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Pricing models

Tiered pricing

Unit prices that change as volume crosses thresholds, with each tier applying only to the units inside it.

Tiered pricing sets different prices for different bands of consumption, with each band charged at its own rate. First 1,000 units at $1, next 9,000 at $0.80, everything above at $0.60. A customer using 5,000 units pays 1,000 × $1 + 4,000 × $0.80.

This is often called graduated pricing, and it is the opposite of volume pricing, where crossing a threshold reprices every unit. The distinction is worth being pedantic about: at 5,000 units the two models produce different invoices from the same table, and customers do notice.

Related terms

  • Volume pricing A single unit price determined by total volume, applied retroactively to every unit once a threshold is crossed.
  • Graduated pricing The precise name for tiered pricing where each band is charged at its own rate rather than repricing the whole quantity.
  • Usage-based pricing Charging by what the customer consumes rather than by a fixed subscription fee. Also called consumption or metered pricing.