Determining the optimal price point for a produce or service is one of the biggest challenges for any SaaS company. It’s never easy to place an objective dollar figure on something that carries so much subjective value. In many instances, the value the market places on a SaaS product or service doesn’t always equal the development costs. Often, the most valuable offering was the simplest to develop. As a result, it’s incredibly easy to under or over value a service when setting the price. And that’s not even taking into account buyer psychology.
While price is not the only factor that goes into a customer’s decision, it is one of the most critical. And SaaS companies can’t discount buyer psychology when setting prices, especially if the product or service is new or has few comparisons. Will customers think the service is overpriced? Will they not convert because it’s under priced?
This is especially true when pricing an upsell. With an upsell, you have a customer who has already agreed to purchase your product. Upsells can be offered during point of purchase on the checkout page, or after the purchase is complete on a thank you page or order confirmation email.
Will your upsell pitch pique enough interest to increase your average order value, or will it have the opposite effect and reduce conversions and potentially damage the value of your products, services and brand over time? Tweet
A/B testing is the powerful solution to answer these questions. It’s a valuable tool for marketers, providing valuable metrics – and insight into buyer psychology — that will take the guesswork out of your pricing strategy.
What is A/B Testing?
A/B testing allows you to try out two different strategies and/or approaches and obtain firm metrics on what works best. Tweet For example, you can use testing to determine the discount threshold for converting an upsell to the next level of product or service.
In this test, Group A would receive a premium upsell offer with one level of discount and Group B a similar offer with a higher or lower discount. By comparing which offer converted the most upsells, you should have a pretty good idea of the best price or discount for your premium upsell offer.
Once you’re satisfied with the pricing, you can continue to use A/B testing to optimize the offer to increase conversions further. For example, you could use the new Avangate A/B Testing tool to test the placement of the upsell offer in the cart, to determine whether an overlay or interstitial converts better.
Why It’s Effective
Is A/B testing effective? Consider this: Google reportedly obtained metrics by running more than 7,000 A/B tests in just one year. Here are three of our top advantages of this marketing tool.
- Identify barriers. It’s often the smallest details that make the biggest difference. You may find that what’s failing in your upsell pricing strategy isn’t the pricing, but how it is presented. Terminology, color, field name, and layout are all small factors that can negatively affect a customer’s decision to buy. Conversely, you may find the barrier is a big detail. Either way, A/B testing will help you identify what that barrier is so you can overcome it.
- Get customized research. Case studies and research are great. We often refer to them in our blog. However, best practices are dynamic. They are always changing with technology, user trends, and endless other factors. Additionally, your product is unique and your customers are, too. Hundreds of surveys or SaaS research may not reveal exactly what you need to do with your upsell pricing strategy. Just because changing “button terminology” drastically increased upsell rates for one company, doesn’t mean that you will see the same results. A/B testing will give you the hard-and-fast truth on which you can make informed, strategic decisions.
For example, after A/B testing the effectiveness of the one-click upsell on its thank you page, Avangate customer Bitdefender experienced an 18% increase in its upsell attach rate, and an increase in average order value of 12%. This is generally inline with customers on the Avangate platform who average a 48% attach rate for upsells.
- Use your time wisely. Trying out different upsell strategies and waiting for the results takes a lot of time, and a lot of trial and error. Get answers quicker and implement changes that will positively impact your bottom line right away instead of losing upsell opportunities while you try out ineffective strategies.
An effective upsell strategy is critical to the growth and development of any SaaS company. Tweet Balancing between new customers, renewals, and upsell strategies doesn’t have to be so challenging.
Avangate powers modern Digital Commerce, solving the complexity of online commerce, subscription billing, and global payments for Software, SaaS and Online Services companies. Backed by a proven cloud platform, unmatched expertise and a depth of digital commerce services, Avangate helps digital business leaders drive the fastest path to revenue, maximize the value of every customer, and expand global reach. Contact us for more information about how our digital commerce services can help you grow your business.