When introducing a new product to the market, one of the most challenging phases is developing sound pricing strategies. You need to determine the sweet spot, i.e., the price that attracts users who are eager to make a purchase and results in the greatest profit for you. 

The best way to determine the ideal prices that will ensure the success of your new product or service is by using A/B price testing. Even though this kind of test is more frequently used to determine whether your website design is optimized in terms of individual elements for an overall increase in conversions, many online retailers also use it to determine prices.

In this post, we’re talking in more detail about product A/B testing and eCommerce A/B testing. We’re also explaining the advantages and disadvantages of A/B price testing and how to do it. Let’s get started.

What Is A/B Price Testing

Testing pricing entails evaluating how your target market reacts to various product pricing points. A/B price testing is a type of price testing that tests different pricing options for a particular product. 

​​How to A/B Test Your Pricing

Here are a few tips to help you run a price A/B testing properly:

Pick two different products from the same category 

Avoid testing two different prices for an identical product in order to make sure you’re being fair with your customers. If potential clients discover that you are charging different prices for different buyers, the reputation of your company will suffer. Testing pricing on two different products from the same category to determine how much consumers are willing to pay for your product is the best option.

Determine the prices you want to test

Next, you should choose the prices you want to test within a particular range based on a number of variables, such as operational costs and competitor pricing. You are trying to determine price sensitivity, or how much demand changes after a given price point is reached. 

For example, you may discover that if you set your product’s pricing at $50, the number of people who are willing to buy it drops significantly. In the end, you want to select reasonable price points to determine the highest price you can charge while still keeping the largest number of potential clients.

Iterate on test results

You can find a very specific price point that will yield the maximum profit by iterating on your test results. For example, consider running another test between $50 and $60 or $50 and $55 if you observe that $50/month generates the highest conversion rates and potential revenue when compared to $70/month.

Measure revenue not conversions

While running A/B price tests, be sure to measure revenue rather than conversions to decide which price is better. On products with lower prices, your conversion rates will probably be considerably higher, but that doesn’t guarantee that you’ll be able to meet your revenue targets. Even with thousands of additional buyers, you can still have trouble reaching your revenue goals if your product prices are too low. Because of this, it’s crucial to monitor revenue rather than increase in conversions. Finally, choose the price point that predicts maximum revenue by figuring out the highest price that still converts enough clients to satisfy your business goals.

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eCommerce A/B Testing

As an eCommerce retailer, there are several easy and effective pricing tests you can perform, regardless of your niche or target audience. Here are six eCommerce A/B testing ideas to try: 

Adding or dropping zeros 

A tag price might appear lower and more affordable if you remove the zeros. For instance, try structuring your price as $10 rather than $10.00. This effect works best on mobile, probably because the focus is more on the price when looking at it on a mobile device. 

In addition, customers tend to perceive a price as cheaper when it is printed in a smaller font. Therefore, it might be wise to evaluate the outcome of formatting mobile prices in a smaller font than on your desktop. By doing this, the cost can appear lower.

On the other hand, you might want to test including the zeros if you want to make the price appear more expensive. This is a good approach in the case of sale pricing. For example, if you’re promoting a discount on event tickets and want to emphasize that attendees will save $100.00. The savings appear to be far larger and, hence, more appealing by adding the extra, non-significant zeros.

Dropping the comma

Try removing the comma from the pricing to make the price look smaller. For instance, test posting the price as $1599.00 if the product normally sells for $1,599.00. What happens if you omit this small bit of punctuation might surprise you.

Removing the currency symbol

Removing the currency symbol during eCommerce A/B testing can help users feel less “pain of paying” and make them more eager to shop on your eCommerce website. The removal of the currency symbol can significantly aid conversions because it makes the product appear more affordable. However, be sure to always test both options because removing the currency symbol may not help if the price itself is unclear due to too many extra numbers or product data in the same area. 

Using the numbers 7 and 9

Many consumers may find the pricing of $19.99 to be far more appealing than $20.00. The explanation is that we typically start by looking at the right-most digit when processing numbers. Before we have even read the entire price, we instantly calculate the cost in our minds.

The “charm numbers” 7 and 9 are similar to magic numbers that tend to convert well, according to research looking at the psychology of numbers. If you look at your competitor in the e-commerce space, you’ll see that most prices end with 9. The reason for this is very simple: prices that end in 9 usually sell the best. So, make sure to do eCommerce A/B testing by ending your prices at either 7 or 9.

