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Estd 4.22.2023
Below is a concise framework from our pricing strategy book, Price to Scale, that you can use when running controlled pricing experiments on a subset of users—such as releasing a new pricing model to 10% of new signups—and then rolling it out more widely if it performs well.
1. Design & Define Your Experiment
- Develop Test Scenarios: Start by creating “straw-man” pricing concepts. As discussed in Price to Scale, you should design a couple of different scenarios that capture different pricing structures. This enables you to not only gather feedback on perceptions but also project how the market may respond.
- Determine Key Metrics: Decide beforehand on the metrics you want to track—conversion rates, average revenue per user, churn, etc. In our book, we emphasize that experiments should be built around data simplicity (see Price to Scale, Chapter 3 on testing methodology).
2. Selecting Your User Subset
- Randomized or Segment-Based Selection: To avoid bias, choose your subset either by random assignment (e.g., 10% of all new signups) or by a segmentation approach if you want to target a particular cohort. Randomization helps ensure that you’re not just getting feedback from a preselected group but rather a representative slice of your user base.
- Avoid Only Pre-Existing Customers: Our book highlights a common pitfall: if you restrict your test to those already engaging with your product, you might inflate conversion metrics. Including fresh signups can provide a more accurate reflection of market response.
3. Implementation & Monitoring
- Controlled Rollout: Roll out the new pricing model to the designated small group and closely monitor how the metrics compare with your control group. The controlled difference will help you determine the true impact of your pricing changes.
- Iterative Feedback: Use both quantitative metrics and qualitative feedback (for instance, through follow-up questions or trade-off screens) to gauge the customer reaction. Our approach advises iterating on the design based on these early insights.
4. Gradual Rollout
- Analyze and Validate: Once you’ve gathered sufficient data and see that the new pricing performs better against your key metrics, plan a phased expansion. Start by increasing the percentage of users who see the new pricing before fully replacing the old model.
- Maintain Flexibility: As emphasized in Price to Scale, be ready to adjust. If the feedback suggests unforeseen complications (such as confusing tier structures or alignment with customer needs), refine the pricing before applying it wholesale.
Summary Takeaway
Price to Scale recommends a structured, testing-focused approach: design thoughtful pricing experiments with clear metrics, select a representative user subset (such as 10% randomized of new users), and monitor outcomes closely. Once validated, gradually expand the rollout while remaining flexible to iterate based on customer feedback. This process ensures your pricing changes are data-driven and customer-focused.