Definition:
Price testing is the structured process of experimenting with different prices for a product to measure their impact on demand, conversion, revenue, and profit. Testing can involve multiple price points while AI models evaluate demand signals, visitor behavior, and performance outcomes to identify the most effective price.
Benefits:
- Reveals how sensitive customers are to price changes.
- Enables merchants to identify optimal prices based on real data.
- Helps maximize revenue and profit while minimizing risk.
Example:
A furniture retailer tests prices for a dining chair at $189, $199, and $219. While the lowest price generates the highest number of orders, the higher price significantly reduces conversions. The test reveals that $199 delivers the best balance between conversion and margin, producing the highest overall profit.