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E-commerce is changing. Constantly.
But one thing that remains the same even decades later is the psychology behind receiving discounts. Customers love discounts, especially tiered discounts.
Discount makes them happier and keeps them coming back for more. The more personalized and targeted discounts you offer, the more your customers feel valued and appreciated, ultimately driving up the average order value (AOV) as they are incentivized to make larger purchases.
Offering tiered discounts is one such effective and psychology-backed discount strategy to increase brand loyalty, AOV, and overall sales. But what is tiered discount or tiered pricing in eCommerce?
A tiered discount is a pricing strategy where the discount offered increases as the customer buys more or spends more money.
By implementing pricing tiers, you not only encourage repeat purchases but also motivate customers to spend more to unlock higher discount tiers.
It is pretty similar to leveling up in a game. You start with a lesser discount, but the more you spend, the greater discounts you get.
Forever 21's "Buy More, Save More" offer is a perfect tiered discount example where if you buy 2 sale items, you get 25% off; if you buy 3 sale items, you get 30% off; and if you buy 4 sale items, you get 35% off.
On one hand, this tiered discount structure benefits the buyers by providing them with greater savings while on the other hand, the seller gets increased average order value (AOV) and larger transactions.
In short, customers are motivated to buy more items so that they get the most out of the discounts, resulting in higher overall sales for the brand.
Explore the benefits of tiered pricing in detail.
Those "spend more, save more" deals you often see in your inbox or during a store visit, aren't just a ‘good deal’. They're, in fact, clever strategies rooted in psychology that tap into a buyer’s natural tendencies and motivations.
At its core, tiered discount structure work by leveraging the human desire for progression and accomplishment. Clever price tiering give customers agency and a sense of control by allowing them to decide how much they want to spend to get better deals. It also makes them feel like they're getting a good deal tailored to their likes and preferences.
To design a tiered pricing strategy that effectively engage customers and foster loyalty, it is important for sellers to understand these psychological factors.
That’s why, with these tiered pricing examples, we are showing you how big brands use psychological levers to give discounts while increasing their AOV.
H&M, the giant fast-fashion retailer, is pretty smart and simple with its tiered discount structure. They simply want you to buy more to get bigger discounts. By offering increasing discounts as shoppers reach higher spending thresholds, H&M effectively incentivizes customers to add more items to their carts, ultimately boosting the average order value. H&M Tiered Discounts:
This simple three tier pricing helps H&M drive immediate sales and foster long-term customer loyalty. On top of it, the clear and straightforward nature of the discount structure simplifies decision-making for shoppers, improving their overall shopping experience.
Learn how to set up your e-commerce volume discounting structure.
Learn how to set up your e-commerce volume discounting structure
Shein's tiered discounts are multifaceted. It aims to provide customers with both immediate savings and long-term benefits.
By offering tiered discount based on spending thresholds, Shein encourages buyers to increase their cart value in order to get higher savings.
Through the code US24J10, buyers get 10% off orders over $69, 15% off orders over $109, and 20% off orders over $189.
But Shein doesn't stop at just discounts.
They use the opportunity to offer additional perks through their loyalty program, Shein Club.
Skechers' tiered discount structure may seem simple but is actually highly effective. They want you to find more things you love and fill up your carts so that you can get better discounts. Here’s how the offer works:
As buyers add more shoes to their cart, they unlock progressively greater discounts, encouraging them to shop for additional products.
Skechers also rewards its VIP members with an exclusive benefit of an extra 5% discount on apparel purchases, increasing their savings and strengthening their relationship with the brand.
This tiered pricing model boosts sales and fosters repeat business and engagement with Skechers' loyalty program.
Also Read : Check out the ultimate guide to offering Buy X Get Y on Shopify
Bershka's tiered discount offer is super rewarding and straightforward. Whether you're buying two items or going for more, you're guaranteed to save money. Here’s how the discount works:
Plus, the discount is applied automatically when you check out.
Safe to say, Bershka's tiered discount strategy is one well-thought approach to boosting AOV while simultaneously enhancing customer satisfaction and loyalty.
Sephora's tiered discount strategy is all about rewarding its most loyal customers with the biggest discounts. Plus, having a limited-time sale further incites FOMO among the buyers, driving impulse purchases, and enhancing customer engagement. In their Beauty Pass Sale, Sephora gives discounts based on membership level:
By offering higher discounts to their top-tier members, Sephora wisely encourages customers to reach higher membership tiers while cultivating a sense of exclusivity and appreciation among their most loyal customers.
With Kite, creating tiered discounts for your Shopify store is extremely simple and quick.
Check out how it only takes 5 minutes to get your tiered discounts up and running with Kite.
Alexis Bittar's Buy More Save More event is designed to encourage customers to spend more by offering increasingly attractive discounts as the purchase value rises:
This tiered discount not only increases the average order value (AOV) but also rewards customers for their higher spending.
The use of promo codes adds an interactive element to the promotion, further engaging customers and providing a sense of exclusivity.
Ready to Launch Your Tiered Pricing Strategy?
If done right, tiered discounts are an effective way to increase your Average Order Value (AOV) and make customers your lifelong admirers.
At Skai Lama, we've helped countless brands worldwide achieve increased AOV, retention rates, a 5x return on investment (ROI), and overall success for your Shopify store.
With Kite, we've seen an average increase of 32% in AOV for Shopify stores. Kite is designed to automate enticing promotions like free gifts, tiered discounts, and buy-one-get-one offers, seamlessly integrating with Shopify stores to drive results.
To learn more about how Skai Lama can transform your Shopify store and maximize your profits, book a demo or check out our apps on the Shopify App Store today.
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We are a team of passionate individuals, all driven by a singular goal - to help our merchants succeed.