The Case Against Feature-Based Pricing
Get an inside look at the pressure to upsell features in the software industry. Explore the economic theory behind tiered pricing and its potential pitfalls.
I'm the CTO at Pistachio, and my goal is to build the best cybersecurity awareness product on the market. My goal isn’t to grow market share, to increase our ACV (average contract value), or to multiply our ARR (annual recurring revenue). My goal is to build the best product.
There are a lot of factors that go into that. We have to get our product vision right, we have to develop exceptional tech, and we have to create a user experience that people love. However, a bad commercial strategy can ruin all of that by fracturing the product into different “tiers” and putting new features behind special pricing plans. And that is why we will never do that at Pistachio. We will never ask customers to pay more for a new feature. Everything we build goes to making the product better for everyone.
The Pressure to Upsell
Companies contort themselves in all sorts of weird directions to justify charging more for features that have zero marginal cost. The logic looks something like this: It costs us money to develop these advanced features that only some customers need. By charging more for these features we can keep prices low for the rest of our customers.
In economic terms, this is similar to third degree price discrimination. A company creates “tiers” of products to sell at different price points to different customer groups. An enterprise might be willing to pay double the price of a normal customer if it really values some special feature like customizable reports or granular access control, so you leave money on the table by letting them pay the normal price. In other words, the seller is able to capture more of the economic surplus by creating product tiers.
That’s the theory, at least. At most companies, the logic is probably even simpler: A customer already bought our product when it didn’t have this new feature, so why give it away for free when we could sell it to them for extra instead? Money goes up.
Your Captured Surplus Is Our Opportunity
The economic theory presented above works great when we are talking about goods and services that have some non-trivial marginal cost to provide. If you are selling desks and you charge customers extra for including a gold nameplate, that is totally fine. Your competition can’t swoop in and offer the same desk at a lower price unless they somehow figured out a cheaper way of making gold nameplates.
However, if your pricing model is just a pure price discrimination play, i.e. an arbitrary attempt to sort users according to willingness to pay, then you have a problem. Yes you can use that model to capture some of the economic surplus, but there is nothing stopping your competition from taking your customers by handing that surplus back. In simpler terms, nothing stops your competition from offering the same feature at a lower price point.
Stepping away from theory, what is really going on is that software companies make their product intentionally worse in order to charge more. They make an amazing product but only give it to the top buyers. Everyone else is left with some out of date service that hasn’t been updated in years because all new development work goes to the top tier.
At Pistachio we will never do that. Not only would it be overtly hostile to the early adopters we relied on so heavily at the start, but it also degrades the quality of the product for most customers. Remember, my goal is to build the best product. Knowing that someone is experiencing less than the best of what Pistachio has to offer would kill me inside, so we would never do that.
This is also bigger than just me. Putting new features behind new pricing tiers is against the very core of Pistachio’s vision. We want to empower digital freedom of movement for everyone, not just the highest paying enterprise customers. And that is why every new feature we build will be added to the product for every customer we have.
We believe in a learn-by-doing approach over snooze-worthy videos.
Instead, Pistachio tailors real-world scenarios so your team can build their cyber skills in a safe environment.
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“We lacked confidence that employees would recognise today’s phishing threats or respond correctly. Since using the Pistachio platform, they are more attentive and proactive in identifying potential risks. The solution is easy to manage, quick to implement, and highly effective.
“The platform is easy to implement and provides clear insights into employee phishing awareness. Its bite-sized learning encourages participation, saves administration time, and allows us to focus more on real threat detection.”
“We were looking for a practical way to improve cybersecurity awareness across the organization. Pistachio made training simple and engaging, and we’ve seen a noticeable improvement in employee awareness with minimal effort.”
“Pistachio removed the burden of planning campaigns, collecting data, and evaluating results. The program challenges each employee at their own level and provides clear, simple reporting. Pistachio has streamlined our awareness training and strengthened our organization’s cybersecurity.”
“Our goal was to help employees better recognize phishing emails and avoid malicious links. Pistachio made this easy and engaging, and we’ve seen a clear improvement in detection, fewer clicks on phishing links, and reduced data disclosure. With minimal ongoing maintenance, it’s an effective and low-effort solution.”
“Within weeks, Presence had flagged several incidents that could have otherwise been missed, including employees forwarding company data to personal accounts during offboarding. The alerts are reliable and actionable, so we've built a full investigation process around them. Although I was skeptical at first, the value was obvious almost immediately.”
“Pistachio has reduced our manual workload to zero with its automated phishing simulations and in‑box delivery of scenario‑based trainings. This has allowed our team to dedicate time to other important security initiatives while Pistachio handles our Security Awareness program seamlessly.”
“Presence automatically detects suspicious behaviour and gives us the visibility we need without constant manual oversight. Within the first few weeks we were already seeing alerts that would have otherwise gone unnoticed as the system learns what is usual and unusual behaviour for our environment.”
“Before Pistachio, security awareness was something we could only offer to a few customers. Today it’s part of every managed service we deliver, and we haven’t had to grow the team to make that happen.”
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