Testing: Beats assuming your prices are right.
"Addressing prices once every year or two isn't going to work anymore."
You've probably already invested time testing and analyzing your sales funnel, but have you ever tested your pricing? How did you determine the pricing on your site? It was a best guess, right?
With all the changes in the last year - iOS & FB, supply chain disruptions, inflation - pivoting to a margin focus is so important. The days of just focusing on the top line are over.
In today's episode, we learn from a price testing expert if you should optimize revenue and profit for the traffic you have by split testing your pricing. Its not right for everbody, and its more than just prices. It’s shipping, returns, discounts, subscription savings, etc. There may be a lot of low hanging fruit.
We're joined by Drew Marconi, CEO of Intelligems, a price-testing and margin optimization product for e-commerce brands. Prior to starting Intelligems, he built Dynamic Pricing systems at Via Transportation, and was a manager at McKinsey & Company beforehand. He has a degree in Economics & Education Policy.
?The Unofficial Shopify Podcast
6/28/2022
Kurt Elster: Today, on The Unofficial Shopify Podcast, we are gonna discuss how to get our money right. Wait, no. Not quite. We’re gonna talk about how to get our pricing right. Yes, we are joined by a man who has run hundreds of pricing tests, both on product pricing and shipping, just in eCommerce across a variety of verticals, and has done even years more experience of price testing across other categories. So, we certainly have someone who’s got quite a lot more experience at testing pricing than I do, because I have done it… Well, I could probably count it on just my fingers and toes.
And so, this guy is going to walk us through it, gonna explain some of the trends he’s seeing, as well as how to perform tests, the best practices, and I think there’s… I’ve heard some misconceptions around testing and so we’re gonna get into those, as well. I’m your host, Kurt Elster.
Ezra Firestone Sound Board Clip: Tech Nasty!
Kurt Elster: And I am joined today by Drew Marconi of IntelliGems, which is, of course, a price testing and margin optimization product for eCommerce brands. Wow. That sounds so attractive. Margin optimization product for eCommerce brands. Did a robot write that?
Drew Marconi: Lot of syllables in there.
Kurt Elster: We should have just stopped at price testing. I like price testing tool. Done. Fabulous. Mr. Marconi, any relation to the fictional characters from the Batman universe?
Drew Marconi: Not to them and also not to the inventor of the radio, unfortunately. We were Marcozzi and got changed at Ellis Island.
Kurt Elster: Wait. Paul, what was your comment there?
Paul Reda: It’s Maroni. That’s the third time you’ve gotten that wrong on the podcast.
Drew Marconi: Salvatore Maroni. It is Salvatore Maroni. But you’re not the first to have gotten it wrong.
Kurt Elster: So, I’m not the first person to make that reference? Ooh. The worst part is I have a bunch of Batman comics at home that I’ve been reading, and that’s why it was top of mind, and I still screwed it up.
Drew Marconi: Yeah. Eric Roberts in The Dark Knight. He was perfect as Maroni.
Kurt Elster: I blew it. All right, enough Batman, even though I did love the new Batman movie and could easily do 30 minutes just on that. I want to talk about price testing. Okay… Well, there’s so many places to begin here. Let’s go with how did you get into price testing. It seems like a really narrow focus. I eat, breathe, live this stuff, so I get it, but for everybody else who’s like, “How do you spend the last six years on just testing prices?” Give us a little background here, a little flavor.
Drew Marconi: It was fluky, to be honest. My current business partner and I, we worked at a ride sharing company called Via Transportation in New York, doing pooled rides. Joined on the growth team. The company had used flat pricing for its first four years of existence. We knew we needed to get a bit more dynamic, and they said, “Hey, Drew, Adam, let’s figure this out.” And it started as a side job of building that pricing system and blossomed into a team, and full-time jobs for both of us, so over the course of four years we built out… All right, how do we do meter-based pricing? How do we do surge pricing based off supply and demand and weather? How do we automate our lifecycle discounts and build subscriptions?
