ON E-commerce Pricing Strategy
How to use data and experiment design to achieve your strategic goals.
I have previously lightly touched on how pricing and promotion were key domains of an e-commerce data strategy, but never got around to explaining in details how to effectively act on it.
Concepts of elasticity of demand
Experimentation — in-Session conversions
Facebook allows us to set up split tests to test the performance of different ad sets. These split tests allow us to get a sense of the elasticity of demand across various metrics, using in-session performance. Similar approaches can be performed on an existing customer base, using a CRM or Marketing automation platform.
Looking only at users who have initiated a session directly after having been exposed to an advertisement, and only using that session information can give us an excellent proxy performance as to the type of uplift we can expect from the different pricing.
There are a few caveats to this, however:
- it requires that the test be done in a small enough subset of the…
