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GBB, how can I explain it? I’ll take it frame by frame it, to have ya'll all jumpin', shoutin', sayin' it… ok ok, I know y'all remember this fun jam from the 90s.
GBB, or Good / Better / Best packaging, is without a doubt the most popular form of packaging for SaaS businesses with 72% implementing this format. It’s an easy and effective way to align value with needs and willingness to pay. "Advanced features... may be mission-critical for the Enterprise buyer... but would be a “bundle killer” for the mom-and-pop buyer who needs only the core functionality." (Poyar, 2016)
The idea is simple and the benefits are immediate. You want to serve different customers who have different needs with different versions of your product. The trick is to do it in a way that allows them to naturally grow and upgrade their package over time.
Here’s a quick breakdown of the mechanics behind GBB:
The Good package
This is usually your entry point into the software. In general, it’s a lightweight version aimed at price-sensitive or basic users who want to get started. Most features are either limited or not available in this plan; the goal is to upgrade you to the middle, better plan. Therefore, about 15-20% of your business should be in this package. You don't want them gettin' too comfortable...
The Better package
This is your sweet spot and offers enough access and entitlements to allow the customer to solve most of their problems. This package also enjoys the psychological benefit of the Goldilocks Effect coined by sociologists Beth Bowman Hess and Joan M. Waring in 1978. Simply put, most risk-averse buyers will default to the middle option. You want to get this one right as most of your revenue will come from this bucket. Look for 50% or more of your business to be in the Better package.
The Best Package
This is your most advanced packaged aimed at the enterprise - which is code for larger volumes, more complex needs, and most demanding in terms of services. Load up this plan with higher limits, beefy security/privacy, and white-glove services - you'll also need more flexibility around contract and payment terms, as well as offer scaled pricing for high volumes. Most make the mistake of trying to position this package as the most popular, Truth is, fewer buyers will be looking for this type of commitment. Generally, about a third of your business falls into this category.
Sounds great, right? It’s all good in theory, but it’s deceptively hard to pull off.
For one, you have to know your customers really really well for GBB to work. Who are they? What do they want for their budget? There’s no easy way to get this information. It comes down to a combination of what activity you see in your customer base (both active and churned) and what you hear in terms of product feedback. This topic deserves its own article that I'll post soon - so stay tuned.
As a matter of fact, GBB needs its own book! Good thing I'm writing one (shameless plug). Without getting too deep into packaging, I want to briefly touch on the customers' willingness to pay (WTP). GBB simplifies the buyer’s journey by showing them exactly what they need in easily digestible segments. Buying difficulty is inversely related to WTP; decrease buying friction, increase WTP. Using the GBB model will do just that!
Exciting isn’t it; a special kinda business.
There's so much I want to share but I'll leave you with a free download - a checklist to make sure you're capturing value with your packaging (oh, and a bunch of tips in case you're not).
Now when you do it, do it well and make sure that it counts
You're now down with a discount!
Update 2022-03-25
If you're thinking about offering a free trial or having a freemium plan as part of your GBB model, listen to this podcast I recorded with Akeel Jabber from SaaS District. I mention key differences between freemium plans and trial periods. I also offer a rule of thumb to help you decide if it's worth considering either at the current stage of your company. The video starts at the point when we're talking about trials and freemiums but the entire show is worth a listen.
Poyar, K. (2016, July 27). Insights from 100 SaaS Companies: Why It’s Time to Rethink Your Packaging Strategy Product & Pricing https://openviewpartners.com/blog/insights-from-100-saas-companies-why-its-time-to-rethink-your-packaging-strategy/#.X511w7vYqtp