Do you ever consider how a minor tweak in your product price can significantly impact your profits?
According to Erin, our head of strategy, there are a few key points to consider when evaluating product pricing.
Important KPIs to monitor
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Units sold vs. profitability: If you raise your price, your profitability should be high enough to counterbalance any decline in volume sales.
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Average order value (AOV): A related metric, but worth noting. If you increase your pricing, AOV should increase. The goal is for the AOV to increase enough to counteract a potential decrease in conversion rate.
It’s not always just about profitability
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Sometimes, it's not about immediate gains but long-term strategies. Some brands price certain products lower (even at a break-even point), like sample packs, to acquire new users.
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These "gateway" products serve as an introduction, with the hope of upselling more profitable products later.
Shipping fees matter
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Our testing shows varying results when adjusting shipping fees. For instance, raising the minimum spend for free shipping can increase AOV by encouraging users to spend a bit more. However, if the threshold is set too high, it might deter them entirely, causing a spike in cart abandonment (and a decrease in conversion rate).
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One week you could price your product at $10 and the next at $8.99. Determine if the increase in profit from the higher price outweighs the potential loss in top-line revenue.
Tip: Run pricing tests during non-promotional weeks. This ensures that seasonal influences don't skew your data.
As we approach the holiday season, you may be wondering: "How should I price my products to maximize profits and conversions?"
Running pricing tests now is a great way to optimize before you set your promotions live.
Need help? With our deep experience and expertise in CRO and UX/UI, we can find your biggest opportunities for optimization.
> Learn more about our CRO services here