And in kind of building this tool and layering it up, we realized we needed a testing system underpinning it. We could make a guess of how that surge algorithm should be weighted but being able to test two or three of those versus one another, all right, now we can see customers’ reaction. We can see if they’re more price sensitive in the mornings, or the evenings, or more elastic in Chicago and New York, and building that testing system, it gave us data. But more importantly, it just let us move a lot faster. We went from having these long decision cycles and ultimately having to go with someone’s opinion to we could give this tool to each city, to each team, say, “Go test it,” and then we have a meeting to discuss the data.
And we saw the power there. We really loved doing it. We’re huge nerds and love data and pricing is… You can go deep. And when we decided to start a company, price testing seemed like a natural place to go. We’d seen the power and we knew it would be useful to other industries, so that’s how IntelliGems got started, and still loving it six years later.
Kurt Elster: When we talk about testing price, are we talking exclusively about price on product page? Shipping rate? Because you rattled off a whole bunch of different ideas around pricing as it related to ride share. What are our pricing options within eCommerce?
Drew Marconi: Yeah. I think people hear pricing and they think just that PDP list price, but capital P pricing, there are… When you log into a best practice Shopify store right now, and there are probably eight to 12 elements impacting the price that the customer pays. There’s the popup that’s paying you for your email address. There is your shipping policy is effectively a pricing policy. Your return policy is priced into that product. You get to the PDP, there is the list price. There’s the compare at price if you’re showing that. You add it to the cart, there may be a subscribe and save discount you can access there if you’re doing it well, or upsell and cross-sell options, and potentially some recommended products or a mystery product.
So, our goal is like let’s test all of this and let’s help the merchant think about it holistically, like see all of those different pieces that impact essentially the income statement, and optimize those in sync, rather than just finding these local optimizations, I keep using that word, for each of those different strategies.
Kurt Elster: So, let’s go granular, then. If I have all these options available to me, where do I start? What’s the order? I assume when you approach a store, you have a standard operating procedure for this is how we’re gonna optimize revenue or profit.
Drew Marconi: Yeah. It depends a lot on the store, but there’s a framework by which we can figure out what the roadmap is. Rule number one is like have a roadmap of what you want to test. Testing, it’s a coin flip. If you are using learnings, you can make it more likely than 50% it’s gonna win, but essentially it’s a coin flip, so the way to get the best return is give yourself as many flips as you can, and eliminate dead time between tests. So, having the roadmap, hold it loosely. Be willing to change. But it lets you iterate really quickly, which then accelerates the impact, so that’s step one.
How do you build that roadmap? You have to have your goals well understood, like goals for your business. That’s usually… Someone asked me like, “What’s my pricing strategy?” And every time it’s like, “Well, there’s no perfect price. Price comes after your business goals.” Are you trying to just maximize the total profit you can get from the store this year? Are you trying to grow your number of new customers because you have an LTV and retention play? Are you trying to grow your top line revenue because you have an investor target you really need to hit?
Let’s get a good grasp of those and how they work with each other, because there could be a test where raising price decreases your conversion rate, decreases your top line revenue, but you are making more profit at the end of the day. And is that a trade off you are willing to make?
So, start with the goals. Build this roadmap. And then we usually recommend taking like… You have to put some stakes in the ground of what variables am I gonna move at a time. So, list price is often a really powerful one. Let’s kind of figure out the range of that list price, where it should be, what’s the price elasticity on this product or this set of products. Shipping rates are also an easy one to pin down early on, like is free shipping worth it for me? If I take it away, how much conversion rate do I lose? If I add a threshold, what’s the tradeoff between my lowered conversion rate and my increased AOV if I change around with the rate?
That one people play with, list price, and then from there it’s like, “All right, let me get into some of these offers,” be it subscribe and save discount, or an upsell and a cross-sell, and you kind of find the ranges on each of these variables, and that’s when you’ve kind of limited your set of options. You can start playing around with multiple variants at once. So, all right, am I better off having a higher price and a steeper subscription discount or a lower one-time purchase price with a smaller subscribe and save discount?
You get into some cannibalization and some metrics that are a lot harder to measure there, so that’s kind of the end of the road, when we’ve narrowed things in and can start fine tuning interaction effects, basically.
