When Should You Reveal Price?

good afternoon everyone that was John tacket from our group I've never had John introduce me before and uh generally it's Daniel Bernstein that was his uh his first run at it thank you thank you John in the meantime I see some questions coming in before we even started one of them is from Robert who says do you allow guesses at sort of when to reveal price yes guess away right now tell me when you think we should reveal price this is sort of a fascinating subject I've got a lot of content to in a very short period of time the title of course is when should you reveal price and uh there are three critical principles that I'd like to teach you however I want to point out that this topic has come up over and over again wherever I'm at wherever I'm lecturing in the world I'm supposed to be in London today I was unable to make it and I sent someone else John pal who's speaking on my behalf at the big internet conference there put on by ubm I was in New York last week and I was asked in a meeting with the CEO and the CEO and a group of top Executives and I was sort of uh talking to them about value proposition and testing and they said how do we conduct price tests the day before I was teaching inside Verizon and I was asked the same question by senior Executives there and uh just shortly before that in New York City with the New York Times I was also doing the same having a meeting with senior leaders and the same question was asked how do we test pricing this uh subject of pricing when to reveal it how do you test it has become really important and it's remained important for many years as we all try to drill down on uh sort of the best practice in this area I'm going to be talking about it today and it's being made possible by monetate now I don't like the whole notion of sponsorships and simply giving people some sort of uh a mention on the back of a magazine or a slide I want you to understand that the way we're able to give you millions of dollars of research at no cost is because of our research partners and and groups like monetate who've made this Clinic possible there's more than $20 million of free research at marketingexperiential answer Robert by the way in fact a very good answer and very close to what I would uh think you're going to see as things start to unfold here and uh this is the first case study test protocol 1645 it's for a major company that we all know one of the largest media companies in the world and uh we're trying to increase startups for a fantasy league and the question is which page will generate the most League startups take a look this is the original you're in fact you're looking at the control in the experiment this page emphasizes is the value proposition of the software itself now we wanted to test emphasizing different aspects of the value as well as uh deemphasizing the price this early in the thought sequence so you're going to note a treatment that addresses that in a particular way we limit the emphasis of the price in fact we shift the focus of the message from the app to the value of the free trial very important move in terms of the thought sequence in addition to that the price is there but it's very hard to see and it's not nearly as uh as prominent as on the control Now we move to a second treatment and in here we shift the focus of the copy and the image to emphasize the value of the company and price is completely gone so now we have a control and we have two treatments and we're doing what's called a radical redesign and we're doing something in our testing program called variable clusters and one of those clusters has to do with pricing and if you look at this slide I have now you can sort of see how the control presents the price on uh the web page prominently on treatment one you'll notice where it's sort of pink instead of red it is deemphasized and on treatment two you don't see it very strong until the second week of the free trial in treatment one we don't emphasize it strongly into the second week of the free trial but in the control it's emphasized on the web page at the beginning and it's emphasized again in the second week of the free trial I'd like the team here to guess which one of these which one of these treatments produce the highest uh return is it the control treatment one or treatment two let's call it c one or two and don't be surprised sometimes C wins I'm not trying to shift you in that direction but I see 2122 21111 111111 one some brave people put down C and then C again and then 2 two two the reason I'm I'm shifting these numbers C and one CCC 22211 it's interesting to sort of for you to hear the difference in response there are many top marketers on this gathered from all over the world I run into you wherever I'm traveling you come up to me and please continue to do so and you tell me that you log into these clinics and you and you watch these uh the replays I value the fact that you've learned so much but I want you to notice that there's a huge difference in opinion here I see three twos and then one C and then one and then one one one one one and then a two and then one one and then two and one one one no one's true sure and we need a methodology so that we don't have to guess but first of all let's look at the results behind me you'll see that the control produced a 5% conversion rate treatment one produced a 9.25% conversion rate treatment 2 produced a 9.85% conversion rate thus the treatment to won with a 97% increase in League starts now have to realize how remarkable that is that is a dramatic gain almost a full doubling in terms of the revenue Pipeline and that's occurring because we've made a shift in thinking and I want you to notice sort of the fact that treatment one with a deemphasized price at the first stage produced an increasing return but treatment to produced an even stronger return when we remove price alt together at that stage in the thought sequence now mind you the goal is not to trick anyone and in fact we want to be certain that they understand what the costs are but what we are trying to do is match that information to the right place in the sequence of thought it raises a question how should price be presented it's complex yet it is a vital aspect of the offer response process and often we're leaving significant revenue on the table because we have not tested and we have not optimized pricing what can we do about this well today we're going to walk through the three most important principles that a marketer might