One of the big choices you make building a brand is settling on the right price for your product. It’s not just a question for new sellers, as existing brands often question their pricing. In this blog we look at the data from our extensive pricing tests to see what might happen to your sales when you change your price, and we look at your options so you can settle on price points knowing you’re getting the best value from the work you put in building your brand.
Pic Jeff Sheldon c/o Unsplash
What is the optimum price to sell t-shirts online? We have asked ourselves this exact question and put a lot of time into working out the answer. Like us, you might have started out thinking that cheaper is better. After all, the lower the price, the more people sell right? What we did next is critical: We tested it. We have studied variations in price and sales on huge volumes of sales.
We use A:B split tests on stores that we control to learn things. The computer creates variations and measures their effect. And we can draw scientific conclusions from the data.
First we split tested price changes and how they affected sales. This meant varying the prices down, and up, and monitoring how many products were sold.
- Starting at £25 we saw an increase in sales as the price dropped, which made us feel like we should lower the price.
- Interestingly though, the sales flatlined below £19, and below £15 they actually went down.
- Below £15, sales went down, not up. We think that is because people believe that the product will be low quality.
When we increased the price, we saw an almost exponential decrease in sales and whilst many high end brands regularly sell t-shirts for £50 and up, we didn’t go past £35, as the numbers got pretty bad, along with the negativity of the comments from new customers.
So on the surface, a lower price is better. But there’s more to it.
The difference between profit and sales
The reality of business is that it’s not all about the number of transactions. If you priced a car at a penny, you will sell loads. But it would not be a good business – some people refer to this in business as “being a busy fool” – what we are aiming to achieve is to optimise the relationship between transactions and proceeds, to make the most money.
Profits in any business are only a small percentage of the transaction. So a 10% reduction in price, or discount, may wipe 50% off the profit, whilst a 10% increase in price might double a fine margin.
Our next step was to look at the tests and correlated the volume with the average profitability per item across all of our data. In this round of testing we found, for example, that reducing the price from £20 to £19 boosts sales more than the £1 reduction in profit. Dropping to £18 increased sales only slightly but took a bit percentage off the profits.
We have encoded the results of this testing into our recommended pricing so that when you adjust your pricing, you can see what our data shows is the optimum price based on consumer testing. And we update it as we learn more.
If you are reading this and still feel like you need to make your products cheaper, you can do that. Our recommendation is to look at value a different way first: Rather than take away from price by going cheaper – you might want to look at how you can add value to your product instead. For example if you invest time in a quality store design, make your store look great with amazing photography and invest a little more in creating quality designs, your customers will not question whether they are getting value for money. In online stores, customers are looking for something unique, funny or niche. They will pay more if the product is relevant, they believe in the cause or if the design is unbelievably cool or if it really tickles them. If your products are none of these, no price, however low, will get the volume of sales you would like.
Lastly it is worth talking about why thoughts turn to price in the first place. It’s often when sales are not yet as incredible as you thought they might be. It’s a really great idea to challenge why your products might not be selling as frequently as you like.
Lowering the price is just the first idea many think of – but it’s one of hundreds of options, most of which are better.
People buy the best products at the best price that they’re aware of. After all, people cannot buy a product that they do not know exists. Our recommendation if you’re looking for where the big growth opportunities lie for your brand? Ramp up your promotion, shout from the rooftops and look at read up on increasing awareness and engagement on the blog.
Or it might be in the details. One of the most underappreciated things online is the product description – people actually read this stuff and a captivating product description that tells a story about the product and engages the reader is as powerful as an incredible photoshoot or snazzy site (both of which come standard with Teemill). It might be that rather than lowering the price to make your product cheaper, a better path could be to make your products look and feel like they’re worth more and work on better descriptions that really sell the features and benefits of the product. Adding value and awareness, rather than taking away value from the price is a better long term route to success.