6.5
Good-Better-Best & Fencing
A tiered price structure with deliberate constraints — fences — that stop customers in one tier from buying at another tier's price.
Label from Rafi Mohammed, HBR (2018); mechanism is second-degree price discrimination
What it does
Tiers that let segments sort themselves, with a fence — a real constraint — preventing one tier's customers sliding into another's price.
When it breaks
If the difference between tiers is not perceived, everyone takes the middle one and total revenue falls. A tier without a fence is just a discount list.
Case
Netflix added an ad-supported bottom tier in November 2022 as a fence against price-sensitive churn. It reported 70 million monthly active users on that tier two years later, rising to 94 million by May 2025, expanding the base without cutting premium pricing.
CNBC — Netflix ad tier hits 70m users ↗Diagram — not yet drawn
Three tiers with the fence drawn as a physical barrier between each pair, labelled with what actually stops the crossing — and one fence deliberately drawn broken.
In the wild
Unvetted · not part of the tier assessment
What has been written about this tool in the last twelve months. Machine-retrieved and unchecked — everything above this line was checked.
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