ought to know when presenting the price of an offer and so we'll begin with point one we'll move rapidly I have a clock in front of me it tells me right now that I have just a few minutes in order to present all of this content and I want to pack every single moment with value for you so let's begin with the first price does not equal cost price does not equal cost here's the first key principle it is essential that marketers do not confuse price with cost price may be the least part of the cost cost does not exist on the web page or in the product's price cost exist in the mind of the customer and many elements other than price can contribute to the total perceived or mental cost of the customer and in fact it's useful to sort of think of price as being one component with a series of other psychological variables you'll see the variable X and Y and Z it is the combination it is the aggregate of all of these which equals your total mental cost and you'll notice in this particular case we've zeroed in on three particular forms of cost in the mind of the prospect or the customer Fusion is the first X effort let effort represent Y and uh or let y represent effort and let Z represent fear in this particular case the reason those are floating variables is because often they have changed we are not presenting a heuristic so much here as illustrating a way to think about the total cost associated with an offer you often can get so concerned about price when it is not price that's keeping someone from purchasing it is total cost particularly total cost compared to total value often when you're sequencing the very right time the very right place to present price you haven't taken into account how much value you've put in the equity side of the mental Ledger before you start trying to withdraw on the cost side of the mental ledger so then let's uh let's see this in action here are other contributors to cost confusion the headline GoPro is dis earning what does it mean it's hard for me now to wait in and understand and that is in itself a cost competing information makes it confusing to know which piece which element to focus on there's effort here the difficulty in reading the white on black the layout itself presents multiple calls to action now there are two stages in cost sequencing and I I can't teach this this is sort of 2011 and today we're speaking at 101 one is the cost associated with understanding the offer because there are four cognitive states that you have to create in the mind of anyone interacting with your offer the first one is I understand it the second one is I believe it once those two have been created then the other two become I want it and finally I can't get it anywhere else when you've achieved those four cognitive conclusions you have brought your offer's value proposition into force and a force that has achieved appeal and exclusivity and Clarity and credibility the problem is the first part of cost occurs before they make the decision to purchase it's the cost associated with understanding the purchase and that's what you're seeing here and fear is this software simple or will it be difficult to understand to set up to deploy does it have all the functionality that I truly need to achieve my objectives all of these become a form of cost that is associated with just even beginning to understand whether or not to make the purchase and then once someone says I I I want this Pur purchase there are a new set of mental costs associated with that second stage so then the goal of the marketer is to minimize you can't eliminate you're going to ask for something you can't eliminate cost but to to minimize uh as much nonprice specific costing as possible Let's uh talk about that but and by the way this is all about friction anxiety the conversion sequence most of you understand C 4 n plus 3 V + 2 i - F - 2 a if if you don't then don't be intimidated it's heuristic that we've been teaching for probably 10 or 12 years here you can learn about it you can also learn about how to improve your own understanding of the value proposition and reduce the cost side in our in our uh landing page optimization course many of you have had that course if you have not taken it I've been asked to do this first time we've ever done it on a clinic it is a test for us but you can save 30% of the cost for the next seven days if you register for that particular particular course let's keep going principle two price can either be Price Plus or Price negative I'm getting questions about that discount code we'll give that to you tweet it to you or something for others I just need to keep teaching guys I don't want to hold on the slide price can be either p+ or P minus what are we talking about well it can be perceived as a positive not just as a negative there are situations when the way you reveal price will not seem like a negative now that's counterintuitive but if the price in itself is a positive surprise if the person is expecting a higher cost if the value is significant then price helps to stimulate a sort of positive expectation a stronger I want it Factor uh or at least the I wanted factor is not countered too heavily by the this will cost this much sort of factor so perceived positive and perceived negative are two ways to view how price is presented and I'd like to sort of give you an idea of that by looking at encyclopedia Botanica we optimized this page in Key Parts of its path some years ago and let's just look at the original treatment in fact this is the control and now I could talk a lot about the headline the way the images presented the text on the right hand side the three different calls to action we can all talk about that but in the short time that I have right now I'd rather just zero in on the original landing page and in particular the bottom of the page to get a sense of how it flows and then bring you to the costing page here is how price is presented marketing audience take a look at that and tell me what you might do to improve that performance you can see it right now the the cost they have pre-checked is an annual cost of $69.95 or you can choose the annual cost of $84.95 or you can choose the monthly cost of $1.95 does someone see a problem with this first of all we have options that are difficult for us to make meaning of it doesn't make sense that you have two annual costs $69.95 and 84.95 there must be some difference in one of those columns but who takes the time to read it and in addition to that you have to understand this