Latest / The Newsletter Podcast with Fexingo: Substack, Beehiiv, and Email Newsletter Business / How Newsletters Use Tiered Pricing to Increase Revenue
Transcript
- Lucas: You know how most newsletters these days have one paid tier — maybe five bucks a month, maybe ten — and that's it? Luna: Yeah, that's the standard model. One price, one set of benefits. Lucas: Right. Well, a growing number of successful newsletters are moving to tiered pricing — offering two, sometimes three levels of paid subscription. And the early data suggests it's a smart move. Luna: Interesting. So instead of just a binary free versus paid, you get a bronze, silver, gold kind of setup. Lucas: Exactly. And the results can be significant. I've been looking at newsletters like The Browser and Stratechery — both have multiple tiers — and they're seeing higher average revenue per subscriber and lower churn compared to single-tier peers. Luna: Huh. That makes sense psychologically. You anchor people on a higher tier, and the middle one looks reasonable. Lucas: Before we dive into the mechanics — and I promise we will — I want to be transparent about something. This show is ad-free, and it's funded entirely by listeners who chip in a few bucks a month. If these marketing conversations have sparked something you've actually used, you can support us at buy me a coffee dot com slash fexingo. Luna: Yeah, it's a small group that keeps this going, and we're grateful. It lets us stay independent and focused on what's useful. Lucas: Okay, so let's talk about the most common tier structure I'm seeing. It's a three-tier model: a basic paid tier that gives you the newsletter and maybe some archive access, a mid-tier that adds exclusive deep dives or audio versions, and a top tier that includes community access — like a Discord or a Slack channel with the writer. Luna: That's almost exactly what Stratechery does. Ben Thompson has the basic newsletter for ten bucks a month, then the Daily Update for more frequent analysis, and then the top tier includes his podcast and the Stratechery Plus community. Lucas: Right. And that top tier is priced at around thirty dollars a month — three times the basic. But the key is that the middle tier is the anchor. If you offer a ten-dollar tier and a thirty-dollar tier, the twenty-dollar tier looks like the sweet spot. Luna: So you're essentially using decoy pricing. The top tier makes the middle one feel like a deal. Lucas: Exactly. And it works. The Browser does something similar. They have a basic tier for five dollars a month, a premium tier for fifteen, and a 'patron' tier for fifty. The patron tier is mostly symbolic — it includes nothing extra except the warm feeling of supporting the newsletter — but it makes the fifteen-dollar tier feel completely reasonable. Luna: I've seen that pattern in a lot of SaaS products too. The 'pro' tier is the real product, and the 'enterprise' tier exists to anchor and upsell. Lucas: Exactly. Now, tiered pricing isn't just about psychology — it also helps with retention. If you have a single paid tier at ten dollars, someone who's on the fence might just cancel. But if you have a five-dollar tier, they might downgrade instead of churning entirely. Luna: So it's a way to capture willingness to pay at different levels. Not everyone can afford thirty bucks a month, but they might pay five for the basic. Lucas: Right. And that's the second big benefit — market segmentation. You're not leaving money on the table from high-willingness subscribers, and you're not pricing out budget-conscious ones. Luna: But there's a risk here, right? Feature bloat. If you're constantly adding perks to justify higher tiers, you might dilute your core product. Lucas: That's a real danger. The best newsletters I've seen keep the tiers simple. The basic tier is the newsletter itself. The mid-tier adds one or two things — maybe a weekly podcast or a subscriber-only thread. The top tier is community access. They don't try to invent ten different perks. Luna: So the value is clear and distinct at each level. Not just a grab bag of random bonuses. Lucas: Exactly. Another newsletter I came across — it's called 'The Sample' — uses a two-tier model: free and paid at eight dollars. But they recently added a 'supporter' tier at twenty dollars that includes early access to new features and a monthly Q&A. They told me that even though only about five percent of paid subscribers chose the supporter tier, it increased their average revenue per paid subscriber by nearly twelve percent. Luna: That's a nice lift from just a small segment of superfans. And it didn't require a massive overhaul. Lucas: Right. And that's the beauty of tiered pricing — you can start with a single tier and add one more later. You don't have to launch with three tiers from day one. Luna: So what's the best practice for deciding the price points? I'm guessing it's not arbitrary. Lucas: No, it's not. You want the gap between tiers to be meaningful but not absurd. If your basic tier is five dollars and your mid-tier is six, that's not a real distinction. The mid-tier should be at least double the basic price, and the top tier should be at least double the mid-tier. Luna: So like five, fifteen, thirty. Or ten, twenty-five, fifty. Lucas: Yeah, something in that ballpark. And you want to test. Some newsletters A/B test their pricing pages — showing different tier structures to different segments of visitors to see which generates the most revenue. Luna: Is there any data on what percentage of paid subscribers typically end up in each tier? Lucas: It varies wildly, but a rough rule of thumb I've seen: about sixty to seventy percent choose the lowest paid tier, twenty-five to thirty percent choose the middle, and five to ten percent choose the top tier. That's from a sample of about twenty newsletters on Substack that shared their numbers. Luna: So the top tier is a small but high-value group. And the middle tier is where you're making most of your revenue, because it's a decent price point with decent volume. Lucas: Exactly. And that's why getting the middle tier right is so critical. It can't feel like a rip-off compared to the top tier, but it also can't offer so much that nobody upgrades. Luna: What about the risks of complexity? More tiers means more to manage — different email lists, different access rules, different cancellation options. Lucas: It's definitely more work. But platforms like Substack and Beehiiv have built-in tier management now. You can create multiple subscription products and they handle the access control. So the operational burden is lower than it used to be. Luna: Good point. So for a newsletter just starting out, would you recommend starting with one paid tier and adding a second once you have a sense of your audience? Lucas: Absolutely. Start simple. Get a hundred paid subscribers. Understand why they pay. Then introduce a second tier — maybe a higher-priced one with a community component — and see how it performs. You can always adjust. Luna: And if you're worried about alienating existing subscribers when you add a new tier, you can grandfather them in at the old price for a while. Lucas: Exactly. That's a common approach. Give your existing paid subscribers a grace period — say six months at the old rate — before requiring them to choose a tier. It builds goodwill. Luna: So tiered pricing seems like a no-brainer for newsletters that already have a decent paid base. The upside is higher revenue and lower churn, and the downside is manageable. Lucas: Right. And the key takeaway is this: don't just copy someone else's tiers. Think about what your superfans want that your regular paid subscribers don't. That's your top tier. And make sure the value at each level is clear and distinct. Luna: I think the next frontier will be dynamic pricing — where the price adjusts based on subscriber behavior or engagement. But that's probably a few years out.