Choosing the right pricing for your product or service can be difficult. Choosing the best price for both your business and your consumers is important to conversions. If it’s too low you risk losing revenue or hurting your business’s value to your customers compared to competitors. Too high and you might push away a lot of potential customers.
How can you find the perfect price range for your business?
A pricing test is when you compare two price points, strategies, or options to find the ideal price for gaining customers and increasing revenue.
The right pricing strategy is one of the more important decisions for your business to make.
Your price determines how consumers see you in the market and creates a perception of your product or service.
For example, Yeti’s expensive coolers suggest more high-quality than the ones you can find at a convenience store. The price might reduce the number of customers buying Yeti but it also attracts high-intent consumers because of the perceived value.
This strategy is known as value-based pricing, choosing pricing based on how much a consumer believes a product or service is worth. I believe Yeti coolers are high quality and I have a good perception of the brand, making it feel like they are worth a high price.
Value pricing is good if you have a good brand reputation, a newcomer to the market might have a difficult time convincing consumers that the product is worth the high price. People need to know your brand first.
Still, understanding the opinions of your audience will help create the most beneficial pricing strategy. Considering the prices in the market with a competition-based pricing model or how much it costs to produce your product or service and desired profit with a cost-plus pricing strategy is important.
Once you chose the strategy that will work best for your business model you might be unsure of the actual price or specific dollar amount that will produce the most revenue.
For example, your strategy might say that a price range of $100-$150 is the best but you need to find the “sweet spot” in that price range. If you are at the bottom of that range you might miss out on revenue or if you are at the top you might miss out on some customers. This is where usability A/B testing comes in. Let’s look at how you can test your pricing.
How to Test Your Pricing
Many people advise against traditional testing your pricing but with Poll the People testing you don’t have to worry about users paying different amounts or unfairness. That’s because you are testing before anyone actually buys a product or service the past risk of price testing is eliminated. Here’s how you’ll want to test your company’s price.
1. Test One Product Or Plan
To ensure you’re getting the best data for your test you want to test one product or plan at a time to understand how it should be priced. You will compare two different prices and gain feedback from the audience on what price they are willing to pay. This will set you up for success, you can choose the “winner” of the test with confidence that your audience is comfortable with your price.
2. Identify The Price Points You Want To Test
You’ll want to find the right price for your product based on things like competitor pricing, operational costs, and desired revenue.
The goal is to gauge price sensitivity or how much demand changes with different prices. For example, you might find that if your price is $150 the demand for your product will drop. You really want to find a price point to figure out the highest price you can go to while maintaining demand for your product.
3. Make It Realistic And Focus On Revenue
A lower price point might produce more purchasers but you might not meet revenue goals even with more customers. This is why it’s important to focus on how much revenue you will get out of each price point. Pay attention to how the different prices affect your revenue to fully understand what the best price is.
4. Test Multiple Price Points And Re-Test Until You Get It Right
If you found that the $120 price range gets more conversions and revenue than a $150 price point consider testing the $120 price point against others to see if you can get more out of your pricing.
Re-testing and comparing different price points lets you find a specific price that will provide maximum revenue.
Finally, choose the price point that works the best. Once you conducted testing of your pricing you choose the overall winner. Determine the highest price that your customers are willing to pay that will also produce revenue.
Usability A/B testing the price of your product give you insights into your audience and what they’d pay. With Poll the People testing you will get a winner and feedback from each person that voted on your test. You will receive an explanation as to why they would purchase at a price point or why they wouldn’t buy at a price point.
Testing before you launch gives you the confidence that you are selling your product for the right price once you do go live. Usability A/B testing before launch reduces the risk of making a wrong choice and eliminates lengthy re-work on your price point.
Testing your pricing is the best way to find your price point without bias or assumptions about your audience. If you are looking to run a test or learn more check out Poll the People.
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