There was a great article by BCG on loyalty programs and its economics & levers. The overall article is very useful, but it triggered a clever test in my mind that we decided to try.
Here are 2 versions of our “Purchase” screen (before and after):
Take a close look at them and answer the following questions
- Has purchase conversion rate changed? If yes, then how?
- Has average purchase value changed? If yes, then how? And what is more important: why?
OK, a clever reader knows that it has improved the purchase value 2x times ☺ But why? Any ideas?
My assumption is that people just like to win. They perceive the “15 flights + 5 flights gift” pack for $14.99 much higher than “20 flights pack” for $14.99, though mathematically this is the same thing! They think they are winning here, they are receiving some additional value and it makes them more motivated for purchase.
The “before” and “after” distribution of purchases for 3 options is:
- Before: 5 flights — 80%, 20 flights — 9%, 1 year — 11%
- After: 5 flights — 38%, 20 flights — 21% and 1 year — 41%
which has eventually improved our average purchase value 2x times: from $8,1 to $15,3!
But am I missing something? Yes, you might noticed that distribution for annual subscription has changed as well, while we were expecting only changes for 20 flights pack..Right? Or not? Let me know your thoughts ☺