The Price Testing Paradox: Why Most Marketers Get It Wrong
Few elements impact your business more directly than pricing. A 1% improvement in price can increase profits by 11%, according to McKinsey research—a far greater impact than similar improvements in variable costs, volume, or fixed costs.
Yet many marketers either avoid testing pricing altogether or approach it incorrectly, fearing customer backlash or legal concerns. Having helped dozens of companies optimize their pricing strategy, I’ve seen firsthand how well-executed price testing can transform business results without damaging customer relationships.
The key is understanding what to test, how to test it, and which ethical boundaries shouldn’t be crossed.
What You Can (and Should) Test in Pricing
When we talk about “price testing,” we’re actually referring to several distinct elements that can be tested independently:
Price Presentation
How you visually display and frame your pricing significantly impacts perception:
- Size and prominence of price elements
- Color and contrast of pricing information
- Currency symbols and decimal points
- Proximity to value propositions
- Anchoring elements (original prices, competitor comparisons)
Price Structure
How you organize and structure your offering:
- Tiered pricing vs. à la carte options
- Monthly vs. annual billing emphasis
- Bundle vs. individual product pricing
- Freemium models vs. free trials
- Basic/Pro/Enterprise segmentation
Price Psychology
Psychological elements that influence price perception:
- Charm pricing ($19.99 vs. $20)
- Prestige pricing (rounded numbers for luxury products)
- Price anchoring with decoy options
- Urgency/scarcity elements around promotions
- Risk reversal (money-back guarantees, free returns)
The distinction is important because while changing actual prices charged to different customers simultaneously requires careful legal consideration, testing different ways of presenting the same prices is generally straightforward and risk-free.
Five Proven Price Testing Strategies That Drive Results
Over years of working with e-commerce, SaaS, and service businesses, these price testing approaches have consistently delivered significant improvements:
1. The Decoy Effect Test
The decoy effect (sometimes called the “asymmetric dominance effect”) works by introducing a third option that makes your preferred option look more attractive.
Example Test: A software company offered:
- Basic: $29/month
- Pro: $59/month
We introduced a decoy option:
- Basic: $29/month
- Plus: $55/month (with fewer features than Pro)
- Pro: $59/month
Results: Pro plan selection increased by 37% with no actual price changes, just the strategic addition of the decoy.
2. Price Anchoring Test
Price anchoring sets an initial reference point that influences how subsequent prices are perceived.
Example Test: An online course platform tested two variations:
- Control: “$197 for lifetime access”
- Variation: “Valued at $997 — Your price: $197 for lifetime access”
Results: The anchored variation increased conversions by 23% while maintaining the same actual price.
3. Price Presentation Format Test
How prices are formatted and displayed can significantly impact conversion.
Example Test: A SaaS company tested:
- Control: “$29 per month”
- Variation A: “$29/mo”
- Variation B: “Only $0.97 per day”
Results: The “per day” framing increased conversions by 19% despite representing the same monthly cost.
4. Feature Bundling Test
Testing which features are included at each price point can optimize for both conversion and average order value.
Example Test: A digital marketing tool tested:
- Control: Three distinct packages with features increasing at each tier
- Variation: Same three price points, but reallocated which features appeared at each tier based on customer survey data
Results: Conversion rate remained similar, but average selected package value increased by 14%.
5. Timing-Based Pricing Test
Testing how you communicate payment timing and billing cycles.
Example Test: A subscription service tested:
- Control: “$39/month” (with annual option in smaller text)
- Variation: “$399/year (Save $69)” with monthly price in smaller text
Results: Annual plan selection increased by 41%, significantly improving customer lifetime value and reducing churn.
The Legal and Ethical Boundaries of Price Testing
Price testing requires careful navigation of legal and ethical considerations:
True A/B Price Testing
Testing different actual prices to different customers simultaneously:
- Potentially legal but complex in most jurisdictions
- May require legal disclosure
- Can create customer trust issues if discovered
- Usually requires method to honor lowest offered price
Recommendation: Consult legal counsel before implementing simultaneous price testing.
Sequential Price Testing
Testing different prices during different time periods:
- Generally less legally problematic
- Less likely to create customer backlash
- Requires accounting for seasonality and market changes
- Takes longer to gather results
Recommendation: A safer approach for most businesses, especially when testing significant price changes.
