Article by: MaryEllen | Thursday, January 10, 2013

Today’s audio diary is called Price Test Follow Through.

And I want to talk about this because it’s really important. We stressed that you should price test in your business all the time, so test different prices depending on what the market is telling you. And what happens very often is people only look at the initial response, not where they stand at the end of the refund policy.

So today I want to give you a really good example. So say right now, you have a course that you’re selling for $59. And you want to price test $79. And it’s a good thing to price test. But again, stay with me. So you send out a A-B split, meaning the same amount of offers going out offering $59 that’s going out that are offering $79. And just for the sake of easy Math, let’s say we get a hundred responses on each. And we think, “Oh my goodness there’s absolutely no difference between the response rate when offering $79, meaning I’m actually making (if I have a hundred responses on each) two thousand dollars more.

But that is your gross number. But see, unfortunately a lot of people stop right here. They don’t look where they stand at the end of the refund period.

So now, let’s assume it’s the end of the refund period, regardless if that’s a 30-day, 60-day or 90-day refund. But all of a sudden we look and we think that our $79 price point is the big winner. But we look, and we have a fifty percent refund rate. Fifty percent of the people asked for their money back. Then we look at the $59 price point, and we have a twenty percent refund rate.

So now again, let’s do the Math. You know, we started out really really good with the $79, we had $7,900, but a fifty percent wanted their money back, our net number is $3,950. Whereas we go over to our $59 price point where our gross number was $5,900 but only twenty percent wanted their money back, so our net number is $4,720.

So do you see what I’m saying, in reality that $59 price point won the test. But what happens is people don’t follow through. They don’t look at where they stand at the end of the refund policy, and that is what you must do in order to have a statistically valid price test.

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