Kurt Elster: It’s the interaction effects that really complicate things because it’s you’re looking at like you’re taking a magnifying glass to one small individual step that’s part of a larger process that depending on the person, on the site, could be two minutes. Could be two weeks. And it’s really tough, and so you’re really working with like a lot of averages here, and then trying to… There’s a balance here, and so it sounds like the order that you go in is, “All right, let’s dial in the range.” Let’s figure out the range of where the product price should be. And you’re saying list price, like retail price, the normal price. And then figure out, “All right, let’s dial in our shipping rate.” Because that has a… I mean, largely shipping is really just a cost center, but it does have an impact on conversion rate.
What we’ve noticed is people’s resistance to paying for shipping is slipping. It’s going away. And so, that’s a-
Drew Marconi: Totally.
Kurt Elster: And so, that’s another optimization opportunity. And then third, the final one, is like, “Okay, once you have those two basics, those are the constants in our system here, then we’re gonna dial in our offers.” And the offers, what’s interesting about that is when we work with clients, they have never tested the previous two options. They always jump straight to testing the offer. And certainly, you could do it, but it’s just interesting to hear that you’re like, “All right, that’s the last part that one would test.”
Drew Marconi: Also, the approach to testing offers is just based on revenue. Hey, I reduced the price. Did my conversion rate go up? Did my top line go up? Which to me is like, “Well, that’s not the right way to think about it.” Did this improve your margins or not? You put out an offer. How many incremental folks bought that? That’s gonna get you some lift in revenue, more orders, you’re gonna make more margin from those orders, but on each order with a discount you’ve given away some margin. So, how do those net out? It’s I think oftentimes like it caters to some vanity top line metrics and we just firmly believe anything discount related should be oriented towards improving the bottom line.
It could be, “Hey, I brought in more users and they’re gonna pay me back over the course of the next couple years.” But yeah, that’s the last step for us.
Kurt Elster: Who is a candidate to be doing split testing? At what stage of the business do you say, “All right, now is the time to start split testing,” versus saying, “Hey, it’s too early. Don’t waste your time.”
Drew Marconi: It’s somewhere around one and a half, $2 million of revenue for year is our rule of thumb. So, it’s a brand that has some product-market fit. You’ve proven that customers will buy this, and you can find them on advertising channels. And more importantly, you have enough traffic where you can run a test and get signal in maximum six weeks. Running a test for longer than that, you’re just gonna confuse people. You should be working on the brand, working on growth, figuring out what messages hook people. And at that early stage, you should be taking big swings. You should be trying 25, 50, or even stronger differences between your groups. That’s gonna help you get signal faster, and you just have a lot less information because you’ve operated with less customers.
So, that’s like the starting point. I find people who can really optimize are then in the maybe $5 to $15 million a year range, so there is product-market fit, you’ve got a repeatable structure, but you’re trying to figure out like the economic engine. How much, what’s my range of what I pay for a customer? What do my first orders look like? I’ve now got some data on retention. That’s where you can kind of go collection by collection and try some more minute changes and set yourself up for that next stage of scale and give yourself the unit economics to do that responsibly.
Kurt Elster: So, where do people go wrong with setting prices? And my suspicion is they just guess once and then kind of stick with it.
Drew Marconi: So, I’ll tell you we’ve done probably 300 interviews at this point with people who run pricing at eCom on Shopify stores and ask, “How do you set your prices?” This is not an exaggerated stat. 80% of the answers someone gives the finger in the wind motion. Usually what it is is like, “Well, we looked at competitor prices and have that in a spreadsheet. We looked at our COGS and our gross margin targets based off some benchmarks. We then,” this is a bonus step for the top 50%, “we built a matrix in Excel that shows us what possible outcomes are based off conversion rates and at different price points.” And then they had a long, painful process for a month or two of debate and they ended up going with the HIPPO, which stands for highest paid person’s opinion. That was decided. They kept an eye on the data for a week to make sure nothing fell off a cliff and then they have not revisited it in one to two years because it was such a painful process, no one was happy at the end of it, and no one wants to do it again.
