A simple tweak in tiered pricing can raise revenue at no extra cost.
We’ve all experienced different forms of multi-tier pricing in our daily lives: from an airline offering a range of differently priced economy class seats to a streaming service providing a choice of premium, deluxe or family subscriptions. As consumers, we’re used to choosing from a range of alternatives that offer different features at different costs, based on our needs and willingness to pay. Typically, these tiers are structured in what is known as a “Good-Better-Best” (GBB) format.
In most cases, GBB options consist of three tiers, with each ascending tier offering extra tools, products or services, but with a higher cost attached. For decades, such pricing models have dominated how marketers structured such deals. And it’s easy to see why: they’re easy for customers to understand and appeal to diverse segments. Marketers also appreciate their simplicity and the potential they offer for cross-selling and upselling opportunities.
Based on these advantages, it’s perhaps no surprise that tiered pricing has been adopted by countless streaming services, as well as almost two-thirds of SaaS (Software as a Service) companies. That’s according to a recent study of over 70 companies that I (Michael Mansard) led for the Subscribed Institute.
But what if this universal convention is, in fact, a bad idea in many instances? That sticking to this tried and tested method could mean marketers are missing a simple way of growing revenue at no extra cost?
Our new research suggests this might be the case. Through a controlled experiment, we found that simply flipping the order of options from the traditional GBB pricing model to a “Best-Better-Good” (BBG) model could actually result in up to a 10 percent increase in revenue.
Changing things up
The inspiration for our study was the small but growing number of firms beginning to explore the potential of the BBG format over the past 18 months. For example, Apple recently rolled out a suite of smartphones starting with the more premium iPhone 16 Pro and ending with the cheaper iPhone 16e. Similarly, streaming service Disney+ now starts by pushing its Premium plan before moving to its Standard and Standard With Ads plans.
Research into the potential revenue benefits of shifting from GBB to BBG is still in its infancy at best. Yet, our findings suggest that doing so can nudge more customers towards premium plans thanks to emotional triggers, such as anchoring and loss aversion.
To explore the impact of BBG vs. GBB approaches on purchase intent, we ran an experiment using a virtual AI assistant service, an increasingly common form of consumer interaction. The service invited participants to choose between three offers (Starter, Plus and Advanced), presented in black-and-white and priced in linear and affordable increments to eliminate any potential biases related to branding, visual appeal or pricing.
While people chose the “Better” and “Good” options less often in the new structure, the change still led to a significant revenue increase of 10.8 percent. The reason for this growth was that more people opted for the “Best” tier in the new structure compared to the GBB model. As you can see in Figure 1, more people (49 percent) went for this option than either the Better (29.6 percent) or Good (21.4 percent) choices.
The emotions behind choice
The reasons people make purchase choices have long been linked to emotional principles. GBB models leverage these principles to guide purchasing decisions and drive revenue growth. These include:
Anchoring: People subconsciously use the highest-priced and lowest-priced options as reference points, which typically makes the middle-tier option seem like the best value.
Nudging: Marketers use cues like “most popular” or “recommended” to reassure buyers and steer them towards the middle option. These nudges act as social proof that they are making the right decision, making that choice easier.
Goldilocks: Similar to the famous fairy tale, research has found that when given three choices, people often avoid the two extremes and pick the middle option, which feels “just right”.
Loss aversion: People are more motivated to avoid losses than try to gain something of equal value. Choosing a lower-tier option can feel like “losing out” on features, which encourages customers to upgrade to the middle tier instead.
Reversing the order
Flipping the order of the options from GBB to BBG clearly influenced the final choice made by consumers. While the “goldilocks” effect had the biggest impact in the GBB model, it was the “anchoring” and “loss aversion” effects that were the biggest drivers in the BBG model (see Figure 2).
Participants tended to focus on what they were giving up (the premium features), rather than what they gained (savings), with the “Best” option serving as a strong anchor for their decision. That was even true for those who didn’t select the “Best” option immediately, with 14 percent of middle-tier respondents viewing it as a potential future upgrade. This is significantly higher than the four percent observed in the control GBB model.
These emotional influences, and an increased tendency to discount the starter option, seemed to reflect a change in the buyers’ focus from “Which upgrade is worth paying for?” in GBB to “Do I see a reason not to get the best?” in BBG. Based on the responses, the emphasis shifted from a more rational choice (with a higher “compromise” effect) to a more emotional choice (with an enhanced “loss aversion” effect), resulting in different final plan selections.
When and how to flip
Our findings suggest that pivoting from GBB to BBG may unlock greater revenue potential by setting a higher reference point and reshaping how customers perceive value. Presenting the premium option first establishes a high-quality benchmark in buyers’ minds, reinforcing perceived loss aversion. While GBB approaches seem to push customers toward the middle-tier choice, buyers’ fear of missing out on premium features tilts their choice to the top-tier option in BBG models.
Managers interested in unlocking these hidden revenue opportunities should consider taking the following steps:
Test BBG vs. GBB model performance. Conducting small-scale, controlled A/B tests allows managers to assess key metrics, such as conversion rates, perceived value and potential upgrade intent. Monitoring customer behaviour over time can also help determine whether a BBG model optimises revenue or actually risks discouraging lower-tier sign-ups. This data-driven approach will help optimise pricing strategy, while mitigating drawbacks.
Seek customer feedback. Direct quotes or personal statements provide invaluable insights into the value customers recognise in your offers and are central to monetisation strategies. When exploring the impact of BBG vs. GBB models, managers should closely monitor customer satisfaction, particularly among those selecting the premium option, to ensure that their choice really does meet their needs and preferences.
Allow for smooth transitions. Providing a seamless path to downgrade (as well as upgrade) options is crucial to avoid dissatisfaction and ensure customers ultimately pay for the option that best fits their individual needs.
A BBG future?
More research is needed in this area, especially studies into the success of real-life examples of BBG pricing models, like those at Apple and Disney+. There may be scenarios, such as in price-sensitive or highly commoditised markets, where the GBB format could be more effective. Furthermore, a key limitation of our study is that we also only focused on initial conversion rates, not the long-term impact of these models on customer behaviour or lifetime value.
But following our recommendations can at least allow marketers to experiment with different pricing models, while minimising risks and expenditure. Boosting revenue and increasing the uptake of premium plans might not require tweaking prices or adding new features. Just flipping the framing used can effectively boost revenue – and at no additional cost. With this in mind, marketers might well soon retire many “Good-Better-Best” offer formats and officially welcome the era of the “Best-Better-Good” model.
