How to A/B Test Your Pricing (And Why It Might Be a Bad Idea)

A/B testing nan pricing for your merchandise is simply a small spot for illustration Goldilocks.

Too high, and you could alienate nan mostly of your imaginable customers. Too low, and you won't person capable gross to prolong your business.

So really do you get it conscionable right?

That‘s what we’re going to research successful this post. We'll springiness you nan ins and outs of A/B testing your pricing, positive immoderate alternatives to A/B testing your pricing strategy.

Product pricing is undeniably 1 of nan astir important decisions for your company.

Your value tin find really consumers spot you successful nan marketplace— arsenic a value-based marque aliases a convenient and inexpensive alternative.

There are a fewer different factors to see erstwhile choosing a price, including what competitors are charging (competition-based pricing), aliases really overmuch it will costs you to nutrient your merchandise aliases service, positive really overmuch you want to profit (cost-plus pricing).

To study much astir different pricing strategies, return a look astatine The Ultimate Guide to Pricing Strategies.

However, moreover erstwhile you've chosen a pricing strategy that useful for your business, you mightiness beryllium unsure if nan circumstantial dollar value is going to return maximum revenue.

For instance, your pricing strategy mightiness show a scope of $50-$60 is champion for your product. However, you request to find nan “sweet spot” wrong that range. Charge it for $50, and you mightiness beryllium missing retired connected nan gross you could‘ve received if you’d charged it astatine $60.

Charge it for $60, alternatively, and you mightiness limit nan number of group consenting to acquisition your merchandise — which could besides alteration nan magnitude of gross you tin receive.

This is wherever A/B testing comes into play. Let's research really to A/B trial your pricing, next.

How to A/B Test Your Pricing

It's important to statement — galore counsel against A/B testing your pricing, for a fewer reasons.

There are a fewer awesome disadvantages aliases pitfalls associated pinch A/B testing a price. These include:

• It introduces an constituent of unfairness to buyers. It doesn‘t look adjacent that personification A is capable to acquisition your merchandise for little money than personification B, which could origin harm to your brand’s reputation. Plus, it could yet dissuade a imaginable purchaser from purchasing — for instance, if a imaginable pitches a caller package solution to her leader for $30/month, and past her leader logs onto nan tract and sees nan merchandise is $50/month, nan disorder and vexation complete nan summation successful value could forestall them from purchasing your merchandise astatine all.
• You‘ll person a group of customers paying an outdated value for your product. Let’s opportunity you yet determine to spell pinch nan $30/month version of your trial — but you already person 40 customers who are paying $50/month. What do you do pinch them? You‘ll request to either migrate them to nan $30/month scheme and perchance woody pinch reimbursement requests, aliases support them connected an outdated exemplary ... which could origin vexation and precocious turnover rates erstwhile those customers study they’re paying much than others.
• It tin beryllium difficult to get statistical significance. You request a definite magnitude of group to acquisition some value options for your trial to beryllium statistically significant, alternatively than axenic chance. For galore SaaS companies aliases companies that activity pinch larger clients aliases much analyzable deals, you apt won't person capable group to guarantee your results are moreover useful.
• It requires nan improvement of aggregate SKUs and different systems functionality, which tin beryllium a ample (and perchance unrewarded) effort.

However, if you are going to A/B trial your pricing, here‘s really you’ll want to do it.

1. Choose 2 different products (or plans) wrong nan aforesaid class type.

To guarantee you‘re being ethical and adjacent pinch your prospects, you don’t want to trial 2 different prices connected nan aforesaid product. Consumers will yet drawback that you‘re charging different users varying prices, and it could permanently harm your brand’s reputation.

One replacement to this is testing 2 different products, aliases plans, wrong nan aforesaid class type to spot really overmuch group are consenting to salary for your product.

For instance, if you waste societal media software, you mightiness take a Basic scheme and complaint group $50/month. Within this plan, consumers person 10 societal accounts and 1 user. Then, you mightiness take your Professional plan, and complaint group $140/month, which includes 20 societal accounts and 2 users.

By doing this, you‘re testing really overmuch group are consenting to salary for a societal guidance tool, and whether there’s a cut-off. Technically, nan Professional scheme offers double nan worth of nan Basic plan, but charges much than double each period ($140/month for 20 accounts and 2 users tin beryllium surgery down to $70 for 10 accounts and 1 personification — whereas a Basic scheme is $50 for 10 accounts and 1 user).

Then, you'll want to way if nan conversion rates are higher aliases adjacent connected some Basic and Professional. If location seems to beryllium a drop-off of buyers for nan Professional tool, you mightiness want to little your pricing connected that merchandise and spot if it tin positively effect revenue.

2. Figure retired nan value points you want to test.

You'll want to find nan prices you want to trial wrong a fixed scope based connected a assortment of factors, including competitor pricing and operational costs.

You're hoping to gauge value sensitivity, aliases nan grade to which request changes aft a definite value point. For instance, you mightiness find if you value your merchandise astatine $100, nan magnitude of group who will acquisition your merchandise drops dramatically.

Ultimately, you want to take realistic value points to fig retired nan highest value you tin go, while still maintaining nan highest number of imaginable customers.

3. Measure gross to find price.

A mini but important item — measurement revenue, not conversions, to find which value wins retired connected your A/B test.

