Tuesday 20 June, 2017
Deciding on pricing for your ecommerce store is a major decision and not one to be made lightly. It takes a great deal of research, consideration and testing to determine the right price points. But one option that makes it easier, and gives your customers more options, is tiered pricing.
Tiered pricing simply means offering different prices for different customers. Your store offers more than one pricing structure. There are many different types of tiered pricing, but for our purposes here, we’re talking about two specific kinds – pricing structures based on quantity and feature-based pricing.
Quantity-Based Tiered Pricing
Here is an example of quantity-based tiered pricing. You have a company that sells printer ink. You have a set price for 1 cartridge, but if a customer buys a pack of 3, they get a discount so that each individual cartridge costs less than if it were bought individually. Maybe you offer a deeper discount for 5, 10, and so on.
This achieves a win-win situation for both the seller and the buyer. The buyer can save money by buying in quantity. Meanwhile, by encouraging the buyer to buy in quantity, it means more sales for the seller, even though the price per unit is lower.
Some products work better than others with this type of pricing structure. The products that work best are those that the buyer has to buy eventually anyway like printer ink, batteries, guitar strings, and so on. Products that don’t work well with this pricing structure are those that are rare, that go bad or that are only useful for a limited time.
Feature-Based Tiered Pricing
Another way to use tiered pricing is to make it feature-based. We’re all familiar with this from buying computers and cars. The idea is that there’s a base price for which the buyer gets the simplest version with the fewest features. The price goes up as they add more features to the product.
The advantage of this pricing strategy is that it makes your product customizable. By offering a high base price but cheap features, you can encourage your buyers to take advantage of the features, thus getting them to pay more.
But one word of caution – don’t make this pricing structure too complex unless you have a sales force on-hand that can spend time explaining it to your customers. Some companies go overboard on feature-based pricing. Offer options to customize, but keep it simple enough to understand.
Ecommerce Platforms and Tiered Pricing
These days, most ecommerce platforms offer tiered pricing options. You can choose tiered pricing based on quantity, limited time offers, certain types of customers, and so on. For example, you can create tiered pricing for your loyalty program. Customers who shop from you a lot save when they buy. You can also get plug-ins for blogs and websites to offer more pricing options.