Wondering whether bundle discounts or lower product prices will drive more conversion while improving margins? This brand ran an AB test to find out!
Context & Background
This brand makes the world’s thinnest portable travel charger. It can provide a full charge to most phones, despite being only 4mm thick, and is far easier to pack and use than traditional blocky power bricks. The chargers are sold direct to consumer in both a wireless and wired version on their Shopify-powered store.
When they started working with Intelligems, each charger was priced at $50. They had also just rolled out a "volume discount" to the store, which incentivized purchases of multiple units by offering 10% off 2+ chargers, 15% off 3+, and 20% off 4+. They introduced this offer with the intent to increase AOV, and therefore revenue/visitor, but hadn't seen a large uptake on that offer.
They came to Intelligems to see if they could learn more about how to optimize their pricing and bundles in order to boost the business as well as to grow their total contribution margin.
For their first test, this brand decided to test their current price point ($49.99) against a $10 lower price ($39.99). Importantly, they wanted to continue to offer the volume discount offer to the control group, but did not want to offer this to the test group. Using Intelligems' find & replace feature, we were able to selectively remove mentions of those discounts from the banner, PDP, and home page for customers in the $39.99 group.
The customer was able to launch the test with only a small test group, starting by directing only 25% of traffic to this group. Over time, they redirected traffic and ramped up the test group in order to receive results more quickly.
After a few weeks and 800 completed orders within the test, the lower price group was declared a statistically significant (and highly impressive) winner. Lowering the price of the product resulted in boosts to conversion rate, revenue/site visitor, and profit/visitor.
The lower price group resulted in a 2X increase in conversion rate
Average order value (AOV) was equal between the two groups. The test showed that at the lower price point, customers purchased more chargers per order which made up for the decrease in revenue per unit.
Combining these, revenue per site visitor more than doubled in the test group!• While lowering the product price decreased gross margin/order, the overall increase in revenue resulted in a significantly higher gross margin per site visitor (and therefore overall gross margin).
The test provided impactful information that allowed the brand to quantify the trade-off between a lower product price, or a higher price with a volume discount. In this case, the lower product price drove higher conversions, resulted in higher units per order, and boosted revenue and profit/site visitor. After completing the test, the store was confident in deciding to roll out the lower price option, and remove the volume discount.
That said, this may not be the answer for every store, or even this store next year! We encourage brands to test often - as the market, consumer behavior, and costs change, the "right" or optimal price might change.