So, that’s a pretty… I don’t know, typical process for folks. I think to your question of what do people get wrong there, one is you’re not iterating. The market changes. Even if you got it right two years ago, your customers have changed, your competitors have changed, inflation rate has changed, your COGS have changed. You need to be moving more quickly than that.
Two, you don’t have great data. You tracked it for a week afterwards. You’re trying to compare versus the past. It’s difficult, so maybe there was a better option even if yours was good enough. And then third I think is this local optimization problem. You kind of start with that price as an anchor and then you have people optimizing shipping, and discounts, and the cross sells, and all of that stuff happens with price as a fixed point instead of thinking of that as part of the broader problem.
Kurt Elster: I asked about split testing pricing. I said, “Who’s doing it? Should you do it?” Just an open-ended question about it because I was curious about it. I had run split tests on shipping. I had not attempted this in any reasonable fashion on products. And it’s kind of interesting. Some of the feedback I got was people who thought it was illegal in some way and it doesn’t feel like that… All right, so I’m not a lawyer, and it does not feel like testing pricing should in some way be illegal. What is your opinion here? Also not a lawyer, but significantly more experience here.
Drew Marconi: Also obligatory not a lawyer disclaimer. So, yeah, there are a lot of misconceptions. I think we all learned in high school econ the term price discrimination and discrimination is a loaded term, and that leads people to think it’s objectively a bad thing or illegal, and it’s not. The bright line here that we don’t cross, and we don’t think people should cross is personalizing list prices based off protected classes. So, if I’m changing the price by micro zip codes or changing it for an iPhone user versus an Android user, or doing that, it will probably correlate with discriminating based on race, gender, maybe religion. That’s where you don’t want to be.
For us, we do two things differently, or two things we try to keep people on track of. One is randomize your tests. You know, you can segment on new traffic, or returning traffic, or you can segment to particular campaigns, but it’s gonna be a random assignment after that point. And two, you are testing to reach a conclusion point. You’re not testing to give your iPhone folks who have the new device a higher price than your iPhone folks who have an old device. You’re testing it to make your business better, and drive to conclusions, and there’s iterations along the way, but that’s like how we think about it.
Discounts, and this is just a funny piece about our legal system, completely different game. You can personalize discounts, and offers, and that’s a very standard practice, so there’s a lot of interesting stuff to do there. But list price, we really try to stay cognizant of those two guidelines.
Kurt Elster: So, the list price is… The list price has a protected status in a way and the legal risk is unintentionally, or intentionally of course would be bad, but unintentionally discriminating against a group of people because you use some profiling based on location or device. The device one is really interesting. And get yourself in trouble that way. That’s the thing to avoid. So, use randomized samples and different segmentation that doesn’t discriminate in the same way, like new versus returning is not going to associate to race, sex, religion.
Drew Marconi: Yeah. Yeah. And it’s like keep it random. It’s very… There’s very little record of this ever happening, and retail stores have been pricing differently in zip codes for years and effectively running tests store by store, so I think a lot of the fear around it is overblown, and that’s a lot of what we do is like educate folks on, “Hey, how do you test your prices? Here’s why it’s okay. Here’s the huge benefit you can get from it. You’ve optimized every single aspect of your funnel and you’ve never touched one of the biggest factors in the whole thing, which is price.”
Kurt Elster: I want to go back to price elasticity. I have an MBA. I studied business. And econ 101 you start learning about price elasticity. For the layperson, give me the basic version of price elasticity, and then I want to know what is the typical range on a price before you see it affect conversion rate?
Drew Marconi: Yeah, so price elasticity is a measurement of how strong your customers react to a change in price. So, let’s say we have a product, it’s $100. We change the price by 10%. We increase it. That product is considered elastic. It is highly price elastic if we see more than a 10% change in demand. So, I increase the price 10%, 20% of conversion goes away. That is I’m making less revenue at the end of the day in that tradeoff. The product is inelastic if I increase the price 10% and I only lose 5% of conversion. When I multiply now my price times quantity, I’m making more revenue than in the original case.
