Finding the best price for your products with A/B testing

12/02/2020

Angela de la Vieja

Establishing a good pricing strategy is one of the most complicated steps when launching new products to the market. What prices will give the best return? How will I know if they’re in the market? Will I be able to attract more general users or others that are highly prepared for purchase? By using A/B testing, it’s possible to resolve these doubts and to establish a pricing policy that will guarantee the success of your new products and services. Even though this type of test is more common to check if your web design is effective or generates a higher conversion rate, more and more online stores are using it to set their prices.

A/B testing involves offering web users two pricing options in order to check which of the two is more efficient. These two options will be displayed randomly to users to test the effectiveness of each variation. Their behaviour and its effects on your KPI will determine whether you stick with option A or option B.

When setting up this test, you can’t assume that the cheapest option will win. With this method, you can check if the lower price will generate more traffic and sales or, on the contrary, if a higher price reduces the conversion rate but results in increased revenue for each sale, giving increased profitability to the more expensive option. This makes it quite easy to find the optimum point that will generate the greatest profits and to obtain valuable information about the elasticity of demand.

Guidelines for running A/B tests safely

Despite the benefits it offers when making important decisions, A/B testing can be counterproductive if not done correctly. Therefore, you have to keep in mind that:

Constantly testing different prices could confuse users, above all if they tend to visit the website quite frequently. To avoid this, you can limit the tests to a specific period of time and to certain geographic areas.
The prices should always be consistent with the market so that the test is as reliable as possible.
Depending on the size of your business, it could take too long or require too much traffic to reach statistical significance. With too little traffic, the difference in performance between the two prices could be minimal.

Knowing this, it’s always a good idea to analyse the pros and cons before designing and initiating your A/B test.

Put the test into action with your prices

When implementing A/B testing, to avoid putting different prices on the same product, you can vary your offer by adding or removing some secondary features. This is particularly recommended for eCommerce businesses that sell intangible services or products. For example:

Option A: software license for €69 per year.
Option B: software license + technical assistance for €75 per year.

With these kinds of tricks, you can see the user’s perception of the product or service that you’re selling. The added value you offer will be what marks the difference between you and your competition.

The final goal is to have as much information as possible to find the prices that your customers feel comfortable with so that your business can maximise its profits.

11/11/2022

Consumer behavior: How can behavior tracking be effective for setting the right pricing strategies?

Behavior tracking is becoming massively popular today. As a result, pricing strategies born from studying consumer behavior are a merchant's dream come true. If done right, it can conquer every market for the business quickly. With abundant data available, the strategic makeover of the pricing models is becoming easy for companies.

What is behavioral tracking, and how is the data beneficial in pricing?

For a quick understanding, behavioral tracking refers to gaining in-depth knowledge and insights into consumers through their web data. Their browsing habits, spontaneous decisions, shopping interests, and preferences come under behavioral tracking.

How can enterprises use customer behavior data?

Companies can use customer behavior data as a tool to strengthen their hold on the market. A customer’s preferences, values, and tendencies allow businesses to work in sync with them through the collected data. Apart from this, customer behavior can also aid in:

Tailoring customer needs for customer retention

Personalization is becoming the heart of a company’s growth. No matter in which area an enterprise is functioning, tailoring the services, products, and solutions is becoming increasingly crucial. Uniqueness and personalization attract the crowd like no other.

Increasing the overall value

One of the best ways customer behavior data affects a business is by upgrading the value of customers for the business. The customer’s characteristics allow the company to target the people that match the business prospects well.

Optimizing every type of content

Everything that is up for digital display requires content. You must have seen companies unveiling their products or services through advertisements and making the initial public appearance. Two essential sales strategies – upselling and cross-selling comes through content optimization.

Pricing Strategy

Last but certainly not least is the influence of customer behavior data on the pricing strategy. The pricing strategy essentially constitutes content derived from data analysis. Companies need to have a dynamic approach to the pricing system to attract the right customers.

17/02/2015

Saint Valentine’s Day, always a good opportunity

V-Day is looming, a long-awaited date for all and also a good occasion for the eCommerce. According the study conducted by Prosper Insights and Analytics, it is forecasted the average consumer expense that day will be the highest in last years. Furthermore, 25% of them will buy online, which means an increase of 4% regarding 2014 (The US department of Commerce). This is, therefore, a key date where market competitiveness increase and which could be assumed as a big opportunity for our business or, a big fail if we do not adopt the correct strategies.

How to turn this event into an opportunity? To achieve this goal, we need to adapt our prices to this hostile environment, i.e. we need to develop an appropriate Dynamic Pricing strategy that allows us to adapt our prices to the variations produced in supply and demand and to position us ahead of our competitors. In V-Day, the frequency in changes will be higher, carrying it out each hour or even each minute. It is estimated that 65% of leader retailers have the ability to respond quickly at these variations, such Amazon. For this reason, it acquires great importance the correct use of a software specialised in price motorisation of competitors. Do not miss the time and adapt your business to new adversities.

28/12/2022

Which are the best footwear marketplaces to sell on?

Footwear marketplaces are booming. The last decade has seen the launch of new specialized marketplaces with millions of different users. Among them are Spartoo, Sarenza and Farfetch, portals with international reach. Their main value is that they unite hundreds of footwear brands, as well as offering clothes and accessories. Although each has its own characteristics, they are all vertical marketplaces, i.e., they focus on a specific area, and their sales categories are interrelated. For sellers, these portals provide an opportunity to expand sales channels and drive the globalization of their e-commerce business. We explain how to sell on these footwear marketplaces so that you can assess whether they align with your plans for the future and then start defining a possible pricing strategy.