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Why You Usually See Three-Tiered Service Pricing

Three colored bands numbered 1, 2, and 3, representing three-tiered pricing for services

You know what I mean. It goes like this: “Buy one of my coaching packages. Your choices are:”

     Package 1: $350.
     Package 2: $750.
     Package 3: $1500.

Ok, let’s slip behind the curtain, and here are the principles you will see at work:

1. The most people will buy Package 1.
2. Fewer people will buy Package 2.
2. Fewer people still will buy Package 3.
3. The main purpose of Package 3 is to make Package 2 look more attractive.
4. It’s perfectly OK to have a super-duper deluxe version that hardly anyone actually buys.
5. Typically, though, the seller will make roughly equal amounts of revenue from every price level. That is, between the numbers of sales relative to the price points of each package, the total revenue will be about the same.
6. The Package 1 customers will be the least pleasant and most troublesome.
7. The Package 3 customers will be the most pleasant and least troublesome. 
8. After learning who’s who, it’s perfectly acceptable – in fact it’s savvy – to fire your least profitable and most troublesome customers from time to time.

Now, noble one, go forth and price your stuff. 🙂

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