And so, it helps you understand how much pricing power you have. If your product is very elastic, lowering prices could be helpful, because you lower the price 5%, you get 25% more conversion. That’s great. If your product is inelastic, you’re able to increase the price, increase your overall revenue.
Kurt Elster: A good working example here, a Snickers bar. Price is elastic. If I told you a Snickers bar is normally $2, it is now $6, significantly fewer Snickers bars will be sold. But if I told you gas used to be $3 a gallon, now it’s $6 a gallon… Well, you really don’t have a choice. You still have to drive your car.
Drew Marconi: Exactly.
Kurt Elster: So, in this case, gasoline, inelastic.
Drew Marconi: Exactly. Now, the one big caveat I’d put on this as people think about it for their businesses, profit is different than revenue. When should I raise prices? When should I decrease prices? Is elasticity more than one or less than one? That strictly tells you if your revenue will be higher or lower at the end of the day. But as I mentioned earlier, that does not always correlate with whether your profit is higher or lower at the end of the day. That 10% price increase, maybe you lost 15% of conversion. But if your unit margin, if the margin that you’re pulling in on each item, like let’s say you have 10% margin, so on each item you went from making 10 bucks to 20 bucks, you’re actually gonna be making more profit even though you sold fewer units and have less revenue.
I wish I had a whiteboard for this, but there is like-
Kurt Elster: Yeah. You need the supply and demand chart.
Drew Marconi: Yeah. And the other thing about elasticity is it changes over time. That Snickers bar, it may… Maybe going from $2 to $2.25 has no impact. Going from $2.25 to $2.75 has no impact. But when you cross $3, all of a sudden demand falls off a cliff because people are like, “I’ll just buy a CLIF Bar.” So, I’ll circle back to your original question of like what’s the range we usually see. It is very different brand to brand.
What we usually recommend people do is like start on both sides. Try a test, run 10% higher, 10% lower, let’s see what happens. We’ve had cases where the 10% reduction in price yields 35% increase in conversion. We’ve had cases where doing a 15% price increase, no statistically significant change in conversion rate. So, it really depends on your customers and where you are in the market, and we tell people like, “Hey, check your ego at the door. Try both sides and see what this curve looks like.” Because it’s not a straight line relationship where increasing five and decreasing five is gonna have the same impact.
Kurt Elster: All right. I want… Well, you’re talking about when running these tests, people, even if they have tested them, it’s like maybe you did it two years ago and things have changed. How much does seasonality affect things? Like in Q4, I would assume that we are looking for deals but also more likely to open our wallets when we encounter any deal, versus Q1, now we have the hangover of Q4. That credit card bill has come home. What impact does seasonality have, if any?
Drew Marconi: I mean, this is where as a young company who’s been doing this for a year, we’re still learning that. I can share from ride sharing it has a massive impact. On paycheck days, we would see decreased price elasticity for the next following few days, so 14th and 20th of the month. Holiday season for ride sharing, much lower price elasticity. People just have to go to their office party, and they have to go to this, and they’re drinking more, and the alternatives are less valid.
So, we have anecdotally seen it in eCommerce. We saw a lot less price… Higher prices were winning a lot more last let’s call it May or June post-stimulus checks. Anecdotally, we’re now seeing lower prices put up a fight in a lot more tests. So, we don’t have a clean sample where we’ve tested the same product each month over the course of a year, but it’s real and I think for us we’re like, “Hey, you should run tests and build up this knowledge for yourself so that you can take advantage of when people are willing to buy.”
Kurt Elster: Yeah. It’s interesting to consider like when pandemic stimulus checks hit versus now, where the headlines are screaming, “Inflation! And there’s a recession coming!” I just got back from Disney World. Tell those people there’s a recession. I have never seen that park so crowded. Obviously, this is a myopic view of it, but I was just trying to view 10% wholesale inflation versus the most crowded, expensive theme park I’ve ever been in, right?
But these things take time, and they change over time, and I think there is a… If you can have the traffic, so you have the sample size to support it, there’s a lot of advantage here to being aware of this.
