It can be a complicated business getting your ecommerce pricing right - online products and services are basically worth whatever people are willing to pay for them. So, how do you find out what your customers will think is a reasonable price?
The answer is you implement price testing, which allows you to see what will happen if you make just a slight increase or decrease to your prices - and there's a very good chance you could be making more money from adopting a different pricing strategy or changing the prices of your products.
You probably already realise that it's not always the lowest price that wins the sale - there are inevitably strange psychological reasons afoot as to how people view prices and what price will persuade them to make a purchase.
There are several ecommerce pricing strategies that have been discussed in greater detail in earlier blogs. Here are just a few that are "ripe" for price testing.
Getting multiple sales in one fell swoop is definitely a win win. Your customers will feel like they are getting more for what they pay and you make bigger profits. Testing will indicate which bundle options create the most sales.
The Number 9
Prices that end in nine consistently do better in testing than lower prices that end in any other number.
In one test that looked at how the same items of women’s clothing sold at $35 versus $39, people went for the higher price 24% of the time.
There’s something about the number nine that persuades people to buy so try testing products at different pricing levels, remembering to make those prices end in either a 9 or 99.
Offer more than one option
For example, when people were offered a choice between expensive premium beer and cheap beer, they often chose the premium. When a third option was added to the mix though, people’s choices changed.
If you have a cheap beer, a standard beer and a premium beer, most people go for the middle option. If you have a cheap beer, a premium beer, and a super premium beer, most people still go for the middle option.
Having a comparison in front of them influences what most people choose. It pays to price test your comparisons to see which options will make you the most profit.
Reduce syllables in your pricing
At a quick glance, does £1,500 or 1500 look higher to you? Obviously they are the same but research has found that removing extra characters and syllables in how prices are written works to make amounts seem like less, which in turn increases sales.
It's worth testing to see how a simple change to the formatting of your prices could make a difference in how your customers perceive those prices and influences their decision whether to buy - or not.
A lot of our perceptions of price have to do with available comparisons, whether they be from other websites or those on your own website.
If you put two similar products next to each other on your site with very different pricing, people are more likely to see the one with the lower price as being more reasonable due to the comparison.
Reframe your pricing
Sometimes the same price expressed a different way can have a big impact on take up. If you sell based on an annual fee of, say, £60.00, reframing the cost to £5.00 a month might increase sales. Yes, the annual figures are the same but £5.00 a month sounds less.
Perhaps try building postage costs into your prices so that you can advertise "free delivery", which customers always enjoy.
The only way to know if people will respond differently to a reframe of your pricing is to test it out.
Change your font
Customers perceive prices as being better value when the font size is small as compared to when it’s big and bold. If you test out different font sizes you will have a good indication (through number of sales) of what size font most appeals to your customers.
The only way to discover if your customers are willing to pay more is to increase your prices.
Put your prices up
The only way to discover if your customers are willing to pay more is to increase your prices and see if your sales drop or remain steady. If you find that your sales go down you can always revert to the old pricing.
Consider starting with a few of your best-selling products rather than raising prices across the board. Pay close attention to how your sales are affected with the new prices compared to the old. If your sales remain buoyant then you have just increased your profits for very little effort.
There are a few options for how to go about setting up price tests:
- Try A/B testing
AB testing is when you launch two different versions of something so you can collect clear data on which is best. In ecommerce it’s commonly used to test things like CTAs, landing page and email design. You can also use it to test how a particular pricing strategy, e.g. bundling, anchoring or a different price font works for you.
Obviously you don’t want to risk alienating loyal customers by offering them, for instance, two different prices for the same product on different devices or offering one customer a different price than their friend paid for the same product - so be careful.
There are a number of different products out there that make it easy for you to set up A/B testing on your website. Some are even free!!
- Test different pricing strategies at different times
It’s best to change just one thing at a time in the different versions of your website. For instance, if you change both the font size of prices and switch to a number that ends in "magic" nine at the same time, you won’t know which change accounts for any difference in the results you see.
If you test out any changes to prices one at a time, then you will be able to make the necessary changes required to optimise your website, i.e. to make the most sales and profits.
Be sure to bear in mind other factors that can influence a change in results at different times. For example, if you try a reframing or anchoring strategy during December, an increase in sales could have more to do with people buying gifts than with the pricing change.
- Test different pricing strategies for different products
Try out different pricing strategies for different, but similar products. If the product offering is different enough, testing out different prices won’t come with the risk of upsetting customers, but will give you an idea of what price points people are most comfortable with.
If a higher price works for one product, then you can extend the price increase to other similar products.
- Analyse test results
For every eCommerce price testing strategy you use, take time to review the results and analyse why they turned out the way they did, then move onto the next test.
You need to collect as much data as possible on the whys and wherefores of your customers' purchasing decisions. Any insight is useful and can help increase your profits in the long run.
In summary, price testing does take some time and effort and there could be a slight risk that if a particular pricing strategy doesn't work, you'll make less for that period.
However, the only way to know how much pricing changes and strategies can pay off for your ecommerce business is to test them.