“How much should I charge for this product?”
That is rarely an easy question to answer. Choose too low and your profit margins drop. Choose too high and you won’t make enough sales to generate good profits. And, guessing based on what other people are doing is no guarantee that your product will sell (they might not be doing very well.) Also, if your price is low, it can be hard to attract affiliates to sell your product. There just isn’t enough money in it for them.
A Perfect Case for AB Split Testing
I am working on a 9-1-1 product (like Tony Shepherd recommends in his Double Genius System – a really great little ebook that I highly recommend) and wanted to find out how much people are willing to pay to solve the problem I address. I’ve seen others in the market selling products for $7 and others as high as $12. I think that they are all priced too low and that I can do better sales at a higher price. So, I set out to test my price.
The first step of the process was to put together the sales letter for my product. Many people who teach product creation recommend that you write the sales letter first and then create the product to deliver on the promises of the sales letter. That’s what I did. In this case, I only have the product outlined, so the sales letter writing process really helped me to define the features of the product and I even came up with a couple of ideas that will set me apart from the competition. I also created 2 bonus reports that factored into my testing plan.
One major focus of the sales letter is building up the perceived value of the product. I wove in many examples of the amount of money that people spend trying to deal with the problem and asked the reader to think about how much they have already spent without success. My goal is that the sales letter should establish a perceived value for the results of the product at about 10 times the purchase price.
Setting Up The AB Split Test
Once the sales page was ready, I created 2 versions. One had a price of $17 and the other $37. These would be alternated by a simple AB Split Testing software package that I have so that visitors would see one or the other.
Since the product doesn’t exist yet, the order button leads to a page that informs the customer that we are still finishing the product and it’s not ready yet. It acknowledges that the customer has an urgent need and offers to give the 2 bonus reports mentioned in the sales letter to help the customer out until the main product is finished. To claim the reports they have to sign up for our email announcement list.
I’m sure that a few people will be angry when they click to buy and get the ‘work in progress’ page, but I plan to offer anyone who joins the list a huge discount when the product is done. This, in addition to the quality of the free reports, will hopefully rebuild some good will.
For people who request the free reports, there is a third page that reminds them to check their email for the confirmation request in order to verify that their email address is valid and opt them into the announcement list.
Results Of The Price Testing
As I write this, the test is still underway. I’ve had about 47 total visits to the sales pages. The $17 price is leading the results with 4 ‘sales’ (an 18% sales rate.) The $37 price hasn’t gotten one purchase click. The confidence rating for the results is sitting at 75%. 2 people have requested the free reports and only 1 has confirmed the request and gotten the reports.
The current test will run until I get a clear winner, but it looks like the $17 price is a sure bet. After this current test is complete, I’ll test $17 against $27 and see how it goes. Overall, I’m not just looking for the most clicks but the total profits. I’d rather make the same money from fewer customers.
Once I determine the selling price, I’ll start testing the sales letter itself. The current 18% ratio is pretty good for starters, but I’ll keep working on it until I run out of ideas for improvement. I’ll start with the header graphic, move down to the headline, and then work through the body of the copy and the offer.
Of course, I’ve got to get the product finished as well!
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I have a quick update on my price testing project.
My results illustrate the importance of letting your tests run long enough to gather a decent sample size – my results have flip-flopped.
After a little more than a week I have gotten 296 visitors in total split between the 2 price offerings. These visitors came mostly from some marketing articles I wrote, so I think I’ve got a hot product here.
Out of 296 people, 13 clicked on the order button (4 eventually joined my update list.) The clicks were almost evenly split between the 2 prices (the $17 version got one extra click), so I am concluding that $37 is a viable price point for this product. There is no clear statistical winner to this test, but more profits would have been generated from the $37 page if the pages had led to an actual shopping cart.
I’ve now cut all of the traffic over to a lead capture page until I get the product finished. I will begin split-testing the other sales page components and the offer once the product is available.
Andrew