Shopify price experimentation is important no matter what stage your business is at.
If you’re a new store, getting your prices right the first time is always a tricky task. You’re conflicted between wanting to charge the highest you can to ensure a healthy profit margin but also your store is newly established so you don’t want to turn away customers.
If you’ve been running your store for a while, you might find that you’re reaching a plateau point where your sales are decent but stagnant. A price increase (or decrease) could help with that.
The good news is if you’re running your store on Shopify’s platform, they make it super easy for you to test your pricing and find the optimum point for your customers.
In this post, you’ll learn:
- The benefits of experimenting with your pricing
- Things you need to be aware of before you get started
- Why dynamic pricing could be the right route for you
- How to utilize A/B testing in order to test winning price points.
Why experiment with pricing
If you’ve read any of the content on this blog, you’ll know that your prices shouldn’t be absolute. You don’t set pricing once and leave it at that.
E-commerce pricing strategy is an ongoing exercise that you should look at throughout the entirety of your business. What this means is that you’ll be able to consistently to consider what price your products are at compared to the current market value and your competitors in order to give yourself a competitive advantage.
The first reason why you need to experiment with the pricing on your Shopify store is your increased profit margins. Oftentimes, your business expenses might increase. This could be because your manufacturer has increased the cost of producing your products, or perhaps you recently made a new hire that eats directly into your business funds.
Whatever the reason, you need to make sure you’re always a step ahead and have room to increase your prices to accommodate that.
The second reason you might need to experiment with your pricing is if you find products aren’t selling as well as they should be.
Perhaps you introduced a new product range to your store after seeing lots of chatter about it on the web, but no one seems to buy. You can also see some action in your Shopify live chat app.
This can be concerning for any shop owner, and often a simply price experiment could be the answer, especially if you have competitors selling the same product. Let’s look at an example.
On this site, 30g of Matcha Tea is £20.00
However on this site, it’s only £15.00
They have a few options here.
Now if the first store found that they were struggling to sell this type of tea, they might look to their competitors and see that everyone else is charing a lot less.
First, they can look at their value. Their tea is £5 more expensive than one of their top competitors but does their product listing add £5 worth of value. In other words, why should someone buy from them instead of their competitor?
Second, they could look at their pricing. Is there a way for them to lower their prices slightly to assume the market position, but still make a profit?
This is a classic example of when you might need to look at or analzye your pricing, but it isn’t the only one.
If you find, for some reason, products stop selling as well as they used to, or don’t sell at all, consider experimenting with your pricing.
Things you need to be aware of
But before you jump in and change all the prices on your website as fast as you can, there are a few things you should be aware of.
First, consider your customer’s willingness to pay. Some products don’t warrant themselves to rapid price increases simply because customers’ aren’t willing to pay more than they already do.
If your product is a nice-to-have and not a necessity, you might find that customers will react negatively to your price increases and you’ll end up losing sales.
That doesn’t mean you can’t experiment with your pricing. Instead of simply just increase your prices, you could experiment with different psychological pricing strategies that convince customers to buy from you without giving off the impression that you’ve hiked your prices up.
Second, think about trust. When a customer buys from you they exert a certain level of trust. They trust that you’re a reputable business who won’t steal their money. They trust that your products will match up with their expectations and the trust that your pricing is fair.
As an example, suppose you have an e-commerce store with only one product. This is often a very smart approach, especially for a new store trying to establish themselves.
If everyone knows your pricing is at X and then suddenly they check your website and it’s increased to Y, how do you think that will make them feel?
This single product e-commerce store sells hot sauce.
The product is marketed at $17.98 with free shipping. Imagine if you bought from this store regularly only to find the next time you visit the price had increased to $28.65 without any warning or reason why.
When you’ve decided that you’d like to try and experiment with the pricing on your Shopify store, one tactic to consider is dynamic pricing.
Dynamic pricing is a way in which you can alter the price a customer sees based on specific pre-arranged characteristics or timeframes.
One thing to note about dynamic pricing is that it doesn’t work for products that have fixed price points. Dynamic pricing uses intelligence in order to apply varied price points for specific products.
This helps you stay competitive. For example, if all your customers decrease their prices to $1 and you’re still charging $70 do you think anyone will buy from you?
Probably not. But also it’s hard work to manually track each of your competitors every single day to look at what they’re charging for the same products.
So instead, consider dynamic pricing software that automatically alters your prices to help you stay competitive within the market.
a/b testing for pricing
The second thing you can do is A/B testing. This is when you create two almost identical pages that have different price points.
A/B testing is really effective if you’re launching a new product and trying to get a feel for the market and their response to not only your product but your pricing too.
You might have seen that customers who come from different channels react and behave differently.
For example, someone who searches on Google for your exact product is much more likely to buy than someone who happens to stumble across your product on social media.
Because of this, you could a/b test different prices for those that come to your Shopify store from social media and those that come from organic search.
Shopify pricing experimentation takeaways
When it comes to getting the pricing right on your e-commerce store (whether you’re new or established) you need to factor in a number of issues.
Not only do you have to think about your own profit margins, but you have to consider your customers to and how much they’re likely to spend.
In this post, we’ve looked at four different concepts. First, we looked at the benefits Shopify price experimentation can have on your bottom line and profits.
Then we considered the concerns you should be aware of before you jump straight into it.
We looked at two approaches for price optimization from dynamic pricing to A/B pricing to give you two angles to try to boost your business.
Why not see if you can test them both on products you know could sell better or provide better margins and see how you fare.
Have you ever experimented with your prices on your Shopify store? Leave a comment below.