Sep 28, 2017 - 11:17 AM
Your best bet is to actually have two landing pages with different prices and test them with a 'fresh' traffic source like SEM.
If you are selling software you many want to read this really long post on pricing by Joel Spolsky:
Here's the relevant excerpt:
The reason I bring this up is because software is priced [ONLY] three ways: free, cheap, and dear.
- Free. Open source, etc. Not relevant to the current discussion. Nothing to see here. Move along.
- Cheap. $10 – $1000, sold to a very large number of people at a low price without a salesforce. Most shrinkwrapped consumer and small business software falls into this category.
- Dear. $75,000 – $1,000,000, sold to a handful of rich big companies using a team of slick salespeople that do six months of intense PowerPoint just to get one goddamn sale. The Oracle model.
Notice the gap? There’s no software priced between $1000 and $75,000. I’ll tell you why. The minute you charge more than $1000 you need to get serious corporate signoffs. You need a line item in their budget.
You need purchasing managers and CEO approval and competitive bids and paperwork. So you need to send a salesperson out to the customer to do PowerPoint, with his airfare, golf course memberships, and $19.95 porn movies at the Ritz Carlton.
And with all this, the cost of making one successful sale is going to average about $50,000. If you’re sending salespeople out to customers and charging less than $75,000, you’re losing money.
Sep 29, 2017 - 01:59 AM
However, there is a short circuit to determining pricing. Luckily, technology is making this problem easier to solve. If the product or service is already launched. You can create and run A/B Testing (or split testing). This is easier if the product/service has a website. Each time a customer visits your site, they are presented with one of two versions of the price. This gives you a real world sample of customer preference. You can calculate -
- Number of visits
- Number of visitors
- Cart abandonment in the case of product
- Percentage of customers that actually complete transaction at (price A) vs (price B)
This should give you a clearer picture of the optimum price of the product.
Of course this also involves having the technical expertise to set up A/B testing process & tools.
Oct 04, 2017 - 10:47 PM
"A/B testing your price is a dangerous territory. A number of companies (Dell, Amazon and others) in the past have been caught and got in trouble for doing just that, showing different price for the same product to different visitors.
A better and safer approach is to test the price across objects. Don’t test the same product for $19 vs $39. Rather you should test two different products that essentially do the same thing, but just have a different price tag.
Before deciding on your pricing strategy, it’s worthwhile to read Cindy Alvarez’s article where she makes the point that price is not the only cost to consider. When customers consider “what something costs”, they’re actually measuring three main drivers: money (cost), time (how long will it take to learn?) and mental energy(how much do I have to think about this?). Take into account the profile of your buyer."