I’ve been thinking some more about tiered pricing this week. While I’m really sold on the approach, I must say that once the price goes a tad too close to the “limit”, it becomes problematic.
Once the price gets high enough, potential customers’ loss aversion makes them feel a risk. They ponder, take more time to decide, and either buy, wait some more, or forget about it. The effect is especially strong when a new tier has just been launched and there are many units left.
As a result, even with a risk reversal mechanism in place (i.e., a money-back guarantee), sales slow down.
When they do, our temptation as sellers is to react and go back to the previous price in order to avoid missing sales. But I’m not sure yet what the best reaction is at that point.
My current thinking is that I should at least wait a week to have more statistically relevant data before adjusting the price. But of course, it’s a bit stressful.
The good news is that FOMO kicks in and counter-balances the negative effect once the number of remaining units gets low enough (i.e., 5-10).
I’m no economist, so take this all with a grain of salt 😂
I’ll need to do some research about this.