Good, better, best. Lower, middle, upper. Promotional, mainstay, wow factor. Call them what you will, but according to the experts, retailers should supply goods in every category in three varying price tiers. It’s an important principle to remember when buying inventory and planning your merchandising for the Christmas season.
"Price tiering provides customers with choices: one to cast aside and two to decide between," says Rick Segel, president of Rick Segel and Associates in Kissimmee, Fla. and author of multiple books, including “Retail Business Kit for Dummies.” He explains that more than three levels is too confusing for the consumer, and that retailers should always show their most expensive items first and then work down to less costly options.
"Offering a lower-priced product option shows customers that you are price sensitive and that your store is not a rip-off,” Segel says. He points out that retailers often need not purchase goods to fill this lower price tier because markdowns will fall into this category. The biggest factor in price tiering is determining the accepted middle price range – what your customers feel the price should be. To do so, listen to your shoppers; you want to hear them say “That’s a good buy!”

“Shopping is an active sport,” Segel says. “It’s about winning. You want the customer to win, to feel like they’ve gotten a good deal and to feel good about their purchase.”

Delivering the Wow
The upper end price tier serves as a wow factor, something that is different. This adds credibility to the rest of the store’s offerings and helps push sales to the other items in the store. Segel encourages a percentage split of 10-80-10, where the bulk of inventory falls into the middle price range.

Merchandising is key to the tiering philosophy. By placing either your promotional items or wow factor pieces alongside the mainstays, you successfully draw customers to the largest – and most profitable – price tier.

Adapted from Christmas Source magazine