Drew Marconi: Yeah. And we’ve had people do stuff like let me keep 5% of traffic exploring a lower or higher price point. And I can pick up on those changes as they happen. I don’t need to treat it as testing is something I do discreetly three times a year or four times a year.
Kurt Elster: I want to know about what trends you’re seeing. There were a lot of changes last year. iOS 14, iOS 14.5, so the Facebook privacy change that disrupted the efficacy of our Facebook ads. Supply chain disruptions, which sometimes are supply chain disruptions and sometimes are a euphemism for climate change enabled things, especially if you’re a food product, like Sriracha just had to suspend production. Oh my gosh. And what are some others? Well, and then-
Drew Marconi: Inflation right now.
Kurt Elster: People’s concerns about inflation versus stimulus checks in the past. There’s a lot going on here. What are some of the trends you’re seeing? Let’s really… Let’s lean on that economics background here.
Drew Marconi: Yeah. I was more of a micro econ guy, less macro, but I’ll share my take. One consistent trend we’ve seen is people being willing to explore charging for shipping. I think for a long time there was the dogma of we need to compete against Amazon and have free shipping. We’ve seen a lot of people open to exploring thresholds, open to exploring charging for every order, and potentially charging 10 bucks an order, like significant amounts. That’s been brought on by I think each of the last couple holiday seasons, UPS and the other folks being like, “We’re just gonna keep this surcharge in there.”
And the results have been positive. People have been generally getting good returns from that. We don’t see a lot of consistent patterns across stores, but that is one that is pretty consistent, like playing around with your thresholds, starting to charge some orders for shipping, differentiating between different types of orders, people are finding extra margin there and I think it’s a spot where there’s opportunity to be more dynamic over the course of the next couple years as you figure out for this order how much is it going to cost to ship.
A second trend, and I think this is not a new one, and people have been doing this for as long as eCommerce has been around, but I think there’s some renewed urgency around growing AOV and using things like volume discounts, or bundling discounts, or upsells to encourage people to do that. So hey, buy four items, get 10% off. Buy 10 items, get 30% off your next order. And I think the reason that has become popular, this is me just theorizing, there’s been this broad pivot to margins, like we need to focus on bottom line. We can’t just put money into Facebook and get money out and everything’s great. We have to focus on the profitability.
People have also become more cognizant of their shipping costs. What’s interesting about shipping costs is they don’t scale with the size of the order. There’s a pretty heavy fixed component. I can sell you a $50 cart or a $100 cart. It’s not gonna cost me twice as much to ship. So, people have realized, “Oh, if I grow my order value, I can spread that shipping cost over more products. I’m happy to give a discount for someone to add more items to their cart because I’m gonna make more profit at the end of the day.”
And I think that we’ve just seen people playing around with different ways of doing that, trying to make it super easy for the customer to add things to their cart, and that’s something that we’re working on helping folks test, like how do you dial in those offers, make them profitable, make them appealing to the customer? So, those are the two big ones I’ve seen.
Kurt Elster: I absolutely agree with you. You’re right. In the past, it was just accepted that the standard is free shipping, and we accept this because Amazon really forced it on us when they said everything over $25 ships free or get Amazon Prime. But you know, the reality set in, everyone… As consumers got more sophisticated… Oh, I hate that word. As we as people got more sophisticated buying online, everybody knew hey, free shipping is baked into the price I’m paying for it. And in Amazon’s case, straight up they’re like “Hey, you’re gonna pay for it up front with an annual fee.” So, we all know it’s not really free. And as a result, now I can start charging for shipping.
And I think it’s especially true if you are able to communicate like brand story and show, “Hey, there is a real person behind this brand. There is one individual or a family. A team. There are real people here and this is a real small business.” And I think that makes people definitely more willing to pay for shipping.
Drew Marconi: And I think there’s just more awareness of, “Oh, I didn’t realize how much shipping costs.” Supply chain… When was the last time supply chain was a national news story? That ship getting stuck in the canal was the most marketable expression of, “Oh, I understand why eCommerce companies are charging me for shipping. These things have to move around the world.”
Kurt Elster: You could see it.
Drew Marconi: Yeah.
