• Skip to primary navigation
  • Skip to main content
  • Skip to primary sidebar
  • Skip to footer

Tips and Tricks HQ

  • Home
  • Projects
    • All Projects
    • Simple WP Shopping Cart
    • WP Express Checkout Plugin
    • Accept Stripe Payments
    • WP Download Monitor
    • Easy HTTPS Redirection
    • WP Security and Firewall Plugin
    • WP eStore Plugin
    • WP Affiliate Platform
    • WP eMember
  • Products
    • All Products
    • Checkout
  • Support
    • Support Portal
    • Customer Only Forum
    • WP eStore Documentation
    • WP Affiliate Software Documentation
    • WP eMember Documentation
  • Contact

Maximize Revenue 101: Should You Lower or Increase the Product Price to Increase Revenue?

Home » Blog » Maximize Revenue 101: Should You Lower or Increase the Product Price to Increase Revenue?

Last updated: April 21, 2015





If you sell products from your website then you probably ask yourself this question a lot. Few of my users have asked the following question in slightly different shape or form many times, so I decided to share some of my own experiences and results from my own tests which might help some of you:

I want to increase my revenue and obviously getting more traffic to the site would help but I have been wondering if I can tweak my product prices to help with this in the short term?

There is no way to know for sure unless you perform some testing yourself because your situation is most likely a lot different than mine. In this article I will share some test methods, basic theories, my test results and things to keep in mind to help you find the answer to your question.



1. Basic Theory

We can express the total revenue using the following simple formula:

Revenue = Conversion * Price

Simple Example: If your product is priced at $47 and if you have 10 sales everyday then your revenue per day would be $470. So every month you would make about 14k.

Aim: your aim is to tweak the “PRICE” variable in the above equation so it yields more than $470 per day.

The above equation sounds simple enough but the KEY is actually to find out the relationship between the “price” and the “conversion” variables for the product in question. In other words, we need to find out how the conversion number changes as you change the price variable.

The relationship between the price and the conversion variables can be expressed with the following formula:

Conversion = K/Price

Basically, conversion number is inversely proportional to your price amount. K is the unknown constant that we need to find out via testing to solve this whole equation. Finally those math lessons are coming in handy :). Lets refer to K as the “conversion constant”.

According to the above formula, as your price amount increases your conversion number will drop and vice version (you probably didn’t need a formula to understand that but it helps when you are trying to prove something mathematically).

2. Test Method

You want to find out how your conversion constant changes as you change the price of the product. This will help you find that sweet spot where it yields the maximum positive  result.

The best way to find out how your conversion constant reacts to the price change is to setup a split test (A/B Testing) with your sales page. So you are going to have two copies of your sales page with two different prices for the product (for example: sales page A will offer the product for $47 and sales page B will offer the product for $97). You then serve “sales page A” to 50% of your customers and serve “sales page B” to the other 50% of your customers (preferably randomly). Once you have enough data, you can then setup another split testing scenario with another two price points and gather more data.

This will help you measure the conversion constant for different price points. When you plug these numbers in the formula mentioned above it will help you find out the sweet spot.

3. My Test Results

Time for some live test data from the tests that I performed on one of my product selling sites (these numbers are not from Tips and Tricks HQ products)

Test Result 1:

When I halved the price of the product the conversion constant went up by 2.8 times.

So if I was selling the product at $50 and I sold 5 copies everyday, the number went up by 2.8 times to 14 copies per day when the price went down to $25.

  • Total revenue @$50 = $250 ($50*5) = About 7.5k per month
  • Total revenue @$25 = $350 ($25*14) = About 10.5k per month

Test Result 2:

When I lowered the price by 25% the conversion constant was still holding over 2 (2.2 to be exact).

So if I was selling the product at $50 and I sold 5 copies everyday, the number went up by 2.2 times to 11 copies per day when the price went down to $37.5.