Price Discrimination Concerns
Be aware of:
- Protected class considerations (can’t price differently based on age, gender, race, etc.)
- Geographic pricing issues (some jurisdictions have specific regulations)
- B2B vs. B2C different legal standards
For a health and wellness client concerned about price testing legality, we implemented sequential tests of different pricing structures over eight weeks. This approach allowed them to optimize their subscription model pricing while maintaining complete transparency with customers.
Multi-Variable Price Page Testing: A Strategic Approach
The most effective price testing often involves testing multiple elements simultaneously using a structured approach:
Stage 1: Foundational Research
Before testing, gather:
- Competitor pricing analysis
- Customer willingness-to-pay research
- Current funnel drop-off analysis around pricing pages
- Customer interviews on price perception
- Analysis of support/sales questions related to pricing
Stage 2: Hypothesis Development
Based on research, develop specific hypotheses:
- “Emphasizing annual billing with a calculated savings amount will increase annual plan selection”
- “Adding a comparison to competitor pricing will increase conversion rate”
- “Decoupling premium features into add-ons will increase average revenue per user”
Stage 3: Test Matrix Development
Create a structured testing plan that accounts for dependencies between variables:
- Prioritize tests based on potential impact and implementation complexity
- Determine appropriate sample sizes for statistical validity
- Plan for both quick wins and longer-term strategic tests
For an e-commerce client selling premium cookware, we developed a comprehensive testing matrix that examined 14 different pricing page elements over three months. This structured approach increased their average order value by 23% and conversion rate by 17%.
| Testing Element | Variation A | Variation B | Variation C |
|---|---|---|---|
| Price point display | $299.99 | $300 | “Under $300” |
| Comparison anchoring | No comparison | “Normally $400” | Competitor comparison |
| Payment options | Single payment | Payment plan (no prominence) | Featured payment plan |
| Guarantee display | Standard 30-day | Prominent lifetime guarantee | Money-back guarantee with customer testimonial |
How to Measure Price Testing Success
When evaluating price tests, look beyond simple conversion rates to more comprehensive metrics:
- Revenue per visitor – The ultimate measure of pricing efficiency
- Average order value – Are customers selecting higher-priced options?
- Profitability per transaction – Revenue accounting for costs
- Customer acquisition cost ratio – Revenue relative to acquisition costs
- Refund/chargeback rates – Are some pricing strategies creating post-purchase regret?
- Renewal/retention rates – For subscription businesses, long-term impact matters most
A fitness equipment company found that while a higher-priced version converted 12% fewer visitors, it increased revenue per visitor by 23% and had no negative impact on return rates—making it the clear winner despite the lower conversion rate.
Testing Price-Adjacent Elements: The Safe Alternative
If direct price testing seems too risky for your business, consider testing these price-adjacent elements that can dramatically impact conversion with minimal risk:
- Money-back guarantee terms and display
- Social proof around pricing (customer testimonials, user counts)
- Feature comparison layouts and hierarchy
- Free shipping thresholds and messaging
- Urgency elements around promotional pricing
- Trust symbols near pricing elements
We helped a luxury skincare brand increase their average order value by 38% not by changing prices, but by testing different free shipping threshold messages. The winning variation (“Free shipping starts at $75” with a progress bar) significantly increased the number of customers who added additional items to reach the threshold.
From Test Results to Pricing Strategy
The most valuable outcome of price testing isn’t just immediate conversion improvements—it’s the development of a data-driven pricing strategy.
Use your accumulating test results to build:
- Deep understanding of customer price sensitivity
- Insight into which features drive willingness to pay
- Knowledge of which customer segments respond to different pricing approaches
- Data on elasticity of demand at different price points
For a B2B SaaS client, 18 months of systematic price testing didn’t just optimize their pricing page—it transformed their entire product development roadmap. Features that demonstrated high willingness-to-pay in testing became priority development items, creating a virtuous cycle of value creation and capture.
Want to explore other aspects of A/B testing? Check out our Ultimate Guide to A/B Testing for a comprehensive overview, or learn about A/B Testing Sales Funnels to optimize your entire customer journey.
Remember, effective price testing isn’t about charging customers more for the same value—it’s about better communicating your value, understanding what customers truly value, and creating pricing structures that align with both their needs and your business goals.