Two Pricing Schemes – How To Effectively Increase Revenue With VMO

A change in price, particularly an increase, has two effects: an increase in overall profit or the loss of both potential and current customers. And as such, businesses must take great care in making substantial changes. Businesses cannot merely make a sudden increase in price without measuring its effect. This would be like putting all of one’s eggs in one basket and simply hoping for the best.

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A/B or split testing is not just a way to test which website configuration is best for conversion. It is also a good way to gauge how your market responds to a change in pricing scheme. And this is exactly what Server Density did using Visual Website Optimizer.

 

Server Density is a business which specializes in hosted server and website monitoring service. Through the use of internal server metrics, Server Density can help a business figure out why its website is down. It counts Electronic Arts, Trend Micro and Task Rabbit among its top clients.

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The people behind Server Density wanted to reconfigure their pricing scheme. But instead of a straightforward price adjustment, they wanted to find the optimal price scheme which will increase revenue. Instead of shooting blindly in the dark, Server Density followed the scientific method. This entailed coming up with a question, doing background research, formulating a hypothesis, calculating the required number of website visitors required for testing, testing of the hypothesis, and analysis.

 

For their A/B test, Server Density had two hypotheses: an increase in price will reduce free signups and an increase in price will translate to greater profits despite of loss of free signups. The test also had two goals: for users to sign up and then to upgrade to a paid account.

 

In their original pricing scheme, the price of the service depended on the number of services and websites the client wanted to be monitored by Server Density. Though many customers appreciated the company’s service, many felt that there is so much to want in terms of pricing. Server Density also wanted to factor in Average Order Value or AOV which is simply computed by dividing revenue over the number of orders.

 

In the test, Server Density came up with three packages, each with a set number of servers and websites that a client can have monitored. So instead of pricing individually, customers have three plans to choose from.

And the results?

In terms of the number of signups, the test showed that the original configuration was more effective in terms of conversion rates for free signups. In terms of upgrades, the difference was marginal. But the real surprise here is that the new package was the better one in terms of AOV. In the final analysis, this meant that what Server Density lost in free sign ups, it gained in revenue — 114%, to be exact.

Results

In business, leave nothing to guesswork. Owners should approach everything in an objective manner, using the best tools available — like VWO. Get Visual Website Optimizer here!

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