There’s no question that the domain and hosting industry is highly competitive, and that price is a factor in buyer’s decisions. But selling products at the lowest possible price isn’t always the best choice. Even a small change in price can change your customers’ perception of your business and your bottom line.

To find the optimum price that your audience is willing to pay, you’ll need to do some price testing. As you test, you’ll want to watch the following:

Conversion rate – This is the number of visitors to your site who actually buy the product you’re testing. By raising a price, you might find that you have fewer new visitors who buy, but that your revenue actually remains steady or even increases. You can use your free Site Analytics tool or Google® Analytics to measure conversion rates.

Return on Investment (ROI) – If you’re paying for marketing in the form of Pay-Per-Click ads, affiliate programs or banner exchanges, consider what each sale or customer acquisition costs you. Divide what you spent by the number of new customers you gained, and then compare that figure to how much the average customer spent. Not in the black? Increase your prices till you are.

TIP: Use Marketing Source Codes to track the revenue generate by individual offers or ad placements.

Refund rates – Is your pricing set at a level your customers feel good about, or do they regularly experience buyer’s remorse and have their orders refunded? Use the Order Refund Report in the Reseller Control Center (RCC) to monitor levels of refunds and look for patterns.

Setting up a price test
Within the RCC pricing options, we’ve provided the tools for you to run automated price tests. Before you start, you’ll need to decide the following:

• Sale duration –If you only make 1-2 sales per day and have very low site traffic, it could take a month or more to gather significant data. If you have hundreds of orders per day and thousands of hits to your site, a week of testing will probably be enough. No matter what duration you choose, keep an eye on the test so you can turn it off if it starts hurting sales. 
• Sale price – There are many ways to approach testing a sale price. You can do incremental testing over time, raising the domain price by $.25 or $.50 per test. Or you start with a price that’s closer to the top range in your market and then work your way back down to the sweet spot. It’s your call.
• Minimize variables –If you want a clear understanding of the impact of your price test, you need to minimize the number of variables you change during the test period. So if you’re planning a new advertising campaign, be sure to benchmark sales at the current price with that advertising plan before starting your price test.

Once you’ve determined your sale factors, log in to the Reseller Control Center to set up your automated price test. From the Product Offerings page, choose the product you’ll be testing and click the link to get to the Edit Prices page. 

If your pricing is currently set at minimum retail, you’ll need to change overall pricing to test higher prices. To quickly modify pricing for an entire product group, use the Quick Edit Pricing option. For example, if you wanted to test an overall price increase of $.50/unit you would:

• Set the Price to Modify = “Your Retail Price”
• Set the Price Point = “Suggested Retail Price + .50”
• Click “Calculate”
• Review the pricing to be sure it’s correct
• Click “Apply” to apply the changes to your storefront

At the end of your test period, you’ll have to decide whether to keep your prices at this level, or reset your pricing based on the results of the test. This type of test does not have an automated shut-off.

If your current pricing is above minimum retail, and you want to run a price test at a lower price point on an entire product group, you can use the Sale feature to run a timed test. To test an overall price decrease of $.50/unit you would:

• Set the Price to Modify = “Sale Price”
• Set the Price Point = “My Retail Price  -  .50”
• Click “Calculate”
• Review the pricing to be sure it’s correct
• Enter a Start Sale Date and End Sale Date
• Click “Set Dates”
• Click “Apply” to apply the changes to your storefront

With this test, your prices will automatically revert to your original retail pricing at Midnight PST on the date you specify for your end date. If you need to end the test earlier, you can reset the Sale Dates at any time to stop it immediately.

As your test is running, use the Product Sales Report to evaluate your test period orders against a control period (an “average” period of the same length, prior to the beginning of the test). If you’re reviewing results daily, look at the same day in the previous weeks and compare units and revenue. If you’re running a weekly or monthly test, check against non-test weeks for an overall picture of units and revenue.

Be sure to account for any holidays or advertising campaigns you might have run that would affect one period and not the other. Holidays may show a decrease in sales, while you’re likely to see a spike in traffic and orders the day you send an email campaign.

Once you’ve completed your test, you’ll need to determine if the new price did better or worse than the control. Did the following measures increase or decrease?

• New customers
• Orders
• Units
• Revenue
• Commission
• Conversions
• Return On Investment
• Refund Rate

Based on your particular goals, these factors will tell you if your test price is better or worse. If your primary goal is to build your customer base, New Customers and Conversions will be key factors for you. If your goal is to increase your income potential whether your customer base increases or stays steady, Revenue and Commission will be your key factors. If you want to maximize your advertising budget, Conversions and ROI are most important.

Once you’ve evaluated your test, it’s time to decide if you want to continue to test that price point or stay with your winning price. If a higher price worked better, you might want to see if you can push the window a little further and try another price increase. If your original price won, you might want to test a smaller price increase to see how that impacts sales.

Price testing isn’t a one-time activity. As your customer base and advertising efforts change over time, you should continue to price test to make sure you’re getting the greatest revenue from your target audience.

Find all the articles in the 2009 Reseller Marketing Planner series in the Reseller Roundup Blog.