A/B Testing in Pricing Strategies | Strategic Pricing Solutions
How confident are you that the prices you have set are the optimal prices? If your prices were higher, would you make more money or perhaps cause customers not to buy? If you lowered your prices, would you get enough extra volume to increase your profitability? These are common questions asked within companies every day, but most often are not answered. Companies worry about their pricing strategy, but frequently just hope they got it right — or good enough. There is a better way. It is possible to move beyond hope as a strategy and build confidence in your pricing by regularly using A/B testing.
The basic concept behind A/B testing is to change the value of a single variable in an offer to consumers, and measure the results to determine which offer was superior. In the case of setting prices, A/B testing is simple. The test is to offer the same product to similar customers, but at different price points. At the end of the test period, measure the number of customers who bought the product or service at each price point, along with the total revenue, margin, and operating income. Then use the price that delivered the best results.
To make the A/B test valid (and therefore worth relying on), there are a few factors that must be incorporated:
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