The Price is (eventually) Right
Anyone who has ever sat through an Economics 101 class knows that there is a price to charge that will maximise your profit, given current market demand and supply. But how should e-commerce companies go about figuring out that price, without those clear and easy graphs to go by? Should we be using A/B and Multivariate testing to optimise profits by varying your prices to different shoppers based on their demographics and behaviour? This article by Get Elastic gives a great overview of the various factors that we should consider when pricing our online offerings.
Option 1: NO NO NO!
There can be a lot of negative consequences when you arbitrarily vary your prices, for example depending on device, location, etc. Orbitz, the online travel website, showed Mac users pricier hotels based on the type of device they were using (in this case a Mac, a rather high-end laptop computer). Integrity and ethics are at stake when you start including prices into the A/B and Multivariate tests that we put our websites through, and some web experts will advocate that price testing online is a bad idea overall. Online shoppers are usually pretty savvy and will start to notice irregularities if they start clearing their cookies and accessing the site from different devices.
Option 2: Yes, but at the right time
Most would agree that your testing experiments on your e-commerce site should firstly revolve around the presentation of the products and the various channels taken to get to the checkout, and then decide whether price testing is necessary. Then, the next step would be determining what you’re trying to achieve, which might sound obvious, but there are some things to consider. For example, are you trying to identify a price where you can establish long-term and loyal customers? Or perhaps are you looking to accelerate revenue in the short term? Whatever the plan, there will be a formula and a series of tests available for us to know what prices to test. Gathering and monitoring data is of course the key and ultimate tool for better pricing decisions in the future.
Option 3: Yes, but always have control
E-commerce can be a tricky game, and sometimes doing some testing can reveal come incredible things about the consumers we are catering to. The key to doing this well, say some experts, is to always have control, and make sure that the tools you are using can remember your past customers and not be charging them different prices on different days so as to get you into trouble.
—
The full details can be found at the link above, but this article has highlighted some of the more strategic and tactical elements of e-commerce technology. And of course with buying patterns forever changing, the prices we charge in July might be completely ludicrous by the time October rolls around. Always being on top of things, protecting your company’s integrity and always crunching the numbers on your data being churned out by testing will be the winning formula for online price testing.
What do you think? Does your website employ price testing experiments on your shoppers?
