Background

Biddlebee, a brand focused on hydration products, wanted to experiment with their pricing strategy for one of their best-selling products: a hydration bottle. The goal was to test if decreasing the price by $5 would increase sales volume and overall revenue per visitor.

The Challenge

Biddlebee aimed to assess whether reducing the price of their hydration bottle from $29.95 to $24.95 would result in higher sales, increased revenue per visitor, and improved profit margins. While an increase in the number of purchases was expected, they needed to ensure that the overall profitability would remain intact.

Hypothesis

The hypothesis was that lowering the price by $5 would drive more people to purchase the product, increasing the total number of conversions. This would, in turn, lead to higher total revenue and greater profitability through increased sales volume.

The Test

Using the Elevate A/B Testing app on Shopify, Biddlebee conducted a price test with the following setup:

• Control: The original price of $29.95
• Variation: The reduced price of $24.95
• Experiment Goal: Revenue Per Visitor
• Total Visitors: 11,872
• Test Duration: Data collection phase

Results

• Unique Visitors:
  • Control: 5,884
  • Variation: 5,988
• Total Revenue:
  • Control: $6,000.00
  • Variation: $5,666.70
• Revenue Per Visitor:
  • Control: $1.02
  • Variation: $0.95
• Conversion Rate:
  • Control: 2.38%
  • Variation: 3.24%
• Total Orders:
  • Control: 140 orders
  • Variation: 194 orders

Profit per Visitor Calculation

The cost to produce and ship each hydration bottle is $18.

• Control (Price: $29.95):
  • Profit per bottle: $29.95 (selling price) - $18 (cost) = $11.95 profit
  • Profit per visitor: 2.38% (conversion rate) × $11.95 = $0.28 profit per visitor
• Variation (Price: $24.95):
  • Profit per bottle: $24.95 (selling price) - $18 (cost) = $6.95 profit
  • Profit per visitor: 3.24% (conversion rate) × $6.95 = $0.23 profit per visitor

Analysis

The results showed that while the variation (lower price) led to more purchases, the control group (original price) outperformed it in both revenue per visitor and profit per visitor:

• Revenue per visitor: The control generated $1.02 per visitor, while the variation generated $0.95 per visitor, despite having more total purchases.
• Profit per visitor: The control generated $0.28 profit per visitor, while the variation generated $0.23. This indicates that although lowering the price increased sales, the reduced profit margins for each bottle ultimately resulted in lower overall profitability.

This test highlights that while a price reduction can drive more sales volume, it does not necessarily translate into higher revenue or profit per visitor. In this case, the control group's original price of $29.95 was more effective in maximizing profitability, even though fewer units were sold.

Conclusion

The A/B test at Biddlebee confirmed that maintaining the original price of $29.95 for their hydration bottle was more profitable on a per-visitor basis. While the lower price of $24.95 attracted more buyers, it did not generate higher overall revenue or profit. Biddlebee can now confidently maintain their pricing strategy, ensuring both customer satisfaction and business profitability.