Kurt Elster: It was so visual.
Drew Marconi: I think there’s a bit more consumer empathy, but maybe I’m being generous, but I hope that’s the case.
Kurt Elster: I think more people are aware, but enough people still are unaware.
Drew Marconi: Yep.
Kurt Elster: So, what have I missed here? What do people get wrong? What do you want them to do? What are you disappointed I didn’t ask?
Drew Marconi: Oh, good question. I think like if I leave people with something it’s that testing is less risky than you think. It’s not illegal. It’s good business practice. It’s also way likely… People worry about customers getting different experiences, like you fix them into a group during the test and… I don’t know, we’ve had 50 million shoppers go through tests and have had fewer than five issues. You have your customer experience team on board with the test. They’re capable of turning those experiences if someone reaches out delightful. You cross your Ts and dot your Is to make sure you’re doing your integration correctly and having the tests go. There’s pretty low risk, especially for the upside you can gain.
I also think there’s ways to get started on being better at pricing without having to go buy IntelliGems or spend a bunch of time setting up split tests. You can try things. Comparing data before and after, it’s not perfect. There’s a lot of reasons it’s not perfect. But it’s better than not doing anything and just assuming that your price is good. Using discounts as a way to test price elasticity. Not perfect, you’re kind of not exactly measuring price, but again, it’s better than doing nothing.
So, I would just encourage people to spend an hour thinking about your price experience for customers. What can I try? What am I open to experimenting with here? Because addressing price once every year, once every two years is just not gonna work anymore. We’ve seen all these changes in the industry in the last 14 months and I think that’s like hammered it home for people, but it’s a living, breathing subject that should be as big a focus as other merchandising topics.
Kurt Elster: It is so fundamental, like what is the price of this item? What is the ideal point that balances availability to people, where subjectively enough… The right number of people are willing to buy. This has hit the right value for them. Because really, pricing on an individual basis is a very emotional decision and that’s a hard thing to figure out. You can’t rationalize your way through other people’s emotional decisions, and I think that’s the importance and the value of this testing, right?
Drew Marconi: Yeah.
Kurt Elster: Versus you can look at competitors and all this stuff. Ultimately, it is an entirely irrational decision. And so, I think the only way you get it is through these random tests, is the only way you’re gonna get an accurate feel for it. But the cost is you have to put in the effort. You need tools to do it. And you need a significant amount of traffic for this to be statistically significant. Is this stat sig? Yes. Hopefully, it is.
Drew Marconi: I loved that line from the last podcast.
Kurt Elster: Is this stat sig?
Drew Marconi: Yeah. And it’s emotional for the brand owner, too, which I don’t want to skip over.
Kurt Elster: Yes. That’s true. I shouldn’t discount that.
Drew Marconi: It’s scary. It’s scary to change prices and there will be people who no longer buy when you raise the prices, and it’s painful. It’s painful to lose any customer that you fought for. But you have to be able to zoom out and see, “Well, the 99 other folks are now paying me more and this is a better place to be.”
Kurt Elster: So, tell me, IntelliGems. Do we have a free trial for this thing? Can I get started using it? What do I gotta do here? I want to jump into testing. You have a tool for it. Pitch me.
Drew Marconi: Yeah, so IntelliGems.io. I-N-T-E-L-L-I-G-E-M-S, how it sounds. You can find us there. Our tool, we basically power these split tests, so you tell us what you want to run, be it different shipping rates, discounts, prices, set up your groups up to five, split your traffic, you can segment it, start the test, and then we give you data within the hour of how conversion rate, revenue, and profit are changing between the three groups or four groups, however many you have.
We really focus on quality of the integration to make sure that it is a completely native experience. If you click to book a demo on your site, say that you found us through Kurt, you’re gonna get a call with me. We can chat just about your strategy. You don’t need to buy the product and happy to share some tips and what we’re seeing. And then also happy to do the integration for you free of cost if you say that you came from Kurt. So, always happy to chat about these things.
Kurt Elster: Amazing. Drew, thank you so much. I have to go test some pricing.
Bill & Ted Sound Board Clip: Excellent!