How to A/B Test Your Pricing (And Why It Might Be a Bad Idea)

Free Download: A/B Testing Guide and Kit

Choosing the right pricing for your product is a little bit like Goldilocks.

Too high, and you risk alienating a large majority of your potential customers.

Too low, and you likely won’t have enough revenue to run a sustainable business. Plus, consumers might not value your product or brand as highly if they see a much lower cost than competitors’.

But how can you get it just right?

That’s what we’re going to explore in this post. Let’s dive into the pros and cons of A/B testing your pricing — and how to do it. Plus, some alternatives to A/B testing your pricing if you’ve determined the weaknesses outweigh the strengths.

Product pricing is undeniably one of the most important decisions for your company.

Your price can determine how consumers see you in the marketplace — for instance, Ray Bans’ expensive sunglasses suggests they’re higher-quality than the ones I can find at CVS. Sure, the price might limit the amount of total consumers Ray Ban attracts, but the price also attracts high-intent prospects based on perceived value.

This premise is known as value-based pricing: a strategy that chooses pricing based on how much a consumer believes a product is worth. I believe Ray Ban sunglasses are high-quality, and more importantly, I have a good perception of the brand, which makes me feel the sunglasses are worth the hefty price.

Value-based pricing is most impactful if your brand reputation is good. If you’re a newcomer to the marketplace, it might be harder to persuade consumers that your product is worth the expense — people need to know (and love) your brand, first.

There are a few other factors to consider when choosing a price, including what competitors’ are charging (competition-based pricing), or how much it will cost you to produce your product or service, plus how much you want to profit (cost-plus pricing).

To learn more about different pricing strategies, take a look at The Ultimate Guide to Pricing Strategies.

However, even once you’ve chosen a pricing strategy that works for your business, you might be unsure if the specific dollar price is going to return maximum revenue.

For instance, your pricing strategy might show a range of $50-$60 is best for your product. However, you need to find the “sweet spot” within that range. Charge it for $50, and you might be missing out on the revenue you could’ve received if you’d charged it at $60.

Charge it for $60, alternatively, and you might limit the amount of people willing to purchase your product — which could also decrease the amount of revenue you can receive.

This is where A/B testing comes into play. Let’s explore how to A/B test your pricing, next.