What is Tiered Pricing? Why is it Important?

Posted by entri in Uncategorized

When selling products online, especially digital products, you need to establish the right pricing. One of the pricing strategies used for product pricing is the Tiered Pricing model. But what exactly it is? Is it important? Check this post to find out.

What is tiered pricing?

Tiered pricing is a product pricing strategy used as a list of options of products and services presented to the customer. In tier pricing, the products are presented with the corresponding price. It is also presented with products or services features, details, attributes, and benefits.

Why is it important?

Application of tiered pricing strategy has a lot of benefits, including the following:

#1: Great for up sale promotion

When an e-store has promotions on various products or services, using a tiered pricing model will help them introduce their sales to the public. The tiered pricing selection enables the customers to choose the laid options.

If you are planning to have a mid-year or holiday promo on popular or selected products or services, you can use tiered-price models. For instance, to improve sales on selected products online, you may consider providing options like buy 2 and get a 10 percent discount or buy 5 to acquire a 30 percent discount. With this, your customer will consider buying the latter instead of the former since there they’ll get better pricing deals.

#2: Flexible

Through a tiered pricing strategy, customers can upgrade the products they want to purchase to a higher tier without the feeling of guilt since options are laid before them.

#3: Targets several customers

One of the advantages of using a tiered pricing model is allowing the merchants to target a wide range of customers without putting too much effort into marketing.

#4: Improves conversion rates

Since there are multiple target groups in a tiered pricing strategy, there is a high chance of converting leads into sales; thus, increasing conversion rates.

#5: Better customer experience

All customers love to have options on several different packages. With it, they can align their budgets and demands. Getting discounts on products or services, as well as rewards, improves customer experience and attracts customers.

Although there is a huge advantage of using a tiered pricing model, there are also disadvantages that you need to watch out for.

Disadvantages:

• The billing system can be tricky for most customers, causing them to decline the best product or service offer. For this reason, you need to have a pricing guide for the customers to understand how the billing system works with tiered pricing.
• Customers will choose the wrong tier. Understandably, some customers easily get excited with promos and rewards, causing them to choose the wrong package.

Wrap Up

A smart pricing strategy will help increase revenue. One of the striking pricing models promoting high sales is using a tiered pricing model.

If you plan to sell multiple products or services with great deals or discounts, a tiered pricing strategy is one of the best options. Customers will have better experiences choosing the products or services they need. Plus, it will give better customer reviews.