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Contractor glossary

Good-better-best pricing

Updated

Definition

Good-better-best pricing means presenting a customer with three options for the same job, each a complete solution at a different price, instead of a single take-it-or-leave-it number. The tiers differ in materials, features or warranty, never in whether the job is done right.

Also called: Tiered pricing, Option pricing, Three-option pricing

How it works

One price asks the customer a yes-or-no question. Three prices ask which one, and that changes the conversation from "should I hire you?" to "what do I want?" It also respects the customer's budget: some want the lowest price that fixes the problem, some want the upgrade, and you don't have to guess which.

Each tier must be a finished job you'd be proud to sign. A typical structure:

  • Good: fixes the problem properly with standard materials and your standard warranty.
  • Better: upgraded materials or features, often a longer labor warranty or a maintenance visit included.
  • Best: the top of the line you install, with your longest coverage.

What tiers look like by trade

  • HVAC: the same capacity from one load calculation, with tiers that differ in efficiency, staging and controls. The HVAC pricing guide covers how the efficiency floor sets the bottom tier.
  • Roofing: shingle line, underlayment and ventilation upgrades, and the length of your workmanship coverage.
  • Plumbing: a like-for-like water heater, a larger or higher-efficiency tank, or a tankless unit.
  • Pressure washing: the house wash alone, the house plus flatwork, then gutters and the patio on top, as in the pressure washing pricing guide.
  • Auto detailing: coating or correction packages built from stages and hours.

Example

Example: A plumber is replacing a failed 40-gallon gas water heater. Good: the same size tank, installed to code, $2,000. Better: a 50-gallon tank with a longer manufacturer warranty, $2,500. Best: a tankless unit with the gas and venting changes it needs, $4,500. Each price is built from its own materials and labor at the same target margin. The numbers are made up for illustration.

Building tiers honestly

  • Same margin on every tier. Build each price from its own costs (see markup vs margin). The bottom tier is not a loss leader.
  • Same scope on what matters. Code items, permits and safety work belong in every tier. Never move them up to make the cheap option look bad.
  • Differences the customer can see. Name the actual brand, model or spec, the warranty years and what's included, side by side.
  • Promise only what you can back up. Describe ratings and features, not savings you can't guarantee.

Common mistakes

  • A decoy bottom tier. If you wouldn't install it in your own house, don't offer it.
  • Too many options. Three is enough. Five turns a decision into homework, and homework gets put off.
  • Tiers that differ in size. On HVAC, offering a bigger unit as the upgrade undermines the load calculation.
  • Pressure at the table. Present all three, explain the differences, and let the customer choose. Then follow up if they need time.

How it connects

Options belong on a written estimate, each with its own scope of work. They pair well with flat-rate pricing, since each tier is a set price, and a service agreement is a common add-on in the upper tiers. Track which tier customers pick: if almost no one picks the bottom one, your close rate and gross margin show whether the tiers are set right.

Go deeper

HVAC guideHow to Price HVAC JobsHow to price HVAC service calls, replacements and maintenance agreements: flat-rate books, diagnostic fees, Manual J sizing, SEER2 tiers and refrigerant.Pressure washing guideHow to Price Pressure Washing JobsPrice pressure washing from your own production rates: square foot, job and hourly pricing, minimums, chemical and water costs, surcharges and bundles.GuideHow to Follow Up on Quotes Without Being PushyA quote follow-up plan for contractors: a cadence by job size, text and call scripts for each touch, honest options, when to stop and how to track close rate.GuideMarkup vs Margin: The Difference That Costs Contractors MoneyMarkup divides profit by cost; margin divides it by price. The formulas, an exact conversion table, the costly mix-up and how to price to a target margin.
EstimateAn estimate is a contractor's expected price for a job, based on the scope as it's understood before work starts. It tells the customer the price could change if the work turns out different, but whether it binds you depends on its wording, the customer's acceptance and your state's law.Close rateClose rate is the share of quotes or leads that turn into booked jobs over a set period. It's jobs won divided by quotes given (or leads received), times 100, and it's most useful split by lead source, job type and who quoted.Flat-rate pricingFlat-rate pricing charges a fixed price for a defined task, no matter how long it takes on the day. The price is built ahead of time from your average time for the task, your cost per billable hour, parts and profit, and kept in a price book.Gross marginGross margin is gross profit as a percentage of revenue: what's left of each sales dollar after direct job costs (materials, field labor, subcontractors, permits), before overhead. A $10,000 job that costs $6,000 to deliver has a 40% gross margin.Scope of workA scope of work is the written description of exactly what a job includes and what it excludes: the tasks, materials, quantities, locations and standards of finish. It's the part of an estimate or contract that defines what the price buys, so anything outside it needs a change order.Service agreementA service agreement is a recurring maintenance plan a customer pays for, monthly or yearly, that includes scheduled visits and set perks such as priority booking or repair discounts. For a contractor it turns one-time customers into steady, predictable work.

See every term in the glossary