Pricing
HK$89 or HK$90? Give the price test a fair chance.
By Prof. Alessandro Buffoli, PhD
The first question is whether the business can distinguish a pricing effect from changes in who happened to shop that week.
A shop sells a product at HK$90 on Monday and HK$89 on Saturday. Saturday sells better. The owner credits the price ending.
I would ask about Saturday before asking about the nine. Different traffic, different customers and a different shopping occasion can explain a sales difference without the price doing anything at all.
Price endings are an appealing topic because the proposed change looks so small. That can encourage a surprisingly casual test. Yet a small expected effect is exactly when a noisy comparison becomes difficult to interpret.
Decide what would make HK$89 worthwhile
Suppose the product has HK$50 in variable cost. At HK$90, contribution per unit is HK$40. At HK$89, it is HK$39. Under those hypothetical assumptions, the lower price needs about 2.56% more units to preserve contribution, before considering any other costs or effects.
The hurdle is modest. It is also precise enough to improve the conversation. The question becomes whether the lower price produces a dependable increase large enough to justify it, rather than whether a nine “looks better”.
Revenue, conversion and contribution can tell different stories. I would choose the primary measure before the test begins. For this decision, contribution per comparable visitor is usually more useful than celebrating unit sales alone, while monitoring returns and customer complaints alongside it.
Make the comparison believable
A suitable test needs comparable exposure to both offers. Depending on the business, that might involve a properly designed comparison across similar stores and periods, or a carefully implemented online experiment. Customer treatment should be transparent and lawful, and any experiment should fit the retailer’s actual pricing commitments.
Keep the product, availability, delivery terms and presentation consistent. If HK$89 comes with a red promotional badge while HK$90 appears as an ordinary price, the result combines the number with the badge. That can be a useful test of the complete offer, but it answers a different question.
Do not declare a winner because the first few sales favour one version. Plan the duration and the amount of evidence needed, allow for the business’s normal variation, and report the uncertainty. A result too imprecise to distinguish a small gain from no gain is still information.
I would be comfortable leaving the price at HK$90 while collecting better evidence. There is no professional obligation to manufacture a confident pricing insight from an untidy comparison. The useful recommendation is the one the business can trust enough to apply again.
Prof. Alessandro Buffoli, PhD
Assistant Professor of Marketing at The Hang Seng University of Hong Kong.