2 ways to test prices and the most important tips to avoid mistakes
Not sure about the proposal of price adjustment? One way to verify this is to test prices with customers. Two basic approaches are very often used: price survey and price test. What is the difference between these two ways?
1. Price survey
Price survey is a form of customer questionnaire, where you present an offer close to the real one and analyse the respondent’s willingness to buy. It is a simulation of purchase where a participant knows in advance that it is a marketing survey. Customers express their interests in the proposal during the inquiry, a real purchase is not realized.
During this price survey you can test several price lists, which are different in structure and price. Various groups of respondents receive different versions of price lists and then choose the product that they would most likely choose in reality. The success of different versions is calculated very simply: the price of products multiplied by the % of customers who voted for the variant. The winning price list is thus the one that can bring the biggest potential revenue. See the example below, where Price List 2 has 13% more revenue.
- In the survey can be used qualitative questions to get information on why respondents choose what they like or dislike
- The price can be tested before starting a real sale
- The reaction of customers to the offer can be obtained from a smaller sample of respondents
- Customer dissatisfaction due to price changes can be avoided because this is a simulation (the presented offer is not realistic)
- Dozens of different bids can be tested
The interest in the offer during the survey is greater than in the real sales process. Therefore, the estimated absolute revenue will be biased (but the survey reliably allows you to compare alternatives)
Beware of the most common mistakes
- It is always necessary to explain (or even better, to show) the product or new features in detail before the offer in price list. If you do not do this, some customers will simply not understand the offer and answer in the questionnaire that they are not interested in it. The price list is intended to verify which option is chosen by most customers, there is no room to explain the benefits, so they must be described in the introduction to the questionnaire.
- Wording should be as close to the real offer as possible because of the objectivity of the results - the description of the benefits must always show what it is. If customers do not understand the advantage, they choose another package. Therefore, avoid using abbreviations that the customer might not know.
- Price survey tests the contents of the product packages and the price. Names of individual packages or graphic design shouldn't differ between individual versions of price lists. Simply different naming of the products may distort the results.
- Be sure to add “none” option to the questionnaire in addition to each bid variant.
- Always make a pilot interview on a small sample before starting the survey - this will help detect minor communication errors or the interview process.
2. Price test
In the case of a price test, the product is sold. The customer votes with his wallet. Price test is usually carried out in the form of an A/B test, where for example, two versions of price lists are on a website and the effectiveness of price lists is tested on two samples of customers. Besides this, the offer can be differentiated geographically (different markets) or in case of non-public price list (B2B), it can be differentiated by time.
The price test works best as a second step after the price survey. Best price lists will be selected, based on the survey, and tested in real traffic.
- This is a real sale - results are more accurate than the price survey. The offer is real which means that in the case of a purchase, the customer should receive the product. The graphic design of the price lists is therefore fully aligned with a company's communication materials.
- The form of the test does not allow you to ask supplementary questions of a qualitative nature (except for one-to-one sales where the structure of the offer can be discussed).
- Usually, only 2-3 variants of price lists can be tested (more price lists are rather for price survey).
- A change in offer or price is a potential risk for PR damage.
Beware of the most common mistakes
- Although we are talking about the price test, you should not forget that this is a real sale. User experience from price pages and purchasing process must be simple and above all 100% functional. It is unacceptable to run public offer before all errors are resolved.
- Conversion is influenced by everything - content of product variants, prices, names, graphics, the way of adding the product to the shopping cart, etc. In the price test the difference in price and content of the package must be tested. Differences in graphics can distort results.
Price survey and price test are excellent tools to verify the correct setting of prices or to choose the optimal structure of the offer in the price list. Always start by asking a smaller sample of customers, then continue with a full quantitative survey and after that, you can run a real offer price test. From our experience, we can say that the financial impact of price changes is always many times higher than the cost and the related effort of a price survey or test.