You‘ll apt person overmuch higher conversion rates connected lower-priced products, but that doesn’t mean you‘re capable to deed your gross goals. If you value a merchandise excessively low, you mightiness still struggle to meet gross goals moreover pinch thousands of further customers. This is why it’s important to measurement revenue, not conversions.

4. Iterate connected results and re-test 2 caller value points, if request be.

If you've tested $30/month against $50/month and recovered $30/month equates to nan astir conversions and imaginable revenue, see re-testing betwixt $30 and $40, aliases $30 and $35.

Iterating connected your results enables you to find a highly circumstantial value constituent that will supply you pinch maximum revenue.

5. Choose nan value that equates to maximum revenue.

Finally, take nan value constituent that suggests maximum gross by determining nan highest value that still converts capable customers to meet your business goals.

Alternatives to A/B Testing

If nan imaginable risks associated pinch A/B testing pricing outweigh nan benefits for your ain business, location are plentifulness of replacement options to trial a product's pricing.

1. Only trial nan merchandise page.

For one, you could effort A/B testing nan pricing page — including different layouts and CTAs — to fig retired nan champion page for optimal conversions and monetization. Maybe your pricing isn't nan issue, but your landing page is.

2. Limit nan go-to-market plan.

Alternatively, if you're releasing a caller product, see launching nan merchandise successful 1 marketplace only to gauge marketplace guidance and performance, earlier rolling nan merchandise retired connected a broader scale. This enables you to make tweaks to your pricing aliases merchandise earlier releasing nan merchandise to nan full marketplace.

3. Survey your customers.

Finally, you mightiness see conducting a study and simply asking prospective customers really overmuch they're consenting to salary for a akin merchandise successful nan industry.

For instance, if you‘re trading a website creation tool, you mightiness ask: "What features are astir important to you successful a website creation tool?" and, "At what constituent would a website creation instrumentality beryllium excessively expensive?" aliases "What is nan maximum value you’re consenting to salary for a website creation tool?"

Ultimately, pricing is astir determining your merchandise aliases service‘s value, and really overmuch consumers are consenting to salary for that value. It’s an incredibly important facet to see erstwhile moving a business, but it's not ever thing you tin A/B trial without perchance losing consumers aliases damaging your estimation erstwhile consumers find different prices each clip they sojourn your site.

Price Testing Methods

If you're group connected A/B testing your pricing, location are different value testing methodologies that tin beryllium mixed pinch A/B testing to amended understand why nan strategy is performing nan measurement that it is. After utilizing nan A/B trial methodology, adhd 1 of these to your investigation to get moreover amended insights into what your customers want and expect from your business.

1. Van Westendorp Price Sensitivity Meter (PSM)

The Van Mestendorp PSM methodology uses a bid of study questions to find value sensitivity by identifying value levels that are excessively debased (“bargain”), excessively precocious (“expensive”), and acceptable (“too expensive” and “too cheap”).

Using this pricing method successful action:

Let's opportunity a package institution wants to motorboat a caller subscription plan. They behaviour a study of their target customers, asking 4 questions:

• At what value is nan subscription excessively expensive?
• At what value is it starting to look expensive?
• At what value is it starting to look for illustration a bargain?
• At what value is it excessively inexpensive to beryllium of precocious quality?

The institution analyzes nan responses and identifies nan scope of prices that nan mostly of customers find acceptable for nan caller plan.

2. Conjoint Analysis

This method is utilized for assessing nan worth customers delegate to different merchandise features and value points. Creating various merchandise profiles and analyzing user preferences allows businesses to estimate value elasticity and place nan astir appealing pricing structure.

Using this pricing method successful action:

A car shaper is readying to present a caller exemplary pinch different customizable features. They create respective hypothetical car configurations pinch varying characteristic sets and prices. Then, they get a beat connected imaginable customers' reactions by asking them to rank their preferences among different combinations.

The study reveals which features and value points person nan highest worth to customers, helping nan shaper find nan optimal pricing structure.

3. Dynamic Pricing

The move pricing attack involves adjusting prices successful real-time based connected factors specified arsenic demand, inventory levels, competitory pricing, and customer segmentation. By dynamically changing prices, businesses tin optimize gross and respond to marketplace changes promptly.

Using this pricing method successful action:

In this example, a ride-sharing institution adjusts its prices based connected request and proviso conditions successful real-time. During highest hours aliases high-demand events, nan prices summation to incentivize much drivers to beryllium available, helping to meet nan demand. Conversely, during low-demand periods, prices are lowered to pull much customers.

This move pricing strategy useful because it allows for nan optimization of gross without overhauling nan value of nan merchandise aliases work permanently.

A/B Test Your Pricing Without Testing Your Customers' Patience

If you are willing successful A/B testing your pricing, we‘d propose utilizing this process, positive a fewer alternatives and further methodologies, to trial retired nan creation of your pricing pages aliases merchandise landing pages. Perhaps by altering really you show your product’s worth connected a page, you'll raise nan magnitude consumers are consenting to pay.

Editors Note: This station was primitively published successful April 2021 and has been updated for comprehensiveness.

This article was written by a human, but our squad uses AI successful our editorial process. Check retired our full disclosure to study much astir really we usage AI.