Page 58 - Harvard Business Review, Sep/Oct 2018

Helping Customers

Understand Good-Better-Best

1 2 3
Once a company has
created a multitiered 2.
offering, it needs to help There’s a nice consistency and
customers understand progression between packages:
Customers don’t lose anything
the various options. This as they move up in price, and
comparison grid, from a each level has three or four key
website design and hosting differentiators.
firm, is effective for three
reasons, as described in the
following annotations.
3.

The packages have been
intelligently named. In particular,
“Business” clearly communicates
the type of customer who should
choose the premium option. The
1. 80% price difference between
that package and “Advanced”
Limiting the use of features signals the company’s belief
available with the Good option
(pages, bandwidth, and storage) that business customers—who
creates a “fence” separating the typically have greater needs and
are less price-sensitive—will be
truly price-sensitive from those willing to pay significantly more.
willing to pay more.

predictably. But some products, such as tutoring services and should differ between Good and Better and between Better and
weight loss programs, require customer involvement to achieve Best. And it’s important to maintain a consistent progression
success. Because of that uncertainty, companies generally aren’t of benefits from Good to Better to Best—beneficial features in
willing to guarantee them, even as part of Best packages and Good should be retained in the higher-priced offerings so that
even if consumers would highly value guarantees. every step up the ladder is a clear improvement.
When devising Best bundles, companies need to be realistic Some rules of thumb can similarly help with pricing.
about the attributes they can include. During brainstorming, it’s Companies should pay close attention to the price gaps between
natural to dream big—but as dreaming turns to planning, vigi- Good and Better and between Better and Best. In my consulting,
lance is needed to weed out features that may be difficult to exe- I strongly advise against setting a Good price that’s more than
cute well or that could delay the launch. It’s also important to be 25% below Better, and I recommend that the Best price should
judicious about the number of attributes. It’s tempting to throw not exceed Better by more than 50%. Although customers’
all the latest and greatest features into Best, but this can result in perceived value must be the North Star, companies must also
unnecessary complexity and an unrealistically high price. consider how many customers might opt for Good, Better, and
After completing the cost-benefit analysis of the various Best and what the margins of each package will be. As a starting
features, it’s time to design and assign tentative prices to the point—before conducting customer research—many companies
G-B-B bundles. Two rules of thumb for design: To ensure sharp estimate that 10% to 20% of revenue will come from Good, 25%
distinctions between offerings, no more than four attributes to 50% from Better, and 30% to 60% from Best. The actual mix

114 HARVARD BUSINESS REVIEW SEPTEMBER–OCTOBER 2018