Trying round numbers

Determining whether to price a product as a round number like $10 or deduct one cent and make it $9.99 definitely deserves eCommerce A/B testing. Round amounts, such as $10 and $200, are easier to digest and, as a result, tend to work well for impulsive purchases in which the buyer can justify the expense by saying that it “just feels right.”

On the other hand, a $9.99 product appears less expensive than a $10.00 item when making more sensible, useful purchases, like dish soap, for instance. Therefore, the soap sells better when it is positioned at a non-rounded price ($9.99) to make it appear more affordable.

Disadvantages of A/B Price Testing

It’s important to mention that despite being widely used and offering certain benefits, many experts are against using A/B price testing for several reasons. Here are the most important downsides of A/B price tests:

  • A/B testing has an element of unfairness. It doesn’t seem right that some customers can buy your goods for a lower price than others, and this might damage the reputation of your company. Additionally, it may ultimately prevent potential customers from making any purchases at all.
  • A portion of your customers will be buying your product at an outdated price. For instance, if you’re selling a software solution and you ultimately opt for the lower price option from the test for the basic plan, how are you going to handle the customers who are paying for the more expensive pricing plan? You’ll have to decide whether to switch them over to the cheaper pricing tier and perhaps deal with refund demands or whether to maintain them on the old pricing model, which can result in irate customers who frequently leave when they realize they are paying a higher price than others.
  • A/B price testing necessitates the creation of numerous SKUs and additional system capabilities, which can be a significant (and possibly fruitless) effort.
  • Statistical significance might be challenging to achieve. For your A/B test to be statistically significant rather than being the result of random chance, you need a sufficient number of participants to choose both pricing alternatives. This can be tricky, as businesses that deal with more complicated deals or a larger clientele might not have enough people to guarantee meaningful results.

Another option is to test discounts and offers versus price itself, that way you can see at what price consumers are willing to convert at the desired level without creating some of the disadvantages listed above. It’s very common to run multiple discounts and offers without upsetting customers for different audiences, even more so, for the purposes of A/B testing to improve conversions. Options include: percent vs. dollar-off, discount vs. free gift, certain order values, free shipping, etc. 

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Alternatives to A/B Price Testing

There are several other price testing methods and testing tools for testing pricing if the possible risks connected with A/B price testing outweigh the benefits for your company. Here are a few testing tools and price testing methods to keep in mind:

Customer feedback from surveys is one of the best ways to improve your e-commerce conversion rates and alternative to product A/B testing. It will save you from every A/B testing pitfall listed above and give you superior statistics. Because you may focus on the specific client personas you need, surveys don’t need as many participants as A/B testing pricing or multivariate testing. Because, unlike A/B testing, you can also poll anyone who is a fair fit for your product, not just those who are visiting your site, the number of respondents you can get will be higher than those who will appear in an A/B test. In addition, doing this research is effective regardless of your business model and size, including businesses with sizable customer bases.

Of course, there is always a chance you might face issues like survey bias, but these can be dealt with simply because you have control over the study’s length and the demographics of its participants, as opposed to hoping and praying that the right people see the right things throughout the A/B test.

Additionally, sourcing responses won’t enrage or antagonize your clients with any potentially unfair experiences. In order to prevent them from being psychologically trapped into a preconceived price when they are ready to buy, you are asking for your customers’ willingness to pay. Of course, this necessitates that the survey is conducted properly in order to minimize anchoring and lower the possibility of negative customer feedback. 

Another thing you can try is A/B testing the pricing page—including different CTA buttons and layouts—in order to determine the best pricing page for optimum conversions and maximum revenue. Perhaps your landing page is the problem and not the pricing itself. 

As an alternative, if you’re releasing a new product, think about launching it in just one market to monitor consumer response and performance before expanding distribution. This gives you the opportunity to adjust your pricing or goods before making them available to a broader market.

The Bottom Line

To sum it all up, even though it has certain benefits, A/B tests might not be the ideal method for testing price. Pricing ultimately involves figuring out the value of your product or service and how much potential clients are prepared to pay for that value. This is called value-based pricing, but you can also try dynamic pricing tests, cost-plus pricing tests, price laddering, etc. Although it’s a crucial aspect that business owners need to take into account, you can’t A/B test it without risking losing customers or harming your reputation if they see different rates each time they visit your website.

We advise employing eCommerce A/B testing to try out the layout of your price pages, product landing pages, discounts/incentives, or checkout process if you’re interested in trying this testing technique. You might be able to arrive at a price increase by changing how you present the value of your product on a page.