CBA: Price Testing – Everyone Wants a Good Deal

Price Testing – Everyone Wants a Good Deal

By Carl Bloom

Marketers repeatedly make the mistake of thinking too logically. For example, that buyers of high ticket merchandise or donors of large contributions can always be counted on to pay a higher price or write a larger check for a contribution.

The truth is everybody wants a good deal or will go for a discount – no matter who they are or how much money they have.

CBA conducted an interesting test of this premise. For a nonprofit client we took a group of donors and split them into thirds based on the size of their most recent gift – basic or small, middle sized and relatively large. We also created a matrix of “asks” for an upcoming additional gift test consisting of asks ranging from a small gift, a step up to a moderately larger gift and third, a relatively large gift, but appropriate for the group.

The theory was, if we suggested all three asks to all three donor groups, there would be a correlation between the “size of the donor’s previous gift” and the current one being suggested. We believed that the larger the gift request (even for people who had been giving similar sized gifts) the lower the percent return, but revenue would still be higher from large gift donors.

The results:

The lower the gift ask, the higher the return. Large gift donors responded with a higher rate of return to the lower gift asks, however, since the response was so much higher than it was from suggested middle and large gift asks, the lowest ask produced the most revenue from those who were considered “high flyers.”

The small gift donors didn’t go anywhere near the larger gift asks, and as expected, went for the lower gifts.

Conclusion:

The test results do not mean that a company or nonprofit should always charge the lowest price or ask for the smallest gift, it does suggest however, that we must learn how to price our products and build successful gift grids. Most important of all, we need to keep testing because there is an optimum price or ask for your organization that will yield the most net income — and it’s worth the trouble to find it.

Better to verify our assumptions than take less to the bank.

Learn more about Carl and the staff at CBA.

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