was a free trial and bringing all that emphasis to the dollar amount in the midst of a free trial sends precisely the wrong message now when they came to us they brought us an optimized process they were very gracious we worked with an excellent team but they had already spent two years with several consultancies and the best marketing people optimizing this path they did not believe it was possible to exceed more than 20% we benchmarked performance improvements and the economic impact at 20% at 50% at 100% they literally stopped us at the number 50 and said this is impossible we don't want to create negative expect ations please we can't do more than 20% this site has been thoroughly optimized yet look at the way the price is being presented this price is being presented with customer with company logic as opposed to customer logic and so what's happening is people are looking at it but they they are seeing it through customer eyes and Through The Eyes of the customer it's very confusing Through The Eyes of uh of of uh the company it made perfect sense and it's when we see price through company that we're unable to determine what that number should be or even how to present it in a way that maximizes response now I say that to you by going back again to this page and I want you to notice the new way that we present the price by the way this page in itself is a study in optimization and all the principles that we teach look at the top of the page the power of the headline the clarity of the value proposition the specificity of the evidentials the new way the graphic has been built the way we use an actual sort of a caption on the graphic to emphasize the core value everything about the top of this page has been designed to get velocity people moving forward at a high rate towards the called action but that's not what this Clinic is about you could probably see this case study in its entirety taught in depth well it's actually taught in the lighing page course that we talked about what I want to focus on is the price and here's how we reveal it first we emphasize the free trial not the cost and then we say a credit card is required to validate your free trial you will never be charged now what we're doing here is reducing anxiety which is a form of mental cost this anxiety must be added to the total price or to the price of the product so the first thing we're doing is reducing anxiety and a sort of mental cost you will never be charged during your free trial and you can cancel at any time so in doing this we've already started to sort of reduce that part of the cost and then we say if you decide not to cancel your subscription your service will continue for just $1.95 a month please notice there's no trickery here we tell them very clearly what that number is but what happens afterward is powerful save and it was highlighted in yellow just like this on the landing page we didn't add that later save $1,251 60 off the print encyclopedia branica now think about that for just a moment in fact go back we say get unlimited access to all 32 volumes of Encyclopedia Banica during your free trial this is telling you you're not getting some sort of watered down version or a restricted version but everything you would have access to if you bought the entire book series when we went to produce this test I remember saying wait a second you mean they get the whole thing I didn't even understand that from the previous page from the control they said yes I said what does it cost for a set of uh encyclopedia Botanical books and they said well it varies you may recall in the old days they sold them door too and the price U varied but they they said somewhere between $1,300 and $1,900 I said really well if that's the case let's let's get your lowest cost and let's reduce that or subtract the difference from that off a 12-month subscription and show them how much they save and that's how that number became so important there and I want you to know that we don't just reduce the cost in that way here we're presenting price in a way that is almost a positive price here lead leads to a positive surprise and stimulates the desire to purchase more importantly uh we continue to reduce the sort of total mental cost do you see that gold seal risk-free cancel at any time during your free trial you can't get that gold seal anywhere in the world unless of course you have Photoshop and if you think about it that seal is not saying anything different than what we said in the text above you will never be charged during your free trial and you can cancel at any time it's the same language but in the landing page optimization course that I referenced earlier we teach about anxiety and you must overcorrect anxiety it calls for a sort of redundancy and redundancy is what's happening here we're making it super clear by the way we're still doing that with the button underneath get instant access now wait a second what's the difference between instant and now done at all but we know that one of your fears is that you're going to you're going to sign up for this and then you have to wait for some password to be mailed to you but your son needs to get that report done tonight he was supposed to do it on Tuesday it's Thursday it's due Friday morning you've come to this site because you've got to find some sort of source that's reliable for him and you need to know that you can get instant access so we tell you again just like we did in the previous copy you can and we overemphasize it by saying get instant access now sometimes in marketing you have to make a choice are you going to be good at persuading people to do something that's good or are you going to um be good at Grammer because sometimes it requires redundancy to get the point across I would have said if I could have get instant access now immediately right away before it's too late I mean I would have pushed that as much as I can to get the message across click the button and you're going to get it now now it's easy for me to say this to you as a piece of advice in fact the problem with the Internet is there's advice going on constantly every website every blog every writer but let's look at the data at meclabs or marketing experiments we always want to go back to the experiment to the case study we've done 10,000 tests like this and we just take a few highlights when we're doing one of these clinics a recent briefing to try and help you understand the point but let's look at the data from this particular test what was the Improvement