Shraddha Shribas | 10 min read | April 17, 2020
While the merchant base in Shopify continues to expand, so too is the number of apps installed. But how do merchants determine which apps value the price? What are the merchants ‘perceptions about the pricing model of an app? Pricing is one of the main considerations when determining whether to install an app.
It doesn’t only include the total sum the retailer pays — it often involves the pace at which they are paid and the charging causes.
Tiered pricing, also referred to as discounts / breaks in volume or quantity, can be used in a multitude of markets. Whereas, consumers often opt to get more, rather than pay less.
We will discuss tiered pricing in this article, and its value to eCommerce merchants. So let’s have a look!
Our Version : Tier Pricing
Tiered pricing is a technique used to identify, within a range, a price per unit. Tiered pricing functions such that if each quantity within a “rank” has been sold the price per unit decreases. To illustrate, imagine that you have just sold 60 units of a particular product.
The first 1-20 units with tiered pricing will cost, say, $10 each. The next 21-30 units would cost 8.50 dollars each and the next 31-40 units would cost 7 dollars each. If those rates are filled, anything over 41 units will cost $5.50 each in the final “stage.”
This pricing strategy is useful because you provide various variations of pricing for your product, so customers have the option of paying for what they can afford. The lower “tiers” price should attract clients who will ultimately switch to higher priced packages. Tiered pricing also permits innovative choices such as product grouping by price, quantity and service.
Our Process : Tier Pricing
Organizations use tiered pricing as a method to offer their products / services at various price points by restricting or expanding the features / functionalities that correspond to each tier level.
Tiered pricing as a model works best for businesses that sell seats, licenses, widgets, etc., The tiered model is a great way to incentivize your customers. It helps you push your customers to buy more and qualify for discounts.
For better understanding , let’s take an example
The price per unit that you sell falls within a given price range. After you have filled in one tier you pass to the next.
Let’s take an example for better comprehension, and presume you have a clothing shop. You want to improve sock sales.With Shopify tiered pricing, for example, it will cost $5 for each separate item within the first 1-10 items. The next 11-21 products — 3.50 dollars each and the next 22-32 units will cost 2 dollars each. The final price for each separate item will be $2.50 As you can see, a single item’s price will decline from $5 to $2.50. Such numbers are just an example, and should be carefully considered before being implemented.
Thus, when the customer gets inspired to purchase a larger number of items for a single item at a lower price, the merchant gets to increase the total value of the order. That’s not a win – win?
Tiered and volume pricing are also smart ways of reaching an market and encouraging consumer spending. The words are often used interchangeably, but in fact they are somewhat different. Considering pricing is critical as it will play a part in the overall satisfaction of your customers.
The functionality as you can see is easy but extremely successful. However it can not be done by default on most eCommerce CMS, like Shopify. Luckily, the App store in Shopify provides a decent range of applications to choose from. So, it should not be a problem to incorporate and enforce.
Here is the Structure of Tier pricing
1. Basic Tier Pricing :
The simple model will provide the necessary features for your customers at an affordable price. Basically, this model will encourage your customers to start using your product and solve the problem that they face.
2. Standard Tier Pricing :
Generally the standard model is a mix of the basic features along with some specialized features. This will bring advantages for your customers that will save money for them and generate a lot of income for your company as well.
3. Premium Tier Pricing :
Typically this model is designed for big business consumers or buyers who know what they want, and how they can benefit from all the advanced features of the product offerings. The Premium tier will get more expensive and get you the best return for each unit sold.
In several businesses, the volume curves form the basis in discounting. Therefore, if a consumer buys more volume, we can also discount products or services, and encourage more unit sales
So here’s how we priced our services in incremental ranges based on various product packages https://www.oscprofessionals.com/shopify-performance-optimization/
so we could get a client base from the small business to the business. You’ll be able to customize the plans depending on their needs as the company scales.
Here are the benefits of Tier Pricing :
1. Solution to increase the business
The choice of quantity is ultimately the most-noticeable move for e-stores in which consumers need to go through to buy their favorite products. Shop owners will certainly take full advantage of this stage to put back further sales. Solutions are to put in place tiered pricing options that allow shoppers to have different better choices as more products and more discounts are considered.
2. Selling to Larger traders
Everybody likes deals, even though there’s no shortage of money to shop, they still want to rise with sales and promotion as thrilling as getting a present. Knowing that online retailers will give customers the best discount with straightforward details appearing right in the section choosing the quantity
3. Optimization of Tier Pricing :
Knowing that online retailers will give customers the best discount with straightforward details appearing right in the section choosing the quantity. Via this, shoppers can flexibly pick their preferred quantity of items by clicking on the choices available from the stores. And therefore tiered pricing in your stores will improve conversion rates.
Ways to make more money with Tier Pricing :
You will make more money with the tiered pricing of your company plan. There are many ways we can understand how you can do that.
1. Use dynamic pricing
Dynamic pricing is an insightful way of clearing interest and learning what the participants are prepared to pay. For instance, you can set the first price, you can set another price after the goods are sold out, and so on. Tracking lets us understand what our presale points will be, how many items there are and what our costs are going to be.
2. Load more on the spot for your products
The status makes you believe that at a higher price you can sell more items on site. When a higher price is disappointing, consumers would be more likely to buy ahead of time. If your prices are higher in thirds over time, always reveal the maximum price next to the current price
3. Boost large sponsors with big booms
For additional rights and improved service, customers tend to pay more. By giving tourists a more comfortable experience, you are gaining a loyal following and at a higher price.
The pricing strategy’s principal goal will be to optimize the customer’s lifetime value. You should make sure you don’t overload them with loads of pricing choices or confuse them any worse. Therefore it is important to have different pricing rates to cater to each of them and allow them to choose the one that best fits their needs.