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The Art of Pricing: Tiered Pricing


Story by bethela Published on November 14, 2007 in How-To	Photo by ErinCain

There are several ways to attract and convert buyers in your store. One way may be through tiered pricing: when you offer multiple price points for a customer to consider. The car industry is a great example of this. There is always the base model, good but with very few bells and whistles. There is a middle level, with a few of the upgraded options and features and a premium level that's decked out with all the features and special options.

So what does the car industry have to do with your store? Not much, but we can learn from how they price. Great products at multiple price points can give a larger range of potential buyers an opportunity to buy something from your store. Creating different price points may also be good to:

Induce trial — A lower priced item may be just what a buyer needs to dip their toe in the water. If they fall in love with it, they may opt in for the higher priced item the next time around. Mary aka contrary says, "A lower priced items may get people to try your items and build trust."
Build a reputation — This is especially important if you are a new seller. Some buyers may not want to take the leap and by a $250 necklace from a brand new seller. Selling some items at lower price points may help build your reputation faster and build awareness of your store.
Target new customers — Some customers may only be interested in your more expensive items, for instance jewelry with semi-precious stones or made of silver or gold. Some may be interested only in the less expensive items and some might just fit in the middle. If all your buyers are in the high range, try some lower priced items to attract a new set of customers. Appealing to a wider variety of sellers can increase your overall sales.
Create excitement around your shop — Higher priced items may also draw some attention to your store. Daniellexo stated "a higher priced set of items can create excitement around your store. Everyone wants to know why it costs so much."

A couple of examples:

One seller who has done a great job of this is discomedusa. She has lots of great items around $25, like these Blade hoops and this Annelid necklace.

She also has items in the $100 range, like this filigree cocktail ring and this matrix ball necklace.

She also has the Diatomateous Necklace, a showpiece necklace or what I would like to call "buzz" piece at $2500.

This unique piece gives her store additional character.

Basilthecat also uses different price points in her store. Examples from each price point include an $20 Eight ball necklace, a $54 Rhinestone Cowgirl Necklace and a $140 Good luck necklace.

This is another pricing topic to think about as you strategize about your store as a whole. In previous articles we explored competitive pricing and understanding your costs which were focused on individual items. Tiered pricing takes into account the items you already have in your store and the overall positioning you may want to have. This is something worth exploring to see if it works for you.

Beth is an admin at Etsy on the Business Operations Team. She is writing about pricing in a multi-part series, so ask her your questions in the comments below. Last week's topic was how Theories in Discounting. Next week's topic is Bundled Pricing.