Optimizing Sales Price
March 30th, 2008 by Mr MultivarDeciding the pricing of a product can be a tricky situation to be in. There is an optimum price tag for any product where the profits are maximized, but finding this sweet spot is the problem we need to solve.
Supermarkets are experts at this since they carefully analyse the data from millions of shoppers to finely tune their prices. But checking out the price of a can of beans in the supermarket does not help us much on the web I think.
So we have to do our own testing. It’s not efficient to guess, since if you get it wrong then you will make no sales. The price has to be dynamically adjusted to continually zero in on the most profitable price point for your product at any period throughout the year.
But to test with too many price points may be a problem if you have no idea of a suitable price and/or you have low visitor traffic to your sales page.
So it helps if you can get some knowledge of what digits to use in your online sales prices. Then you can produce a manageable number of variants of your sales price to test out.
To cut a long story short, the most profitable numbers to use are: 0, 1, 3, 5 to produce prices such as $15, $35, $100 etc. But this is not my data (it’s from the man from Costa Rica who shall not be named on Forums).
I am currently setting up a test with my own product and look forward to revealing results when I have them. Before this test, I did make multiple sales at $5 and one sale at $25
A while back I asked a question on a marketing forum why everybody was obsessed with using 7’s in their pricing since I couldn’t find any logic to it. And nobody out of the circa 100,000 members answered my question.
So that makes me suspect that the guru’s have programmed their automatic lemming buyers to respond to the “7″ digit. Of course, the guru’s do not reveal these kinds of secrets to their followers. Only those in “inner circles”. But let’s not get too mystical here.
p.s. I just found an option in my PayPal payment acceptance preferences that is set to “must have PayPal account” by default which I think would reduce sales, so I switched this setting, I don’t care what credit card processing system customers use as long as they buy.
Tags: pricing
April 24th, 2008 at 9:55 am
Hi
I landed here from Blogginexperiment website.
Very interesting article about pricing. Could you tell me another source for further reading about this subject?
On which kind of product will you performing this test?
April 26th, 2008 at 6:27 am
Hi Javier,
there doesn’t seem to be much information on the web about how to set product prices that is freely available.
One idea is to launch with a price of $35 for the first wave of buyers followed by $100 after that. But premium products may be $300 and subscription products priced at $25 per month.
My product is on another one of my sites and is a lead capture solution. It only seemed to sell as a result of me promoting it on the Warrior forum (even though I did not use a 7 in the price). Maybe I don’t get enough targeted traffic to my sales page otherwise?
However, I will be testing the pricing of my new products using my own multivariate testing software which will be my next product after the mini-site builder product that I just posted about.
I think I will start with a price tag of $50 and optimise the text first. Then, once the sales flow I can vary the price, hopefully up.
Thanks for your interest in my article, I am not posting frequently but only when I have good quality information to post.