Optimizing your pricing pages
Pricing and pricing pages
Pricing is an important part of the business. While determining a product’s price is not the role of conversion optimizers, we can help reduce friction experienced when faced with a price and guide people toward the right selection.
- Since pricing is part of the sales flow, we should reduce friction in the process
- Some prices sell better than others, so we can split test to figure out the optimal price point
- We can influence people’s choices by using different psychological phenomena
The higher the price point, the more you need to explain
One truth to remember: the more expensive the product, the more proof and copy you need to provide.
People don’t need to know much if your product costs $1 — the risk there is very low. If your product is in the thousands (think real estate, cars, luxury products), they’ll need much more information — especially if you’re not a famous brand (Prada can sell a $10,000 bag way easier than an unknown or brand new designer).
Don’t ask people how much they would pay
If you don’t know how to price products, don’t rely on what your customers say. You should never ask your audience ‘how much would you pay for it?’ — the answers will be useless. The results will be very different when these people actually have to open their wallet and give you money. It’s easy to pay hypothetically.
Rather, come up with some formulas for pricing and test them with actual traffic. If you start out too low, you can always increase the price down the line. Constant testing of price elasticity is important.
Things that typically work well and you should experiment with:
Multiple prices vs. one price
The thinking behind multiple price points is this:
When people see a price, they consider whether to buy or not. When they see 2 or 3 options, they skip this consideration and jump straight into figuring out which option is best for them.
Of course it’s never that simple, but 2–3 options/price plans typically result in more sales when compared to a single-price offer.
When you test this, note that you shouldn’t measure just “total signups”, but revenue.
Let’s say you sell a product for $29.99 (Control). Now you split test it against 3 options (Variation 1) where the plans cost $29.99, $39.99 and $89.99.
Control: 225 signups. Total revenue= $6738.75 (225x$29.95)
Variation: 180 signups. Total revenue= $9858.30 (34 x $29.99 + 78 x $39.99 + 68 x $89.99)
If you had measured just the number of signups, you would have declared the control as the winner. Costly mistake!
How to do it: You offer two options very similar both in terms of the offer and price, but one has some sort of distinct advantage, making it the “no-brainer” choice.
Research example: People were offered to choose between a trip to Paris (option A) or a trip to Rome (option B). They had a hard time choosing. Both destinations were equally desirable, and it was hard to compare them.
Next, they were offered three choices instead of two: a trip to Paris with free breakfast (option A), a trip to Paris without breakfast (option A-), and a trip to Rome with free breakfast (option B). Now, the overwhelming majority of people chose option A, the trip to Paris with free breakfast. The rationale here is that it’s easier to compare the two options for Paris than it is to compare Paris and Rome, so people go with the Paris + freebie trip.
A graph to describe this phenomenon:
When you add a slightly worse option that is similar to A (call it A-), it becomes glaringly obvious that A is better than A-, hence more people choose that.
See another example in my pricing experiments post.
Price Anchoring/Contrast principle
How to do it: Lead with the most expensive price plan and/or add a price plan that’s very expensive, making other options look cheap in comparison.
Anchoring extends far beyond into pricing and into the physical world.
To experience it for yourself, do this test at home: Pour water into three bowls. Fill one bowl with cold water, the second with hot water, and the third with lukewarm water. Now stick one hand in the cold water and the other hand in the (not too) hot water. Keep them submerged for 30 seconds or so. Now, put both of your hands into the lukewarm bowl. One hand will feel the water is warm, the other one that it’s cold. That’s anchoring: Your first experience shapes following ones.
It’s about the contrast. The same principle applies to price. Nothing is cheap or expensive by itself, but when compared to something else.
Once you’ve seen a $150 burger on the menu, $50 sounds reasonable for a steak. At Ralph Lauren, that $16,995 bag makes a $98 t-shirt look cheap.
What’s the best way to sell a $2,000 wristwatch? Right next to a $12,000 watch.
This is called anchoring and adjustment in psychology.
See a full description in my pricing experiments post.
Decoy + Contrast
When you have three pricing plans, you can combine contrast + decoy pricing:
- The first plan is a decoy. It’s similar to the middle plan, but offers visibly less value while costing almost as much. Think of it as A- (as per The Economist example).
- Second plan: This is A. It’s the one you actually want to sell that offers good value for its price. The price ends with 9. Maybe it even shows that it has been reduced from a previously higher price or it’s on sale (either way, it has to be true/ethical).
- The third plan serves as a contrast to the middle one. Its role is to anchor in a high figure. Make it much, much more expensive than the middle plan. You don’t actually intend to sell it, but there is always the type that wants the most expensive plan — so make sure you can actually deliver.
Prices ending in 9s
It’s true — prices that end with 9s tend to work better.
In eight studies published from 1987 to 2004, charm prices ($49, $79, $1.49 and so on) were reported to boost sales by an average of 24 percent relative to nearby prices. I have seen this as well in my own testing (see “Split testing prices” below and examples in my pricing experiments post).
And no — I’ve never seen a study done on prices ending with 7s, nor have I noticed a pattern for this in my own testing.
Split testing prices
You should test your pricing. It’s controversial but happens all the time.
Amazon has gotten in trouble with it in the past, but continues to split test prices day in, day out. Before you buy a product on Amazon, check the price on it from different browsers and devices — you might see noticeable differences (hard to know in advance which product they’re running a test on).
The only case when testing prices becomes difficult (if not impossible) is when you’re selling one or very few items that you promote heavily. For instance, Apple sets pricing in their iPad and iPhone in advance and it’s used in their ad campaigns — you can’t test prices here. But if you run an ecommerce site selling hundreds of products, you definitely can. This doesn’t strictly apply to ecommerce — you can and should test pricing on SaaS, digital downloads, and so on.
Here’s a test I ran for an ebook pricing that was sold for $29.95:
Interesting findings: $29.99 got the highest number of signups. Almost double of $29.95. We human beings are ridiculous.
Even $39.99 converted slightly better than $29.95 (however $29.99 still got more absolute revenue).
Had I not tested this, there would’ve been no way to figure out that I could make way more money by either increasing the price by 4 cents, or 10 dollars!
Should I always reveal my prices (even in B2B)?
Yes, as much as you can. If you don’t disclose your prices but your competitors do, you’ll lose a lot of business to them. Most people are too impatient and won’t bother to request a quote if they can see prices on competitor’s websites.
But I don’t have fixed prices, it depends!
Sure, it often does. You can then either publish a range of prices, state starting from $X, or give sample pricing (we did Y for a client, budget was $X).
Having an expected budget drop down will set expectations to the cost:
Never be afraid of turning down unqualified leads.
If your pricing depends on specific variables, build instant quote calculators.
We built one for a “landing page makeover” service:
Of course, calculators can’t figure out every possible nuance, so you treat these as “ballpark” prices rather than exact prices — once the lead is in you can go over all the details.
If you don’t publish prices at all, you’re essentially saying “too damn expensive”. Not everyone will see it that way of course, so you’ll also get many unqualified leads (people who can’t afford you). It’s the worst of both worlds.
Assessing pricing plan design:
There are tons of ways to design a great pricing plan (the part of a page that communicates pricing) or a dedicated pricing page. Designers have a lot of flexibility here.
Some best practices/tips for optimizers to consider when assessing pricing design:
Simplicity (most important) — how easy it is to understand cost? What do I get for it?
Can you tell me how much each of these Vero plans cost?
Pretty easy, right? Below the plans, more detailed information is shared.