of this approach well there's the control there's the treatment here's the result a 103% increase in conversion now this was a digital offering and this wasn't some sort of phantom conversion increase I worked with the vice president of Encyclopedia Botanica and by the way it wasn't me that did any of this it was a whole team of analysts and scientists and researchers but I knew him personally and helped set this up and the reality is revenue doubled it's a digital offering this changed their entire year this impacted their p&l they were honest they were grateful and we had a wonderful relationship and I have to concede by the way we tried many tests after this and we could not beat that particular particular performance of this lift what I can tell you is that business saw a dramatic increase because they started to understand something more uh profound about how to communicate customers how to synchronize with a thought sequence in particularly when to present and how to present the price let's keep going here's an example again of a change you don't want to do what you see here your card will be charged X dollar for X service monthly that is a flat presentation of price that it doesn't think about cost it thinks about price price it's focused on a simple Point your price will be X but see there's a cost here the cost is the anxiety that comes around that particular offer how hard is it to cancel how can I reach customer service will this be one of those things where I call and get put on hold and I I can't get anyone to help me do they have a a phone number even how do I know for sure that it's safe to make this decision there are other costs those are examples we we fix that with this version once your free trial has ended now notice this wording it's really particular it's carefully engineered once your free trial has ended your subscription will be automatically enabled there's a nice way to say we're going to charge your card automatically enabled so you can continue the service without interruption now that turns the charge of the card into a benefit your card will then be charged I want you to notice that the fee is there there's no trickery again I have no time and no tolerance for marketers who are using slight of hand or marketers who are who are deceiving the people they're working with it will be charged a monthly fee of X but notice again the emphasis to reduce the mental cost you will never be charged during your free trial and you can cancel at any ay all caps anytime so this is about reducing the perceived cost of the free trial as opposed to Simply displaying the price and uh so it leads to this big question when should you reveal price sooner as you see in the encyclopedia branica example or later as you see in this particular study that we began the program with I want to move towards the third point but first of all I want to give you three key principles that will help you make that decision here's the first in most cases price should be presented only when the value is established and the fulcrum that's the mental fulcrum in as people weigh whether or not to go forward with your offer is fully weighted on the value side it's essential that the value is conceptualized it must be imagined it must be felt it must be fully appreciated before you reveal the price that's a key principle that drives how you display price in certain cases particularly with expensive products service products or or or in these sites where you're focused on a small group of products as opposed to say an e-commerce offer where the price is displayed next to something that they're very familiar with like a toaster even then if you're selling a toaster it should have a particular value proposition and the remarkable uh distinctive feature of that toaster should be emphasized in a way that makes it particularly valuable and that should happen very close to the price point but let's keep going our research also suggests that in some cases delaying the presentation of price can create anx xiety sometimes it's the wrong thing to do it creates anxiety because you think is there a catch how much is this really going to cost what is are they trying to fool me and this is very true in Industries where people expect to see the price up front people fear they will fear rightfully that they might be being they might be manipulated by the other party so my point for you is you must be aware of point one but you must be cautious as it relates to point two on the screen behind me which brings me to point three the key is to understand how price impacts the cognitive elements the variables in a person's thought sequence now knowing that will help me sort of bring you to the third point it's quite interesting so here is the third price must be tested price testing gets very frightening people say yes but if I put two different prices on the Internet won't I anger one side there's a way to do that we teach this in the fundamentals of online testing and our more sophisticated certification courses that we do in this all I would say for you right now is let let's learn enough to understand how to think about the test test protocol 1,154 I have uh seven minutes left I want to pack these seven minutes with as much value as I can here is a site the goal is to increase total revenue generated by a subscription forget the dollar amount just think about the relative difference there's the page Marketplace tell me which price point is best we tested all three I want to see your I want to see your I want to see your sort of opinion and by the way I don't mind if you don't get this right because how would you know do you test all right so far every single entry is 1495 and there's a lot of them I've seen 110 back to 1495 and for once a 1250 two 1250s 1495 Has It by looks like 85% 90% 1495 1495 uh Brandon says 1495 but Geneva Viva I don't know if I can pronounce your name right last name is castal says 10 all right let's take a look I'll show you what we discovered here's the price points the question is total sales and total revenue let's fill in the chart with the results of the test at $10 we sold 156 units just for the test 94 units at 1250 and 74 at 1495 essentially the more expensive we made the product the less money we made or less the less Revenue we generated frankly it's the less money we made as well the less expensive price generated a 33% more Revenue than the next expensive price and 41% more than the highest but there's more if you think about it we had a 33% increase