You have a product that is working well, but you’re looking to generate more revenue out of it. A way of doing so, especially if your product is usage-based, is to limit a few features on each tier. But how do you decide on the limit to implement to generate some revenue?
Follow along if you’re interested:
This works for API requests, file storage space used, messages sent, users added, or templates created…
Let’s say we have the following frequency distribution table for the free accounts template usage:
|N of templates||N of accounts||% of accounts|
If we sum the number of accounts having 0, 1, 2, or 3 templates, we have 81% of accounts. We should draw the free tier limit at three templates.
If your data is on the A column (A2:A11), and the classes on the C column (C2:C8), then your formula is: =frequency(A2:A11, C2:C8)
Now, you have the usage distribution for each feature. You may have 1, 3, or even ten features you could limit, but which makes more sense?
List the impact for each limit: How many accounts would be impacted if you implemented this limit now? What’s the proportion of those accounts based on the specific tier you’re limiting?
See the following example:
|Type||Limit||N of accounts||% of free accounts|
|File space||2 MB||56||2.86%|
|Rate limit||400 requests/min||30||1.50%|
Here, we can see the limit that would have the most significant impact is the number of templates: almost 10% of the free accounts would have to move to the next tier if we limited it.