I love testing. I truly do. Especially when it involves behavioural science.
A few years ago I was working on Mobileheads (unfortunately they’ve shut down), at the time the sites main strategy was using flash deals to sell products at a negligible margin – usually 10-15%.
Here’s a snapshot of their Google Analytics account:
Most of these visitors that came were ready to purchase immediately. They’d pay the flash sites and in return they’d get a 100% off voucher code to redeem on Mobileheads.
The traffic was extremely hot, but, they had no intent on purchasing anything additional – the majority of the traffic were deal hunters not interested in anything but what they had already paid for on the flash deal site. You can see that from their whopping 30% conversion rate (12x above industry standard).
I was asked to help effectively with increasing their revenue. They needed a win to make a profit to hedge their risk – just statistically with a potential 2% return rate and their small 10-15% profit margin, they understood the danger behind the flash deal going south and leaving them worst off.
When I get involved working with a client, I tend to overstep my boundaries. I dig into profit margins, resource availability and more, mainly because I always discover something I can leverage.
Sitting with Mobileheads, I analysed their business with them and I found something interesting:
They had two shipping options on their site
- Priority shipping – 1-2 days – $3.99
- Economy shipping – 3-5 days – $2.99
Because of the sheer volume of orders coming in, it was much more feasible to send everything out as priority shipping as the service costed almost the same as the economy shipping. Adding another filtering process to their picking and packing chain was more expensive that just sending the products out on the same shipping service.
Now, priority shipping was $1 more expensive, this $1 extra could really play a big part in aiding their profit margin.
Data showed their customers were willing to wait a theoretical extra 2-3 days to save that $1. The split of orders only had 9% of people upgrading their shipping to priority. It was a little extra income for Mobileheads, but not enough to call it successful (approximately $3,200).
What we decided to do
I tested something quite unique. I had followed behavioural economist Dan Ariely’s work closely and I read about his experiment using students in his MBA and the options he gave them.
Dan Ariely’s – Paris without coffee experiment
In this experiment, Dan asked his class whether they would prefer to go to Rome or to Paris on an all-inclusive trip, the options were:
- Rome – all inclusive
- Paris – all inclusive
As you would imagine, both cities are quite unique – 50 50 split right down the middle.
He then added in a third option. One which seemed redundant at the time:
- Rome – all inclusive
- Paris – all inclusive
- Paris – all inclusive – except coffee (pay for your own coffee)
Having option 2 available, no one would ever select option 3. We would expect to see the same results, 50 50 for option 1 and 2. Right? Wrong.
Here’s where it gets interesting
The results showed a whopping 68% now opting in for Paris (Option 2).
With the worse option 3 being introduced, option 2 became much more lucrative to students.
Pretty interesting stuff right?
The economist had a similar example on their site many years ago:
Same scenario. A healthy 84% chose option 3 (print & web). Having option 2 (Print) available makes option 3 seem much more valuable.
How we applied Dan Ariely’s work to Mobileheads
I thought I’d try something with Mobileheads’ shipping rate. A “fake” third option to sway the pack.
Scenario before my experiment:
- Priority shipping (1-2 days) – $3.99 (9% selected this option)
- Economy shipping (3-5 days) – $2.99 (91% selected this option)
Scenario after my experiment:
- Priority shipping (1-2 days) – $3.99
- Priority shipping (2-4 days) – $3.99
- Economy shipping (3-5 days) – $2.99
Guess what?
31% conversion on option 1. $11,019 for Mobileheads.
We managed to increase the opt-ins for priority shipping by 31%, simply by adding a redundant option. This gave Mobileheads crica $7,000 extra without changing anything in their currently workflow.
Not bad for 10 minutes of implementation, right?
Let me know your thoughts in the comments below.