in Revenue with the cheapest price point that's just a boost what if you could raise revenue by 33% all we did is change the price and remember it's a digital offer the cost of deliver stays the same and stays very low keep watching this so there's total revenue in the test cell and this is the actual control price point and by submitting this information you get a one-time charge of $10 and then there's an option to upgrade to 495 a month which becomes recurring Revenue it's very fascinating how this actually came about because the results are more interesting when we factor in the add-on option because the point is the more people that purchase at $10 gives us a chance to ask them to upgrade to a 495 month price point more people were likely to subscribe to the add-on option at the $10 price point leading to an even greater Revenue increase so this is an additional gain here when people paid $10 a lower number they were quicker to add the 495 option what does this mean well if you look at the numbers a third time we generated a 93% return on investment what you need to understand is that that the less expensive price actually generated more than double the ROI is this interesting to you do do you see how getting that price point tuned in right can make a dramatic difference in all that you do and it's really about understanding what's happening in the mind of the customer listen it's always that if you don't hear anything from if you log into this for the next 10 years look I'm in a 50-year plan took me 15 years to build it out of that 50-year plan marketing experiments was born the main company me Labs the P the science lab that powers everything from there is marketing experiments marketing Sherpa uh start with a lead and and other media companies but always we've been trying to build an institution that would impact the way the entire world thinks about this discipline and we don't want to be a uh a vendor per se we want to educate and train and change the way people think doesn't mean we don't do research or have have companies that we work with and establish field Laboratories but that's all part of the bigger picture of transforming things thinking and when I look at this you know what's exciting most to me is not about the particular price point but the value that comes with us filling in the gap between what we think we know about the customer and what we actually know about the customer that is where your competitive Advantage lies that's where your true margins lie that's where the marketer must become a customer philosopher more than anyone else in the organization you've got to get inside of the customer's mind and understand such things and you will bring such value that the company cannot do without you it's these insights that set you apart this is why testing is important testing is not just about a getting a lift it's about getting a learning and that learning transforms your ability to communicate with the customer so what does that lead us well to three critical principles presting price is part science part Alchemy read that as this it's a guess with some science involved it starts as a guess by the way if that offends your scientific nature you need to understand that almost all science starts with an intuitive guess including Einstein's work ask him he admits it and and Reed Carl popper I'm a philosopher of experimental philosophy and science uh science often begins with a sort of intuitive leap we call it a guess when we talk to each other scientists call it an Intuition or a leap or some other sort of uh sophisticated $ five word but in the end starts with a guess and then that guess is formulated into a hypothesis and the hypothesis is tested and the testing of that hypothesis is what leads to an Insight often not the very Insight that we were after and often doesn't corroborate our guess but it leads us to new information and there's a lot on this ROM K hn best book on this ever presenting price is part science and part Alchemy company value is generated by maximizing the gap between your price to deliver and the customer's willingness to pay did you hear that there's a sort of a difference here Michael Porter did excellent work in this particular area I I I don't think his he did any testing of value proposition that's what we've been doing in this lab but his work in uh competitive advantage talked a bit about the the price Frontier and and in fact this slide sort of talks about that a lot of times getting in the upper left side of this Frontier on this graph is where those High producing high margin companies live it's where you need to be and to do that you got to understand what's happening in the mind of the customer and you've got to figure out what their willingness is to pay and you can influence that willingness by sharpening the message of your value proposition but in the end and this is the sort of final point you cannot know that you have the right price until you've run an experiment where you've actually charged too much there are some things like that in life you don't know that you're at the right place until you've gone too far when you do that you discover the top threshold of the sort of willingness to pay state and that's where you find maximum value so my time is it up Paul Cheney my time is up but if you want to grasp what we've talked about today in a simple truth there it is and uh again if you want to learn go to that uh use Twitter or something to give them that code and uh and and you can take our course in this area but the bottom line is we want to keep discovering what works and sharing the information with you um I uh really appreciate the people that come back over and over again and listen and those of you that come up at conferences and events and some of you can begin doing your we'll be offering master's degrees before too long here in me laabs uh and uh anyway we just want to keep growing this evidencebased Marketing Group who really care uh about discovering how customers are thinking with that in mind uh I'd like to invite you back next week if you found this good today or if you found it troubling would you use your Q&A feature just give me some feedback I'm going to read it before I leave out of the studio at least as much of it as I can Bob Hennessy says super duper Bob uh that's an interesting comment I don't know if you've ever had a super duper before but I appreciate it thank you all we'll be back in a couple of weeks and we'll keep trying to discover what works he h