Price Testing — Do you know how to price your products or services to achieve the highest revenues? Our research suggests that you may never know unless you test different prices for your products/services.
For physical products, profit margin should always be taken into account. For subscription-based services, this is much less of an issue because the cost of delivery is far less.
Many times it may be to your greatest advantage to select a price that generates slightly less revenue if that price also generates significantly more new customers. The lifetime value of a customer shouldn't be ignored. The additional sales you can make to existing customers may be significantly more valuable than the immediate additional sales.
The average lifetime value of your customers and your ability to make additional sales to them will be the determining factors here. Many times it’s all about building your list. You can always sell more late, but only if your have your clients contact information.
For a product, a service, or a subscription, one key goal is to find the price that is "too high." In other words, keep raising the price until the results clearly show you are charging too much. Then slowly inch back from there until you find the highest price the market will bear, giving you the highest revenue on sales.
However, note that this highest effective price point, which will have the highest profit margin, may not necessarily be the best way to generate the greatest amount of new customers, as has been noted above.