The Importance Of Pricing Optimization

Posted by Ad Hustler | Posted in Doing Business | Posted on 21-07-2009

As affiliates we rarely have the opportunity to set pricing for the products we sell.  However, many affiliates have other businesses such as ecommerce sites or informational products.  One type of optimization I have made a lot of money with over time is pricing optimization, particularly using bulk pricing discounts.

Let’s say you are at a concert of your favorite band.  You go over to the merchandise area and see 2 shirts you really like.  They are priced at $25 per shirt.  Most people are going to decide on one shirt or the other.  If they buy, the merchandise booth will make $25.

Let’s re-set up the scenario.

Let’s say you are at a concert of your favorite band.  You go over to the merchandise area and see 2 shirts you really like.  There is a sign that says “All T-Shirts – 2 For $40.”  The average consumer will now think differently.  They may think, “I like 2 shirts and it’s only $40 bucks for 2 of them, I’ll get both!” or they may ask “How much is 1?”  Either way, a much larger percentage of the consumers are going to end up dropping $40 at this T-Shirt booth then they would have with the $25 per shirt pricing.  Trust me, i’ve tested this.

One little tweak in pricing can change something from profitable to super profitable.

The obvious question is how does this help online?

If you own a product and you control the pricing of it, I suggest trying 2 types of pricing structures:

  • 2 For $xx
  • Buy 2 Get 1 Free

These pricing structures work if product you are selling is a high margin/low cost item.

This one tweak can change your profit margins dramatically.  Have you tried this?

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Comments

  1. cool pricing scheme..its look like we have some sales discount by using those 2 pricing scheme and everybody love discount :)

  2. Ya, the upsell inherent in pricing can boost profits because the customer acquisition cost is a constant.

    On another note, there’s a bit of consumer psychology involved when you do a promo like:
    1) Buy 2, get 1 free
    2) Get 50% off when you buy 2 or more
    3) Buy 1, get 1 free

    And if you split/MVT the options, you can see some clear winners in the bunch.

  3. @Andrew – It’s such an easy way to boost profits that it’s amazing so few play with pricing.

  4. @AdHustler/Brandon – ok, i figured out the secret to your success.
    You don’t sleep.

  5. @Andrew – I’m a hard worker :) – It’s something I take pride in.

  6. Excellent Post very useful for so many people around me likes this very much
    thanks :)

  7. flashing back to my economics professor giving this example of how many t-shirts would you buy vs ice cream cones.

  8. @Pingo

    Why would anyone buy t-shirts?

    Ice-cream cones FTW!

  9. I agree. Discount is fast idea works great & gets better result s than waiting to do individual sales.
    powerful indeed!

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