There's a pricing phenomenon so consistent it has a name: the decoy effect.

When Apple launched the original iPhone, they offered three storage tiers. The middle option outsold the others combined. This wasn't because 8GB was the perfect amount of storage—it was because the human brain struggles to evaluate things in isolation but excels at comparison.

Good/Better/Best pricing isn't about tricking customers. It's about giving them a framework to evaluate their own needs.

The Sloan Insight

Alfred P. Sloan transformed General Motors by rejecting Henry Ford's "any colour as long as it's black" philosophy. Instead of one car for everyone, he created "a car for every purse and purpose"—from Chevrolet to Cadillac.

Different customers value the same outcome differently. A first-time driver and a corporate executive both need transportation, but they're willing to pay vastly different amounts based on how they value reliability, status, comfort, and capability.

Single-price strategies leave money on the table with customers who would pay more, while excluding customers who would pay something.

The Anchor Effect

Good/Better/Best works because of how humans make decisions:

The "Good" tier establishes accessibility. It says "this is for people like you" to price-sensitive customers who might otherwise not consider you at all.
The "Best" tier establishes value. Even if few customers buy it, its existence makes the other tiers seem reasonable. A $999 option makes a $599 option feel like a bargain.
The "Better" tier captures the majority. Most customers self-select into the middle because it feels "balanced"—not too cheap, not too expensive.

The tiers create a conversation in the customer's mind: "Am I a Good, Better, or Best customer for this product?" That's a much easier question than "What is this worth to me in absolute terms?"

The Value Gradient

Effective tiering isn't about feature bundling—it's about understanding how different customers extract different value from the same core capability.

Customer Type	Primary Concern	Likely Tier
Experimenting	"Will this work at all?"	Good
Committed	"This needs to work well"	Better
Critical	"This cannot fail"	Best

The features that differentiate tiers should map to these concerns. For a backup service:

Good: Basic backup (will this work?)
Better: Faster recovery (will it work well?)
Best: Guaranteed uptime SLA (cannot fail)

The Sloan Test

For any pricing structure, evaluate:

Does each tier serve a distinct customer mindset? Not just "more features" but different value propositions for different needs.
Is the progression logical? Can customers easily understand why Best costs more than Better?
Does the middle tier feel like the obvious choice? If most customers go Good or Best, the middle isn't positioned correctly.
Are there clear upgrade triggers? What would make a Good customer become a Better customer? Is that growth path obvious?
Does pricing reflect value delivered? A 2x price increase should feel like (at least) 2x value increase.

Beyond Three Tiers

Good/Better/Best is a framework, not a law. Some products work better with two tiers (simple decision) or four (more granular needs). The principle is the same: create comparison points that help customers self-select based on their own value assessment.

The goal isn't to maximise revenue from any single customer. It's to capture appropriate value from all the customers you could serve—including those who can't afford your current single price.

The Full Framework

The complete Good/Better/Best analysis covers psychological principles, case studies (GM, Apple, SaaS companies), common mistakes in tier design, and tools for setting prices that capture value without leaving money on the table.

Read the full Good/Better/Best analysis →

Pricing isn't about finding the one right number. It's about creating a structure where customers can find themselves—and pay accordingly.

Good/Better/Best: The Psychology of Pricing