6.5
Good-Better-Best & Fencing
A tiered price structure with deliberate constraints, called 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 let segments sort themselves. The fence is the real constraint that stops 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 ↗In the wild
Unchecked · not part of the tier
What people have written about this tool in the last twelve months. A machine found these and nobody has read them. Everything above this line was checked by hand.
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