A/B Testing
Practical A/B Testing for Small Businesses
Business• Jul 5th '22
BRIEF
A/B testing or split testing is a powerful tool used to optimize marketing performance by comparing the performance of two different versions of an app or web page. While digital companies can easily control the test by sending traffic to two versions of a page, running A/B tests in the physical world can present some unique challenges. In this article, we'll discuss the potential pitfalls of A/B testing for small businesses and provide practical tips to help you make the most of this strategy.
When it comes to A/B testing, there are several key components that need to be taken into consideration. The sample size is essential, as this will determine how much data is used in the test. It should be large enough to provide statistical significance, though not so large that it becomes too costly or time consuming. Randomization is also important, as it ensures that all users have an equal chance of being included in the test. A control group should also be included in the testing process, as this will provide a comparison and act as a baseline. The duration of the test should also be considered. Generally, a longer test will provide more reliable data, though this can also be more costly. Statistical significance should also be taken into account, as it will determine the confidence level of the results. Finally, the insights that are gained from the A/B testing process are invaluable. These can be used to help inform future decisions and help companies continue to improve their products and services
While the above elements are keys to an effective A/B testing deployment, there are some additional pitfalls that small businesses can run into. Suppose we had a small business looking to test out the effectiveness of a coupon mailing program. They select a large enough sample size, randomly select a control and treatment group, mail out the coupon to the test group and track the selected customers in the two groups for a well-defined duration. As they review the results coming in from the test here are some keys to keep in mind
Not looking beyond the average
Some customers may have a higher level of access to the coupon, causing a lift among one type of customer and a fall for another type. Finding ways to get light users to increase consumption is often a businesses' biggest opportunity. But in the context of the testing there needs to be a way to account or discount for group-specific behavior
Forgetting that customers are connected
Even though the test separated customers in control group A from those in treatment group B, it is very likely that the customers in A can have interactions with those in B. This can lead to the coupon meant for a customer in group B ending in the hands of a customer in control group A. This can lead to sample dilution and reduce the statistical significance of the results of the test. To avoid these techniques are needed that allow you to measure the extent of group interactions or avoid them altogether. For instance you can use time-series experiments where you apply the coupon to all customers for some time and compare that with the absence of the coupon for a certain duration. This allows more accurate decision making while enabling large enough sample sizes.
Focusing Predominantly on the Short Term
The Initial signals from a test may be different from long term, since one encounters the "Burn-in effect “ . There is also the impact of seasonality which can trigger different behaviors. Over time multiple changes may introduce change in behavior of customer and its important to measure the long-term effect. This can be addressed by running the experiment long enough to get the steady-state effect and running “holdout “ experiments- customers who don’t receive any of the treatments for sometime
No matter the size of your business, A/B testing can be a great way to measure and improve your marketing results. By understanding the challenges and taking practical steps to overcome them, you can maximize your chances of success and get the most out of A/B testing. With the right approach and strategy, you can use A/B testing to help propel your small business to the next level.
