A/B Testing
7 mins
Introduction
What Exactly Pricing Split Testing Is?
Pricing Split Testing consists of a randomized experiment that usually involves two variants (A and B), although the concept can be also extended to multiple variants of the same variable.
According to stats, A/B testing can really help by making twice as many people click on ads, which helps companies set the right prices and sell more. It’s a clever plan for growing a business.
It includes application of statistical hypothesis testing or “two-sample hypothesis testing” as used in the field of statistics.
A/B testing is a way to compare multiple versions of a single variable, for example by testing a subject’s response to variant A against variant B, and determining which of the variants is more effective.
For example, let’s say-
Version A: 5 services for $20/month
Version B: 10 services for $35/month
One could test the products with the variations as above and finally come to conclusion with which works better for the customers, obviously the one that sells more!
What Is the Science Behind Pricing and How A/B Testing Helps?
In the world of economics, pricing is an interplay between supply and demand. Traditionally, the price of a good or service settles at a point where the amount producers are willing to sell (supply) meets the amount consumers are willing to buy (demand). This equilibrium point is considered the "fair" price.
In simple terms, think of pricing like a seesaw in a playground. The seesaw balances when the number of kids (supply) on one side is equal to the number on the other side (demand).
This balance point is the best price. But sometimes, what people are willing to pay can change, and that’s where A/B testing comes in.
Split Testing is like trying different weights on the seesaw to see how it tips. If you make bread more expensive, people will grumble but still buy it because they need it.
But if you hike up the price of a fancy handbag, fewer people will want it. A/B testing helps you figure out how much you can change prices before people start walking away.
It’s not just about the price, though. It’s also about what people think they’re getting for their money. Let’s say you have a new app.
With A/B testing, you can show one group a higher price with extra perks, and another group a lower price with just the basics.
This way, you can find out what mix of price and perks makes people think they’re getting a good deal and makes you the most money, all while playing by the rules of economics.
Practical Examples for Pricing Split Testing
Let's see some real scenarios where Pricing Split Testing make a big difference:
Package Options
Picture you're offering different levels of service or product bundles, each with its own price tag.
Through testing, you can find out if customers lean towards a basic, cheaper package or if they're willing to pay more for a premium package with extra features. This insight helps tailor your offerings to what customers value most.
Free Trial vs. Freemium
Suppose you're launching a new software product. You could offer a free trial for a limited time or a forever free basic version with restricted features (known as freemium).
By testing both approaches, you can determine which one attracts more users and, ultimately, converts more of them into paying customers. This helps you strike the right balance between acquiring users and generating revenue.
Discounts vs. Value-Adds
Let's say you're running a promotion for your product priced at $100. You could either offer a discount to reduce the price or add extra value, such as bonus features or extended service duration, without changing the price.
By testing both strategies, you can identify which one drives more sales. This helps your future pricing and promotional strategies.
Price Anchoring
Have you ever noticed a product with a price crossed out, followed by a lower "discounted" price? This technique, known as price anchoring, can influence perception and make the discounted price seem more appealing.
By testing the effectiveness of price anchoring against presenting a single, undiscounted price, you can determine which approach resonates better with your target audience.
These examples show only a glimpse of A/B testing pricing strategies. Trying out different pricing helps you learn what customers like. With this info, you can set prices to make the most profit and keep customers happy.
How to Perform Pricing Split Testing?
To effectively perform Pricing Split Testing, you need to follow these steps:
Set Your Goal: First, think about what you want to make better on your website. Do you want more people to buy things, or maybe spend more money when they do?
Make a Guess: Next, take a guess about what you can change to make your goal happen. If you're selling stuff, maybe you think changing the price will make a difference.
Create Different Versions: Now, make a few different versions of your website. Change the price on each one, but keep everything else the same. This helps you see if the price is what's making the difference.
Show People Your Website: Use a tool that can show each version of your website to different people who visit your site. This way, everyone gets to see a different price. We’ll talk about this in more detail in the next section.
Check What Happens: Keep an eye on what people do on your website. Do they buy more stuff or spend more money with one price over the others? This helps you figure out which price works best.
Use the Best Version: Once you know which price works the best, use that one for your website. This way, you can make sure your website is doing the best it can to help your business.
This systematic approach will help you to refine your pricing strategies based on data. You can figure out the best price to help your website do what you want it to do.
Use Dynamic Landing Pages with Pricing Split Testing
Dynamic landing pages are changing online marketing. Unlike static pages, they change content for each visitor based on things like location and behavior, or other rules.
This capability allows marketers to create targeted messages for different segments of their audience, increasing the impact of their marketing strategies.
Customizable landing pages offer several other benefits, such as improved lead generation through targeted incentives, higher conversion rates due to focused content, and better brand awareness with consistent messaging.
They also support cost-effective marketing, facilitate multiple campaigns, and provide immediate feedback on campaign performance.
With landing page split testing, marketers can use dynamic pages for A/B testing with great flexibility.
They can test various elements like prices or call-to-action buttons to see what clicks with their audience. This way, they make informed decisions and keep tuning their campaigns for the best outcomes.
For example, if you’re selling online and want to try out different prices, landing page split testing on dynamic pages lets you show different prices to different people at once.
This helps you quickly learn how pricing affects sales, without needing many separate pages.
Dynamic landing pages also offer a more personalized shopping experience. They adjust content to match each visitor’s profile or actions, making the experience feel custom-made.
This leads to more engagement and sales. Basically, dynamic landing pages that come with built-in landing page split testing make A/B testing much simpler.
They also help make marketing campaigns more effective by sending customized messages at just the right time.
Some Split Testing Software to Make the Testing Easy
When it comes to A/B testing, there are several tools out there to help streamline the process, each with its own set of features.
Fibr is one such tool that stands out for creating dynamic landing pages that allow for monitoring and evaluating A/B tests in real-time. This means you can watch how changes affect your results as they happen and adjust on the fly.
With Fibr, you can craft personalized landing pages that resonate with your audience, leading to better conversion rates.
It’s designed to be user-friendly, so you don’t need to be a tech wizard to use it. Plus, it’s not just about setting up tests; it’s about understanding your audience through real-time data and responding quickly to what works.
Other tools like Optimizely offer a range of features for testing different elements of your website. VWO is great for more complex scenarios and provides detailed reports. Crazy Egg goes beyond simple A/B testing by offering heatmaps and recordings to really get a feel for user behavior.
Choosing the right A/B testing software comes down to what you need for your specific situation. Consider your budget, how comfortable you are with technology, and what features you’re looking for.
Whether it’s Fibr AI for dynamic, real-time testing, or another platform for more specialized tasks, the right tool can make all the difference in optimizing your online marketing efforts.
About the author
Pritam Roy
Pritam Roy, the Co-founder of Fibr, is a seasoned entrepreneur with a passion for product development and AI. A graduate of IIT Bombay, Pritam's expertise lies in leveraging technology to create innovative solutions. As a second-time founder, he brings invaluable experience to Fibr, driving the company towards its mission of redefining digital interactions through AI.
