The Architecture of Value: Good / Better / Best
"A car for every purse and purpose."— Alfred P. Sloan, General Motors, 1924
Pricing is not a math problem; it is a psychology problem. Alfred P. Sloan defeated Henry Ford not by building a cheaper car, but by segmenting value. By tiering offerings, you capture the consumer surplus of the wealthy without excluding the price-sensitive.
From Tesla's software-defined tiers to airline cabins, the most profitable companies don't guess what customers will pay—they let customers self-select into their willingness to pay. This page examines four pillars of the Good/Better/Best strategy.
The Goldilocks Curve
A single price point leaves money on the table in two directions. G/B/B steers behaviour to the middle, while anchoring high and remaining accessible low.
Accessible price. Standard functionality. Strips away friction to capture market share.
The target choice. The intersection of high volume and optimised margin. Most users land here.
High status, comprehensive. Exists to capture surplus and make "Better" look like a bargain.
Four Pillars of Segmentation
Executive Summary: Iconic executions of the tiered strategy.
Tesla
Software-Defined Value
Variants: Standard vs Long Range vs Performance.
Identical hardware, differentiated by software locks. The "Best" tier is almost pure profit.
Industry-leading margins (>25% at peak).
Airlines
The Time Paradox
Variants: Economy vs Business vs First.
Everyone arrives at the same time. The product is not the destination, but the experience of the journey.
Front of plane subsidises the back.
General Motors
The Original Ladder
Variants: Chevrolet → Pontiac → Buick → Cadillac.
Sloan invented market segmentation. "A car for every purse and purpose" defeated Ford.
Surpassed Ford in 1927. Held #1 for 77 years.
Apple
The Storage Ladder
Variants: 128GB vs 256GB vs 512GB.
The "Good" option is often deliberately constrained (storage anxiety) to nudge users to "Better".
The "Decoy Effect" in action.
Tesla: Software-Defined Value
Zero Marginal CostJob to be Done
"I need an EV that fits my budget, but also alleviates my range anxiety and satisfies my desire for performance."
The Approach
The Insight
The hardware cost difference between Long Range and Performance is minimal (red brake calipers, spoiler). The price difference is substantial ($4-6k). The jump to "Best" is almost entirely profit.
Margin Flow-Through
Hardware cost remains flat; Margin expands with Price [1]
Airlines: The Time Paradox
Yield ManagementJob to be Done
Economy: "I need to get to London as cheaply as possible." (Utility)
Business: "I need to arrive rested, working, and respected." (Experience)
The Approach
The Insight
The flight duration is identical for all passengers. The value is not in the destination, but in the removal of friction. The "Best" tier subsidises the "Good" tier.
Floor Space vs. Ticket Price
Price multiplier far exceeds the space multiplier [2]
General Motors: The Original Ladder
Market SegmentationJob to be Done
"I want a car that reflects where I am in life." The young buyer starts with Chevrolet. As they prosper, they trade up through Pontiac, Oldsmobile, and Buick. The pinnacle: Cadillac—a symbol of having arrived.
The Approach (Price Ladder, 1924)
The Insight
Ford saw the car as transportation. Sloan saw it as a symbol of attainment. By creating aspirational rungs, GM kept customers for life—and introduced planned obsolescence through annual model changes. Ford held 50%+ market share in 1920; by 1927, GM had surpassed them.
The Brand Ladder (1920s Prices)
GM surpassed Ford in 1927 and held #1 for 77 years [3]
The Pricing Traps
Common mistakes that undermine tiered pricing.
Cost-Plus Pricing
Adding a flat margin to manufacturing cost fails to account for customer psychology.
- Leaves Money on Table: Rich customers would pay more.
- Excludes Market: Price-sensitive customers are priced out.
- Ignores Emotion: Customers buy value, not your BoM cost.
Customisation Hell
Offering endless options (cognitive overload) leads to "Analysis Paralysis". G/B/B simplifies the decision into three clear buckets.
- Decision Fatigue: Too many choices = No sale.
- Production Complexity: Hard to manufacture/support.
- Value Confusion: "Why is this knob $50?"
Strategic Comparison: G/B/B vs. Freemium
Goal: Acquisition.
Relies on a $0 anchor. The hurdle is moving from Free to Paid (infinite price increase). High churn, massive top-of-funnel required.
Goal: Maximisation.
Anchors value at a paid tier. The decision is "Which one?", not "Should I pay?". Higher ARPU, better for mature markets.
The Sloan Test
Before finalising your tiers, ask:
1. Is the Anchor Heavy?
Does the "Best" option exist primarily to make the "Better" option look like the smart, rational financial decision?
2. Is the Platform Shared?
Are we creating packaging complexity (good) or operational complexity (bad)? Do the tiers share a common core?
3. Does Good still work?
The "Good" option must solve the job. If it is purely a "punishment tier" (e.g. physically painful seats), you damage the brand.
So What? Why This Matters Now
Alfred Sloan defeated the world's most efficient manufacturer not by out-engineering him, but by understanding psychology. Henry Ford's "any colour as long as it's black" was peak production efficiency—and commercial suicide. Sloan's "ladder of success" let customers self-select into their willingness to pay. Nearly a century later, the principle holds: capture the area under the demand curve, not just one point on it.
The Single Price Problem
Most products launch with one price. This leaves money on the table in two directions: customers who would pay more (lost margin) and customers who would buy at less (lost volume).
G/B/B solves both simultaneously. The "Good" tier captures the price-sensitive. The "Best" tier captures surplus from those who want the maximum. The "Better" tier—your profit engine—looks like the rational choice.
The Psychology Advantage
- →Anchoring: "Best" makes "Better" look reasonable.
- →Self-selection: Customers reveal their willingness to pay.
- →Reduced decision friction: Three options, not twenty.
- →Upgrade path: Today's "Good" customer is tomorrow's "Better".
The Implementation Challenge
The hardest part isn't the pricing—it's the discipline. Tesla's genius is that their tiers are packaging differences, not operational differences. The factory builds one car; software unlocks the rest. VW Group's MQB platform shares over 60% of parts across brands. This is the secret: operational simplicity, packaging complexity.
"Price is what you pay. Value is what you get. The architecture is how you capture both."
References & Data Points
- Analysis of Tesla Model 3 BOM (Bill of Materials) vs MSRP variances for SR+ vs Performance models (2023). Hardware cost delta ~$1,500; price delta ~$12,000.
- ICAO data on yield per passenger kilometre for First/Business vs Economy class cabins on trans-Atlantic routes. First class typically generates 8-12x the revenue of economy per square foot.
- Sloan, A.P. (1963). My Years with General Motors. GM surpassed Ford in 1927 and held the #1 position for 77 years until Toyota in 2008. The "Ladder of Success" created modern market segmentation.
- The Henry Ford Museum (1925). Advertisement for General Motors: A Car for Every Purse and Purpose. Original documentation of GM's tiered brand strategy.