Choosing the right price for your product is like a little bit Goldilocks.
Too high and you run the risk of alienating most of your potential customers.
Too low and you probably won’t have enough revenue to run a sustainable business. Plus, consumers may not appreciate your product or brand if they find the cost much lower than the competition.
But how can you get it it’s correct?
That’s what we’ll explore in this post. Let’s dive into the pros and cons of your pricing A / B testing – and how it’s done. Also, several alternatives to A / B test your price if you have identified weaknesses over strengths.
Check the price
Check prices are when you conduct checks to determine the ideal price for attracting leads and increasing sales. A type of price test is A / B testing different prices for a given product. Another is the piloting of pricing models for a region.
Pricing is undeniably one of the most important decisions for your company.
Your price can determine how consumers see you in the marketplace – for example, Ray Bans expensive sunglasses show they’re of a higher quality than the ones I can find at CVS. Sure, the price might limit the total number of consumers that Ray Ban attracts, but it also attracts potential customers with high intentions based on perceived value.
This premise is known as value-based pricing: a pricing strategy based on how much consumers believe a product is worthwhile. I believe Ray Ban sunglasses are of high quality, and more importantly, I have good brand awareness, which makes me feel the sunglasses deserve the hefty price tag.
Valuation has the strongest impact if Brand reputation as well. If you’re new to the market, it can be difficult to convince consumers that your product is worth it – people need to know (and love) your brand first.
There are several other factors to consider when choosing a price, including the price the competitor is charging (competitive pricing) or how much you will have to pay to produce your product or service, plus the profit margins you want (cost – plus pricing).
To learn more about different pricing strategies, see Basic guide to pricing strategy.
However, even if you’ve chosen a pricing strategy that’s right for your business, you may not be sure private Dollar prices will return maximum revenue.
For example, your pricing strategy might show a range of $ 50 to $ 60 that is best for your product. However, you need to find the “sweet spot” within that range. Charge $ 50 and you could miss out on the revenue you could get if you charged $ 60.
Alternatively, charge $ 60 and you can limit the number of people willing to buy your product – this can also decrease the amount of sales you can get.
This is where the A / B test comes in. Discover how A / B checks your prices, next.
How A / B Check Your Prices
It is important to note – many recommend against The A / B is checking your prices, for a couple of reasons.
There are a few major downsides or pitfalls associated with A / B testing for a price. Including:
- It introduces an element of unfairness to the buyers. It seems unfair that Person A could buy your product for less than person B, which could damage your brand’s reputation. Plus, it could ultimately discourage potential buyers from making a purchase – for example, if a prospect introduces a new software solution to her boss for $ 30 / month, then Her boss logs in to the website and sees the product at $ 50 / month, and confusion and frustration with price increases can prevent them from buying your product.
- You will have a group of customers paying an outdated price for your product. Let’s say you finally decide to go for a $ 30 / month variation of your experiment – but you’ve got 40 customers paying $ 50 / month. What do you do with them? You’ll need to switch them over to a $ 30 / month plan and be able to deal with refund requests or keep them on an outdated model … which can cause disappointment and sales rates. High when those customers know they’re paying more than others.
- Statistical significance can be difficult. You need a certain number of people buying both price options so your testing is statistically significant, rather than pure chance. For many SaaS companies or companies working with larger clients or more complex transactions, you probably won’t have enough people to make sure your results are even helpful.
- It requires development of multiple SKUs and other system functionalityIt could be a huge (and possibly unrequited) attempt.
However, if you do We Go to A / B to check your price, this is how you want it done.
1. Choose two different products (or plans) in the same category.
To ensure that you are ethical and fair to your potential customers, you don’t want to test two different prices on the same product. The end consumer will realize that you are charging different users for different prices, and that can permanently damage your brand’s reputation.
An alternative to this is to test two different products or plans in the same category type to see how much people are willing to pay for your product.
For example, if you sell social networking software, you can choose the Basic plan and charge people $ 50 / month. In this plan, the consumer gets 10 social accounts and 1 user. You can then choose your Professional plan and charge people $ 140 / month, which includes 20 social accounts and 2 users.
This way, you are checking how much people are willing to pay for a social management tool and whether to be cut off. Technically, the Professional plan offers twice the value of the Basic plan, but for a fee than more than double per month ($ 140 / month for 20 accounts and 2 users can be broken down into $ 70 for 10 accounts and 1 user – while the Basic plan is $ 50 for 10 accounts and 1 user).
Then you’ll want to track whether conversion rates are higher or equal on both Basic and Professional. If there appears to be a drop in buyers for Professional tools, you may want to lower your price on that product and see if it can have a positive impact on sales.
2. Find out the price points you want to test.
You will want to determine the price you want to test within a certain range based on many factors, including competitor’s prices and operating costs.
You are hoping to gauge price sensitivity or how demand changes after a given price level. For example, you can see that if you value your product at $ 100, then the number of people buying your product drops significantly.
Finally, you want to choose the actual price points to find out tallest the price you can go for, while maintaining the highest number of leads.
3. Revenue measurement to determine prices.
One small but important detail – measure sales, not conversions, to determine what price will win in your A / B testing.
You will likely have a much higher conversion rate for products with lower prices, but that doesn’t mean you can hit your revenue target. If you value a product too As low as, you may still find it difficult to reach your revenue target even if you have thousands more customers. This is why it’s important to measure sales, not conversions.
4. Repeat the results and recheck the two new prices, if necessary.
If you’ve tested $ 30 / month vs. $ 50 / month and found $ 30 / month equates to the most conversions and revenue possible, consider retesting between $ 30 to 40 dollars or 30 and 35 dollars.
Your repeat results allow you to find a specific high price that will give you maximum sales.
5. Choose the price equivalent to the maximum turnover.
Finally, choose the price point that suggests maximum revenue by determining the highest price that will still convert enough customers to meet your business goals.
Alternatives to A / B Testing
If the potential risks associated with A / B test pricing outweigh the benefits for your business, then there are plenty of alternatives to testing product pricing.
For one, you can try the A / B price check Page – includes different layouts and CTAs – to find the best page for optimal conversions and monetization. Maybe your price doesn’t matter, but your landing page does.
Also, if you are releasing a new product, consider introducing the product in a single market to assess the market’s response and performance, before launching a product on a larger scale. This allows you to make adjustments to your price or product before releasing it to market.
Finally, you might consider doing a survey and simply ask potential customers how much they are willing to pay for a similar product in the industry.
For example, if you are selling a website design tool, you might ask: “What features are most important to you in a website design tool?” and “At what point will a website design tool be too expensive? “or” What’s the maximum price you’re willing to pay for a website design tool? “
Ultimately, pricing is about determining the value of your product or service and how much consumers are willing to pay for that value. It’s an extremely important factor to consider when running a business, but it’s not something you can do A / B testing – at least not likely to offend consumers or hurt. Damage your reputation when consumers find different rates every time they visit your website.
If you are interested in A / B testingWe recommend that you use this process to test the design of your pricing pages or product landing pages. Perhaps by changing the way you display the value of your products on a page, you increase the amount consumers are willing to pay.