Start with margin, not price
Most tier tables are written from the price down: 10 percent off two, 15 off three, 20 off four, because those numbers look tidy on a product page. The cost of a tier is not set by the price, though. It is set by what is left after the cost of goods, and that is the number to start from.
Every figure on this page is an example. Take a candle that sells for 40 dollars and costs you 16 dollars to make and pack. The margin on one candle is 24 dollars. Swap in your own price and your own cost per item, and the method below carries over unchanged.
A percentage off the price is bigger off the margin
Fifteen percent off 40 dollars is 6 dollars. Those 6 dollars come entirely out of the 24 dollars of margin, so the shopper sees 15 percent off and you give away a quarter of what you earn on each candle. The lower the margin, the sharper this gets. On a product that sells for 40 dollars and costs 28, the same 6 dollars is half of the 12 you keep.
The quick check is one division: the discount per item in dollars, divided by the margin per item. Do it for every tier before anything is published. A tier that gives away more than half the margin on each unit has to move a lot of extra units to pay for itself.
Worked example: three tiers
Same example candle, three bars. One candle at full price: the shopper pays 40 dollars and you keep 24. Two candles at 10 percent off: 72 dollars, a cost of 32, a margin of 40. Three candles at 15 percent off: 102 dollars, a cost of 48, a margin of 54.
Now read it as the shopper's choices. A shopper who would have bought one and now buys two earns you 16 dollars more than the single sale. One who moves up to three earns you 30 dollars more. Those are the shoppers the deal is for.
The case that costs money is the shopper who would have bought two at full price anyway. Two at full price was 80 dollars and 48 of margin, and the tier hands back 8 of those 48. The deal pays when the shoppers it moves up outweigh the shoppers it simply discounts. Nobody can tell you that ratio in advance, which is why the arithmetic comes first and the test comes after.
Choosing the form of the discount
A percentage off scales with the price, which suits a range with mixed prices. An amount off per item fixes what you give away, so 5 dollars off each candle costs 5 dollars whatever the candle sells for. A fixed price for the whole tier, three for 99 dollars, reads cleanly on the page and lets you pick the round number yourself.
Watch the cents as well. Percentage prices are rounded to the cent on each item, and a rounding rule such as ending every price in .99 moves the total by a few cents in each currency. Neither breaks a deal, but both belong in the sum if you sell on thin margins.
Then list every other discount live on the store. A tier price can meet a store wide discount code at checkout, and together they can give away more than either was meant to. In TreStack Bundles every deal's discount is set to combine with product, order and shipping discounts, with no setting to change it, so a code set to combine with product discounts can apply on top of a tier price. Run the example once more with both and decide whether you can live with the result.
What to check once it is live
The discount follows the cart, not the button the shopper pressed. Someone who picks three candles and then removes one pays the two candle price, and below the lowest tier there is no discount at all, which is what you want for margin. In TreStack Bundles every unit of a targeted product counts toward the tier, including units added with the theme's own Add to cart button, unless you turn on Apply discount only via bundle widget.
Measure margin, not only revenue. Added revenue in TreStack Bundles counts what each deal brought in above one item of the main product at its regular price. It is a revenue figure and does not subtract your costs. The analytics page also reports profit per visitor, worked out from the cost per item you enter on each product in Shopify, so fill that field in before the deal goes live.
TreStack Bundles is coming to the Shopify App Store. The docs below cover how a quantity break is priced, how it meets other discounts, and how added revenue is counted.
In the TreStack Bundles docs
Something on this page no longer true, or a measurement that disagrees with it? Tell us and we will correct it.
