Price Test

Why this matters for your decision

In a pricing decision, what counts is not which price is considered fair, but at which price enough people choose the offer and the margin holds. This trade-off can only be made if demand is observed for each price.

Surveys provide valuable indications here, but on average they overestimate willingness to pay (Schmidt & Bijmolt 2020). A behavioural price test starts where the survey stops: it compares the few prices that are seriously up for choice.

How a price test is structured

The offer stays identical in all variants: product, benefits, page, images, copy, target group and channel. Only the price differs. Each person sees exactly one variant, so no previously seen price influences the response to the next.

At Horizon, the respective price already appears in the ad copy and on the offer page, so that the response applies to that price from the first contact. The price is tied to a clearly named benefit, and the price information is easy to read. Brand search terms do not belong in the keyword set, because people already searching for the brand bring a higher willingness to pay.

Purchase intent is measured per price. Up to six prices can be compared in parallel, and from question to data analysis takes around four weeks. Nothing is sold.

Example

An insurer is planning a new home contents tariff and is undecided between €4.90, €5.90 and €6.90 per month. In the behavioural test, measured sign-up intent at €4.90 and €5.90 is almost level; at €6.90 it drops by around a third.

Offsetting the contribution margin per variant, €5.90 is the more profitable variant compared with €4.90. Whether €6.90 makes sense despite lower demand depends on whether volume or margin matters more, and that trade-off is for the company to make.

How it differs

A price survey such as Van Westendorp or Gabor-Granger asks for assessments. A price A/B test in your own shop measures real purchases, but requires that the product is already being sold and that different prices may be shown live. A behavioural test before market entry measures purchase intent for offers that do not yet exist or whose new price does not yet apply.

Conjoint analysis estimates how much individual attributes are worth. A price test compares finished offers at different prices.

Limitations

A price test compares only the prices that are tested. It says nothing about points in between or outside, and it requires the prices to be far enough apart for a difference to be measurable.

A price comparison on an offer page does not fit if the decision is made on the shelf next to competitors, runs through a comparison portal, or the item is so inexpensive that nobody buys it individually online. And if a product is already on the market with reliable sales data, that data is often the better source.