Should I raise my prices?
Compare what all accepted sales leave after their delivery cost, not the price of one sale. At €100 with a €70 cost, 12 repairs leave €360. At €120, 10 repairs leave €500, but 6 leave only €300. A higher price pays only if enough customers still buy.
A higher price can leave you with less money if too many customers stop buying. This example shows how to compare the money left from all repairs, instead of looking at the price alone.
A price is only one part of the result
A pricing experiment compares different prices for a defined offer. Its central question is not simply whether customers accepted the new price. It is what happened across the opportunities to sell: how many customers accepted, how much work followed and what that work left after the costs included in the comparison.
Acceptance rate, revenue and the amount remaining after costs describe different things. More accepted quotes mean more orders. More revenue means more sales value. Neither, on its own, establishes that the business is better off. The delivery effort and costs can move at the same time.
How many customers can Mira afford to lose?
Mira charges €100 for a repair that costs her €70 to do. That leaves €30 from one repair. If twelve customers buy, she has 12 × €30 = €360 left.
She tries charging €120 for the same repair. The cost is still €70, so each repair now leaves €50. If ten customers buy, she has 10 × €50 = €500 left. That is €140 more, even though she does two fewer repairs.
But if only six customers buy at €120, she has 6 × €50 = €300 left. That is €60 less than before. The price is higher in both cases: losing two customers still leaves more money, but losing six leaves less.
That is the point of this example: compare what remains from all the repairs sold, not just the price of one repair. These are made-up outcomes, not a prediction of how many customers will buy. Rent and other business costs still need paying.
- Both groups receive the same repair offer, with twenty quotes in each group.
- Every accepted quote becomes a completed, paid repair; there are no discounts or refunds.
- Amounts exclude VAT or sales tax. The €70 is the included delivery cost per completed repair; other business costs are excluded.
Try it with your own numbers
What the customer pays now, without VAT or sales tax.
The price you are considering.
The costs you include for each completed sale. Other business costs are left out.
Count every quote, including those that were declined.
How many of those quotes became paid sales.
An outcome you want to compare, not a prediction of how many customers will buy.
Your result
Fill in every field to see the result.
Your numbers stay in this browser. Nothing you type is sent or saved.
A comparison is not yet an explanation
Suppose the higher price was offered to urgent customers and the original price to people casually exploring their options. A difference in acceptance could reflect urgency as well as price. Changes in the offer, customer mix, season or follow-up can make two groups unlike each other even when their quote counts match.
A comparison becomes more informative when the offer and circumstances are similar and price is the factor being varied. Random allocation to price groups can reduce systematic differences between them. Chance variation still remains: twenty quotes make the arithmetic easy to see, not the evidence conclusive.
Name the costs before naming the result
In the repair example, “amount left” means sales minus a stated €70 delivery cost for each completed repair. It leaves out rent, selling time and any other costs not included in that €70. Calling the remainder final profit would give it a meaning the calculation does not support.
For your own comparison, list what the per-repair cost includes. Some costs increase with each repair; others must be paid even when no repairs are sold. The accounting term contribution means sales minus all costs that vary with the work. Use that term for this remainder only if the €70 includes all those costs and no fixed costs.
Common misconceptions
- The price with the highest acceptance rate is best.
- Acceptance describes buying behaviour. The economic comparison also needs the value and included cost of the resulting work.
- Compare only customers who bought.
- That hides the opportunities that did not become sales. Using all quotes as the denominator makes the two illustrative groups comparable in size.
- Twenty quotes prove the new price works.
- These small groups illustrate a mechanism. They are not a recommended sample size, a statistical conclusion or a forecast for a different market.
Know what to record before testing a price
Choose one clearly defined offer. Record all quotes, the price offered, which customers accepted and the costs included for each completed job. Compare similar groups and note other differences, such as urgency or a changed offer. A higher remainder in a small sample is a reason to investigate, not proof that every future customer will behave the same way.
Sources
- ACCA: Cost-volume-profit analysis (opens in a new tab)The relationship between price, sales volume, variable costs and contribution; the assumptions behind simplified cost models.
- NIST: Completely randomized designs (opens in a new tab)Varying a factor, random assignment and the random variation that remains in an experiment.