  • Total revenue @$50 = $250 ($50*5) = About 7.5k per month
  • Total revenue @$37.5 = $412 ($37.5*11) = About 12.5k per month

Test Result 3:

When I increased the price to double; the conversion constant went down to .25

So when I bumped the price to $100 it was only selling about 1 copy per day:

  • Total revenue @$50 = $250 ($50*5) = About 7.5k per month
  • Total revenue @$100 = $100 ($100*1) = About 3k per month

You probably know by now which option I decided to go with 🙂

4. Things to keep in mind

  • Remember that you are not focusing on the “Number of sales”, you are more interested in the total revenue. So for example: lowering the prices will most likely increase your number of sales but the question to ask yourself is, “Does it actually result in a total revenue increase?”
  • Don’t come to a conclusion that lowering the product price will always yield more revenue. Do your own testing and you might find out that increasing the product price actually gives you more revenue given your situation.
  • Treat each product uniquely. Just because one method works for a particular product does not mean that the same will work on all of your products.
  • You can also use these numbers to figure out how much discount you want to offer when you run special deals for your products.

Other Things to Consider

You should also keep in mind the life time value of a customer when pricing your products and services.

I hope this article has given you some ammunition to run your own tests and find out which price point works best for your product. Please share your theories and findings in the comment area below.

Related Posts

  • 10 Tips to Increase Your Sales Page Conversion
  • 10 Fundamental Ways of Building Customer Trust
  • 10 Tips for Writing an Autoresponse Email
  • Developing an Article Marketing Strategy for Your Online Business

Online Marketing,  Shop Admin Tips e-commerce tips,  landing page tips,  Online Marketing,  Shop Admin Tips,  Testing

Reader Interactions

Comments (18 responses)

  1. Dina Eisenberg says:
    September 6, 2012 at 11:36 am

    Very helpful article-thanks. I’d love to interview the writer for my upcoming event, 60 Days to Pricing success: how to set, say& get your right price. Please email me if you’re interested. So many people struggle with the difference between revenue & profit I did a podcast about it. Great tips & tools thanks!

  2. admin says:
    January 22, 2012 at 10:26 am

    I understand where you are coming from. You can always test with small changes. For example: if you do a split testing with $50 and $40 I don’t think your customers will be upset. I think people are used to the fact that not all shops will offer the exact same price for an item.

  3. Leah says:
    January 22, 2012 at 2:41 am

    I have reservations about doing this experiment in my small market. I see the value in it, however, so please do tell if you see an alternative or way to tweek this in order to get the same information.

    My reservation stems from the time I was OUTRAGED when I paid $80 for a monthly membership to something and then found another mirror site with $40 for the same thing. I was livid – emailed everyone trying to expose the scam. Now I’m thinking they were simply testing the waters. As a customer, it threw me for a loop & left a bad taste in my mouth because I thought for sure I’d been had.

  4. Matias says:
    August 29, 2011 at 6:44 am

    I’m planning to sell digital products and I’m thinking to put the lowest price. But I think I can test some other prices to get the best result. Ty for the tip

  5. friv says:
    August 20, 2011 at 9:56 pm

    Very well, I like this very much.

  6. Ivy says:
    August 16, 2011 at 9:13 pm

    @ Ian, thank you for your comment and the calculator resource.

  7. Ian Ibbetson says:
    August 16, 2011 at 10:12 am

    Hi,

    Nice looking plugin, which I’m going to play with with a view to switching from a well known competitor… 🙂

    Your explanation of A/B testing is good too, but not necessarily that useful to those of us selling tangible product. Those products have a (more or less) fixed cost per unit, and increasing revenue is no good if you do it at the expense of profitability. I recently heard a story of someone marketing a product similar to mine; she let herself be talked down to selling at a wholesale price of £1 per unit, when her production cost was more like £1.10 per unit. The people she sold to are retailing that product at £2.25!

    As we sometimes say “Revenue is vanity, profit is sanity”.

    Your formula still works with a little tweaking though; we just need to look at gross margin rather than total revenue. Gross margin is what percentage of the selling price is profit. Thus if an item cost us $20, and we sell it for $30, our margin is $10. To calculate the optimum price for tangible goods, the formula we need is

    Profit = Conversion * Margin

    where

    Conversion = K/Margin.

    Cheers all 🙂

  8. admin says:
    August 7, 2011 at 1:01 am

    Thanks John 🙂

  9. john says:
    August 6, 2011 at 7:27 pm

    Your welcome, I do that all the time myself. LOL.

    Your message is relevant for everything that is sold.

