Setting a price for your products or services can be a tricky business. You want to ensure you’re offering the best value for your customers while still making a healthy profit. Since 48% of customers have raised their customer service standards thanks to the pandemic, nailing down your pricing is more important than ever.
One of the biggest mistakes you can make as an eCommerce owner is to stick with one pricing strategy throughout the course of your business. If you want to increase sales and Average Order Value (AOV), you need to be willing to switch things up and explore different pricing strategies.
One pricing strategy that more and more Commerce businesses are taking advantage of is tiered pricing. It is a great way to incentivize customers to buy more of your products and services while also increasing the overall value of each order.
In this article, we’ll discuss tiered pricing’s definition, benefits, and how you can enable it on Shopify.
What is Tiered Pricing?
Tiered pricing is a pricing strategy where customers are offered different price points for the same product or service based on various factors, such as quantity purchased or loyalty status. It allows businesses to offer discounts and incentives to attract different types of customers with varying budgets.
A tiered pricing model can also create value for products and services by offering additional features at different levels, such as priority shipping or customer support. With tiered pricing and other marketing tactics, businesses can make their offerings more attractive and increase overall sales.
How Does Tiered Pricing Work in Shopify?
Shopify tiered pricing allows merchants to offer discounts for larger purchases. It creates multiple price tiers based on the quantity of a product that customers purchase.
For example, if customers buy more than one item, they may receive a Shopify quantity discount. A merchant may offer tiered pricing for a particular product, such as 10% off when customers purchase between 5 and 9 items, 15% off when they purchase between 10 to 19 items, and 20% off when they purchase more than 20 items.
This type of pricing encourages customers to buy product bundles while rewarding them with discounts. Merchants can create as many tiers as they want and customize the discounts associated with each tier.
Tiered pricing is not available on Shopify’s main dashboard. You’ll need to install an app or use a third-party solution to set up tiered pricing.
Benefits of Tiered Pricing
There are several benefits associated with using tiered pricing on Shopify. Here are some of them:
Increased Revenue
Tiered pricing enables businesses to generate higher revenues by offering discounts and incentives at different price points. This can also result in higher AOVs as customers are motivated to purchase more items or services when they know there is a good deal on offer.
Higher Customer Satisfaction
With tiered pricing, customers can choose the option that best fits their budget and needs. This increases customer satisfaction as customers feel they’re getting a good deal. It also incentivizes them to come back for more purchases in the future.
Increased ROI
Tiered pricing can lead to a higher return on investment as businesses don’t need to invest heavily in marketing or advertising campaigns to generate sales. Customers are more likely to purchase when they know they will receive a discount, leading to an increase in profits without the need for additional investments.
Improved Brand Image
Offering discounts and incentives through tiered pricing helps businesses create a positive brand image. Customers will view your business favorably when they know you are willing to go above and beyond in offering value for their money.
Tips for Planning a Tiered Pricing Strategy
Before you get started, it’s important to come up with a tiered pricing strategy that works best for your business. Here are some tips:
- Focus on Your Customers: Tiered pricing strategies should be designed with the goal of increasing customer satisfaction and loyalty. Make sure your discounts are attractive enough to entice customers to buy more but not so generous that you end up losing money.
- Stay Relevant: Adjusting your tiers regularly is key to staying competitive and relevant in the market. For example, if one of your competitors offers higher discounts than what you do, consider increasing your discounts to remain competitive.
- Make it Simpler: Use simple language when describing each tier and its associated discount. This will make it easier for customers to understand and take advantage of the offer.
How to Enable Tiered Pricing in Shopify
Third-party apps or plugins help Shopify merchants enable features and processes, like tiered pricing, that are not available in the Shopify dashboard. To install an app on Shopify, you simply need to browse the Shopify App Store.
There are several tiered pricing apps available on the Shopify App Store. Make sure to research the features of different apps to find the right one for your store.
For instance, Shopify Quantity Breaks & Discounts is one of the most popular tiered pricing apps on Shopify. It allows merchants to create multiple discounts based on order quantity, with no coding required. Quantity Breaks also offers several customization options so that you can tailor your pricing tiers and discounts to suit your business needs.
Once you’ve installed a tiered pricing app, you can revisit your Shopify dashboard and start setting up tiered pricing. You can create different tiers and discounts for each product or apply the same tiers to multiple products.
Bottom Line
Tiered pricing is an effective strategy for boosting sales and retaining customers. By offering tiered discounts on larger orders, you can incentivize customers to buy more of your products.
Shopify tiered pricing apps are a great way to enable this pricing strategy without writing any code. With the help of these apps, you can create multiple tiers and customize the associated discounts to best suit your business needs.
If you’re looking for an effective way to boost sales and increase AOV, tiered pricing is the way to go.