Network-wide A/B price testing: $20M+ incremental annual revenue
Strategy & analytics work at a national automated retail company operating 40,000+ locations across the US.
- The question
- Is the current price point ideal? Will a price increase result in a revenue increase? Leadership had an instinct that demand was inelastic enough to support a price increase, but wanted rigorous evidence before committing. A wrong decision at network scale is expensive to reverse.
- The approach
- My work started with a customer survey designed specifically to produce price elasticity curves rather than a simpler "would you pay X" sentiment read. The elasticity data was used to narrow the range of plausible price points to the three most likely to maximize long-term revenue, each representing a different tradeoff between customer retention and per-transaction revenue gain. From there, I selected matched test and control markets comparable in demand profile, seasonality, growth, and other factors, and ran a difference-in-differences design with year-over-year adjustments to isolate the price effect from underlying market trends. The experiment ran with sample sizing based on the minimum detectable effect we'd need to act on, with enough test sites at each of the three price points for conclusive results. Results were monitored throughout against pre-agreed thresholds for rental volume and customer behavior.
- The result
- The live test confirmed the elasticity estimates within tolerance across all three price points. The full set of results were presented to leadership with a recommended price point showing the best balance of customer retention and long-term revenue gain. After the change was rolled out network-wide, the reporting infrastructure built for the test was reused to confirm the expected revenue lift in newly selected holdout markets, validating an estimated $20M+ in incremental annual revenue.
- Why it worked
- The elasticity work narrowed the range of plausible price points before any live testing started, which kept the experiment small and focused while still testing enough alternatives to give leadership a real choice rather than a single recommendation to accept or reject. In the test/control selection process I matched markets carefully to avoid bias and noise from differing seasonality or growth rates, ensuring reliable, readable results.