    Always be measuring and testing, thats the way to better profitabilty.

    Your message about looking after your customers is so true. I recently had to renew my yearly driving insurance which I pay monthly. The company were offering the same type of insurance deal to new customers which worked out about $205 dollars cheaper than they were renewing my insurance for. I ask the company to lower my premiums and they said they could not as this deal was only for new customers.

    I went and placed my business with another company and was given the deal I wanted.

    Moral of the story is, don’t take your existing customers for granted or they will go elsewhere. A small increase may be acceptable, but not a giant increase to an existing customer while at the same time giving a new customer a giant saving.

    Look after your customers, give them new quality products, and most of them will stay with you for life and buy most of your products over time.

    I know you get that because I have followed the development of your site and products over a number of years and can see the great quality, support and communication that you provide to your customers, and prospective customers.

    Keep up the good work.

    Regards

    John

  10. admin says:
    August 6, 2011 at 12:47 pm

    @john, thanks.. corrected the error.

  11. john says:
    August 6, 2011 at 6:56 am

    Hi

    Have you maybe made an error in your calculation? or am I reading it wrong.

    $50 x 5 = $250 and not the $125 that you show in your calculations.

    Helpful article by the way.

    John

  12. admin says:
    August 6, 2011 at 3:49 am

    One common practice when selling services is to keep the prices for your existing customers the same. So only your new customers will pay the new price. Prices over time tend to go up, so as long as you explain to your customers nicely most of them will understand.

  13. Robert says:
    August 6, 2011 at 3:42 am

    I have often wondered if my service is priced too low. I know my service is premium but how should I go about raising the price without upsetting current clients?

  14. admin says:
    August 6, 2011 at 3:30 am

    There are a few split testing options out there. Google website optimizer is a really good one. You can even manually monitor the effect of price changes on a per month basis if you want to do some basic testing without getting too involved.

  15. Peter says:
    August 6, 2011 at 3:17 am

    This theory is so much better than blindly changing prices every month and hoping for the best! Thank you for such a nicely explained article. I am off to setting up some testing of my own. What do you recommend for the split testing?

Leave a Reply

Your email address will not be published. Required fields are marked *

Primary Sidebar

Featured & Popular Articles

Video Answers to Top WordPress QuestionsWordPress Optimization Tips and Tricks for Better Performance and SpeedEssential WordPress Security Tips - Is Your Blog Protected?WordPress Simple PayPal Shopping Cart PluginTop 15 Search Engine Optimization (SEO) Techniques I Forget to DoList of the Best and Must Use WordPress PluginsHow do I Start a Blog and Make Money Online?Good Domain Name Picking Tips for Your Blog SetupFind Out Which WordPress Web Hosting Company Offers the Cheapest and Reliable Web Hosting Solution

Featured WordPress Plugins

WP Express Checkout Plugin
wordpress estore plugin
wordpress membership plugin
wordpress affiliate plugin

Recent Posts

  • How to Use Browser Developer Tools to Inspect Elements and [...]
  • Accept Donations via PayPal from Your WordPress Site Easil [...]
  • Buy Now Button Graphics for eCommerce Websites [...]
  • Subscription Button Graphics for eCommerce Websites [...]
  • Adding PayPal Payment Buttons to Your WordPress Sidebar Ea [...]

Comment & Socialize

  • @Rob, We have just released ...
    - admin
  • I installed the plugin a co ...
    - Rob
  • @Sebastian, We've released ...
    - admin
  • I've used this plugin on a ...
    - Sebastian Djupsjöbacka
  • @John, this plugin doesn't ...
    - admin

Check out our solutions

View our WordPress plugin collection and start using them on your site.

Our WordPress Solutions

Footer

Company

  • About
  • Privacy Policy
  • Terms and Conditions
  • Affiliate Login

Top WordPress Plugins

  • Simple Shopping Cart
  • PayPal Donations
  • WP Express Checkout
  • WP eStore
  • WP eMember

Blogging Tips

  • How to Start a Blog
  • Selecting a Good Domain
  • Cheap WP Hosting
  • WP Video Tutorials
  • Simple SEO Tips

Search


Keep In Touch

Copyright © 2025 | Tips and Tricks HQ