Picture: Meeting a customer and building a relationship in person can service you up the road. When it comes retaining clients, winning renewals, or negotiating price this will help you. If you ever make a mistake this can be the one thing that keeps the client instead of going to a competitor.

Reward/Call-to-Action: Do you want more help with this? If you do I have a free resource that helps you strategize and figure out when and how to implement in-person customer meetings to your business. You can it for free by clicking the link below and get instant access.

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