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Pricing and Conversion Rate

10% increase in prices lead to 50% drop in sales.

4:20 pm on Apr 25, 2006 (gmt 0)

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We raised our prices 10% this year, and we are still below the competition price.

Our conversion rate has dropped 50% this year, and we have been looking at what we did, to casue this drop.

Traffic is the same, site design is the same, PPC to Organic traffic is the same.

I find it hard that a 10% increase would result in a 50% drop in sales, considering that we are 20% below retail and still a few percentage points below the competition.

We have stuck to our prices for the past four months, so we have plenty of stats to go on.

I was thinking of reverting to 2005 prices (10% discount for the month of May) and if things improve, just keep the prices down.

I still find it hard to believe that pricing is the factor however. Anybody with a similiar experince.

5:17 pm on Apr 26, 2006 (gmt 0)

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WHat other factors invloved - are your shipping costs higher than competitors, making total cost of transaction almost same or worse?

Is your site / service as good as your competitors - sometimes people will only use a site if the prices are dirst cheap if they don't like the look of it. (not making assumptions here cos of course I can't look at your site) People will often pay slightly higher prices to go with a trusted name, but huge bargains will always get the better of even some of those - 10% hike might have made the difference.

5:53 pm on Apr 26, 2006 (gmt 0)

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We raised our prices 10% this year, and we are still below the competition price.

What about a new competitor who's just showed up and undercut your prices?
What about sales overall in your industry- are they flat or down?
7:22 pm on Apr 26, 2006 (gmt 0)

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What are you selling? general goods?
4:36 am on Apr 27, 2006 (gmt 0)

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What's your average sale?

If it's $1,000 than 10% could be enough to chase your customer base away.

The only way to know is do like you said. Lower the prices and see if conversions return. I don't see another way to rule out the possibility.

3:39 pm on Apr 27, 2006 (gmt 0)

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Items range in price from a few dollars to $100 dollars with the average price being around $25. Customers usually pick up several articles with the average sale being around $100. We sell niche market merchandise, have maybe 2 or 3 serious competitors in Canada and about a dozen serious competitors in the USA.

Our site if well designed, looks profesional, but could have minor improvements such as making sure all thumbnails are the same size on the page, and other little things, that may take a bit of polish off the site, but nothing major.

Market Conditions do not vary from year to year.

Our shipping rates are competitive to a $1 or $2 above the competition. But overall, anything over $40 we beat the competition in total price and shipping.

In the past, we have raised prices without much effect, but maybe we are now reaching the threshold.

My understanding, is that customers don't really comparison shop that much, but is more interested in selection, and getting their entire purchase from one location, if the price is within the ball park.

I figure that if we raised prices to much, we see a modest drop in sales, not a plunge off a cliff.

4:15 pm on Apr 28, 2006 (gmt 0)

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Have you analyzed the market to see who is getting the sales? (I know that's not a quantifiable number but you can get close.) In our market a 10% increase wouldn't necessarily make or break a deal. We find it's more when a new competitor(s) come in with something that hurts conversion.

We look at our business many different ways. I analyze the heck out of traffic. Our traffic is up, conversion down, but sales are up. Just as much as your pay attention and massage your site you should probably about 10 times more aggressively seek out your competition to see what it may be that gets them the conversion. Layout, Cart Design, Location of products, clicks to check out, etc.

6:28 pm on May 1, 2006 (gmt 0)

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If you have significant traffic than this is an easy test.

Set an A/B cookie that evenly split traffic from all of the major sources (organic, PPC, affiliate etc to ensure an even 50/50 split).

Show 50% of users prices that are 10% lower and the rest the full price. This way you will have some accurate data after just a few days. Otherwise you will have too many other factors like affiliates doing a succesful campaign, PPC traffic conversion flucuations etc etc. The only way to be really sure is A/B testing on same day/time and as accurate of a split as possible.

Think out all of the factors, split users accordingly (you could even split into 3+ groups showing 0/5/10% off). Once you have run through 10-20 thousand unique visitors I would say you have enough data to know, or at least tweak your testing.

Anything short of that is speculation.

9:55 pm on May 2, 2006 (gmt 0)

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So here's the real rub:

Is is worth caring about the loss in sales? Specifically, you should be looking at the impact on your profit, your bottom line. If you're making more total profit who cares if your customers are fewer?

Looking at Revenue is swell, and you get to feel like you're doing huge money business, but realistically a billion dollars in sales mean bupkis without a billion dollars in profit.

Sit down and have a serious look at your profit. Unless you're selling really high margin items, there's a decent chance your actual profit is up.


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