Have you ever asked yourself how to set the right price for your products or services? The difference between what customers want to pay and what the product is worth can be a tricky part of your product marketing.
Small changes in your pricing strategies can increase or decrease your conversions.
The best way to find out is to run pricing experiments.
In this article we explain why pricing experiments are so important for your e-commerce, how to run them and finally what type of essential pricing experiments are recommended for your pricing strategies.
What are pricing experiments?
Pricing experiments give you the opportunity to gain insight into how your customers perceive your pricing and how your company operates.
Find out if your customers shop online only because of lower prices, if they are willing to add more products to their shopping cart or which option provides best conversions while keeping profit margins.
How to run pricing experiments
Experiments and their outcome confirm what happens when a particular factor is manipulated.
During your selected type of experiment, one or more conditions are allowed to change in an organized manner. The effect of these changes is measured, recorded, validated and analyzed. Finally, there is a conclusion for your experiment.
You can run manual pricing experiments for 14 or 28 days. Pick top sellers that you compare to a different experiment in a different time period.
A popular way to run a pricing experiment is to monitor Google Analytics, set goals and evaluate their results.
Another option is to use a pricing intelligence software to analyze your historical data and turn the insights into optimal prices.
Examples of pricing experiments
Take your time to explore and run pricing experiments that are the best for your business context. Pricing experiments depend on your industry, product type, customer and season.
1. Give them different options
Perception plays a huge role in pricing. People benchmark prices and compare them to others. One of the most popular pricing experiments is to offer 3 options of prices. From bargain to premium price. Do not overwhelm your users by the number of options that you offer.
2. Try the power of the number 9
Ending prices with the number 9 is one of the oldest tricks in the book. These prices can be effective and outsell slightly lower prices for the same product.
3. Font and design type
Smaller font is perceived better than a bigger, bolder font, because physical magnitude is related to numerical magnitude.
4. Anchor the price
Anchoring is all about the contrast. Your product is by itself not cheap or expensive when it stands alone. The perceived price contrast only happens when a customer starts comparing the products or services in your offer. Add some expensive products to your offer and let the regularly priced products stand out.
5. Review your decimal points or commas
Keep your prices simple. Prices that contain more decimals seem drastically higher to consumers. Be aware of these examples: $1,499.00, $1,499, $1499. The third option could win this contest because it’s the simplest one. This mostly applies to higher prices (above $100).
6. Experiment with “Pay What You Want”
Let your users decide to pay whatever they want. You might be surprised but it can turn out that customers would pay more because they value your product highly. You can indicate a minimum price and trust that you have fair minded customers.
7. Tag it with limited availability
Have you seen campaigns for limited quantity of products? This kind of approach evokes exclusivity of your products and creates a sense of urgency in the minds of your customers.
8. Take it easy with A/B testing
Running pricing experiments using the A/B test approach can get you into trouble. Showing different prices for the same product to different visitors can be perceived unfair if they find out. A better option is to split the pricing variations over time intervals.
9. Test a dynamic pricing strategy
The ability to compare and recommend prices in real-time by using a pricing intelligence software such as FutureMargin gives business owners a huge opportunity to increase their customer experience. Test a dynamic pricing strategy and see how you feel about monitoring your prices 24/7, evaluating valuable information and thus making faster, more effective price adjustments.
The right price can make the difference. Optimize your existing pricing strategies and try to maximize your results by running pricing experiments. Find out which pricing strategies work best for your business and don't hesitate to further combine winning strategies for your final price value.
FutureMargin is a conversion analytics software that measures and guides your systematic product pricing and increases your e-commerce profits. FutureMargin can be integrated with Shopify stores through a Shopify app, or with any e-commerce store through API.