Pratikkumar P. Gaikwad | 15 min read | June 22, 2020

Tier Pricing

1. QuickRead

When it comes to marketing your goods or services, it is important to have the correct pricing approach.
It makes a difference, after all, between becoming very profitable or even losing money with every sale!
One of the most popular pricing strategies is tiered pricing, and since customers are willing to spend their budget on your stores, they have the incentive to buy more if your offers are truly attractive and precisely meet their needs.
This blog will show you the unexpected benefits of tiered pricing systems in online stores.

2. Tiered Pricing

Let’s quickly describe what this pricing approach is like?
Tiered pricing is literally – offering the goods or services in tiers that need to be filled in before going to the next level.
The price in that tier ONLY applies to the units purchased in that tier.
Let’s say you’re a consultant that sells 100 consultation hours to a company, and you decide to price your service using a tiered pricing strategy.
Will it help you earn more if the company decides to hire you for 100 hours?
Well, let’s just take a look at our table and chart!
It’s quite obvious that using tiered pricing will help you earn more, indeed an extra $1,600!
Tier pricing here continues to offer a discount only after the customer stops charging the full price within the first 20 hours.
And once they finish paying $80 / hr in the second tier for the next 40 hours, they’ll be able to enjoy a $60 / hr final tier discount for the last 40 hours.
It’s just the better way of getting the price!

3. The Advantages of Using Tiered Pricing

Three Outstanding Benefits of Tiered Pricing Application

An ideal solution for promotional upsales

The choice of quantity is undeniably the must-noticeable step for e-stores in which customers need to go through to buy their favorite items. Store owners can definitely take full advantage of this stage to bring back more sales. One of the best solutions is to bring in tiered pricing offerings that allow shoppers to make specific better choices as they consider purchasing more products with more discounts.
For instance, store admin can make multiple offers such as buy 2 to get a 10 percent discount, buy 5 to get 30 percent sales, etc. Even customers only need one; because of the appealing discount they don’t want to skip by, they can consider buying more for their friends or relatives. Both sides are receiving rewards as a result.

Increase conversion by tiered-price optimization

Tiered Price can only be displayed in Default Magento 2, as a notice; customers can not easily configure them. Therefore, e-commerce wants an innovative tiered-price feature that will help them simplify their pricing strategy. Via this, shoppers can flexibly pick their preferred quantity of items by clicking on the choices available from the retailers. And consequently tiered pricing in your stores will boost conversion rates.
Tips: In general, the middle tier is where you will get the most of your income. It’s also the most common alternative you’ll remind your customers of their preference.

Better experience for customers

Everybody likes deals, and though there’s no lack of money to spend, they still fall in love with promotions and advertising as thrilling as getting a gift. Understanding that online stores can offer them the best discount with clear information appearing right in the section selecting the quantity. Buy two products, for example, with a 20 percent discount. The overall cart is $50; the discount price is $10 so you’ll just have to spend $40 to get double pieces. This helps consumers to get the clearest glimpse of their purchase if they select the choice for the quantity. Tiered pricing, therefore, adds to the loyalty and reliability of the consumers.

4. Tiered Pricing Works for Physical Products

Cornerstone, a men’s grooming subscription service, makes use of tiered pricing options to provide a wider choice of choices.
Customers who just want the basics can go for the starting set while others who prefer a more premium experience can go for the higher-priced option.
Many who just want to test their shaver out, without spending too much money upfront, will go for the starter kit.
Instead of throwing in more shavers or blades, they creatively package with different products bundled in along with a second and third option.
This encourages multiple product purchases, increases overall profit, and clears a wide range of inventories without relying on selling a single item in bulk!

5. Tiered Pricing is also a Great Strategy for Services

Tiered pricing is fantastic when it comes to services and it’s no wonder that most Saas and technology companies use the three-tier pricing method for selling.
Tiered pricing allows you to group together various features into ‘tiers’ which can range from basic to premium.
Wix, the biggest website builder in the world, provides tiered pricing when it comes to their services.
Their four rates allow them to reach various market segments, ranging from learning newbie to creating their first website to serious businessmen trying to develop a website.
Different thirds of Wix come with progressively improved functionality outside disk capacity, to cater to the various consumer customers they are aiming to attract.
The client has more benefit as the business rakes in more sales!
There is a limit to how much of a discount you can give without going into a volume price war when it comes to selling digital storage space.
Dropbox understands this and cleverly bundles its storage solutions with a tiered method of pricing.
Storage space is costly but applications that are built-in cost for consumers to use them close to nothing.
And that’s exactly how they distinguish their highest tier by slightly increasing the product (storage space) and throwing in a whole host of powerful features!
But does this mean tiered pricing is the ultimate solution to it all?
Not exactly, tiered pricing involves not only considerable planning and strategy to get it done correctly, but it does not work in all situations.

6. So At the end

If you sell a service or product that speaks to different customers or you do custom work such as consultations, tiered pricing would be a better alternative.
If your product is something of service, however, there is no interest in making the approach too complex-it makes more sense to selling quantity. (Remember to pay heed to the costs!)

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