Background
Artea, an online retailer known for its handmade clothing, experiences high visitor engagement but struggles with a low conversion rate: 87% of visitors do not purchase. To better understand customers and their purchase behaviour, the company ran an A/B test. The team randomly selected half of 5,000 users who had visited the website in the last 2 months but had not made a transaction, sent them a coupon that offered a 20% discount on the next purchase. The coupon was non-transferable to other users and was valid for one month. One month later, Artea marketing team collected the number of transactions and total expenditure made by all of the relevant users.
Task
Our case study task is to analysis the Coupon A/B test campaign and answer the following questions:
Was the coupon assigned randomly?
Did Artea’s coupon campaign work?
Which proportion of users should Artea target?
Would Artea be able to increase transactions and revenues with the new strategy? By how much?
Legal and ethical consideration by the minority and gender.
Q1: Was the coupon assigned randomly?
Yes
In assessing the randomness of the coupon assignment during the A/B test, we compared the test group (with coupon) and the control group (without coupon) across several variables: acquisition channel, browsing minutes, weeks since last visit, and the number of past purchases. The histograms and bar charts demonstrate an even distribution between the two groups for each variable.
Q2: Did Artea's coupon campaign works?
According to the data analysis, the coupon campaign increased the number of transactions but did not correspondingly increase revenue. To optimize both sales volume and revenue, it would be more effective for Artea to strategically offer coupons to targeted groups rather than distribute them randomly, while also considering the impact on brand value.
Q3: Which proportion of users should Artea target?
The company should issue coupons to users from Facebook and Instagram who already added products in their shopping cart.
Q4: Would Artea be able to increase transactions / revenues with the new strategy? By how much?
An approximate 9% increase in revenue and a 17% increase in the number of transactions can be expected if coupons are distributed to users from FB and INS who have products in cart.
Q5: How does the demographic data influence your targeting strategy?
Our marketing strategy tends to reach non-males and people who aren't part of minority groups more effectively. However, everyone is free to use social networks and Artea shopping cart. Therefore, the marketing strategy is legal and ethical, and we would use our defined targeting groups as planned.
Upon sign up, users indicate their gender, race and ethnicity, providing Artea demographical information that could be used to make the targeting decision. At first, CEO Alex hesitated to use demographic data for decision-making, fearing it could introduce biases. She valued equal treatment for all customers but she was aware of algorithms could create biases that were translated into marketing practices.
We assessed whether female or minority customers differed from others in past behaviour among the recent 6,000 visitors to Artea.
From the data file, we found out the following insights.
• Non-males are more likely to have items in the shopping cart.
• Minorities are highly underrepresented in all channels but Google
• Both minority and non-minority groups are equally likely to have items in their shopping cart. There is a similar level of engagement in terms of placing products into the cart between the two groups.
• Minority groups mainly live in states 3, 7, and 10, so they aren't as widely represented. Also, people living in states 1 and 2 are most favoured to receive coupons.