Week1考试查缺补漏：A-B testing

Revenue Metrics

“Revenue Metrics” as outward-facing metrics that have to do either with sales (for example, revenue and unit sales by time interval, customer, or geographic region, the “funnel” of qualified leads for enterprise sales) or marketing (for example, response rates to advertisements or email campaigns).

Profitability Metric

“Profitability Metrics” is defined as those related to “the efficiency of processes by which the company creates and delivers its products and services to its customers.”
It includes “how much is spent on variable costs [such as] raw materials and labor.” Cost of aviation fuel is at least partially under the Company’s control, as it could make changes in equipment or routes that would improve cost per passenger seat mile, or use options to guarantee future fuel prices.

Efficiency metrics include how long products are in inventory, as well as losses due to “unsold inventory . . . unsalable due to spoilage or wastage.” While cost of goods sold per unit could be a measure of efficiency, overall cost of goods sold in a location would not be, as that could change for many reasons, including greater cost of goods sold simply because more units were sold.

How to increase efficiency when managing time-sensitive inventory? The first change to introduce when faced with excess inventory that is subject to complete wastage is variable pricing. Variable pricing means that the same service is selectively offered at lower prices when demand is lower (and higher prices when demand is higher).

Risk Metric

“Risk Metrics” is defined as those relating to “potential dangers a company faces…Net cash out is always the most important [risk] metric to track. How many months can the company survive at the present burn rate?”

Four reasons to minimize time in inventory

They include: negative float, cost of storage, risk of complete wastage, and product obsolescence.

Growth is not always good

“one of the most common triggers” for profitable companies to run out of cash is “uncontrolled or unplanned sales growth.”

Estimate Days inventory

Days inventory can be calculated from annual cost of goods sold, and value of year-end inventory.

A-B Testing案例

One online shopping business found that 20% of shoppers quit during the checkout process without buying anything. A good next step would be:

When the reason that shoppers are dropping out of an online checkout is unknown, concluding that shoppers don’t understand the process well enough, are having second thoughts because prices are too high, or are simply irritated and need an apology, would be nothing more than a guess. A much better approach is to determine the real factors influencing dropout rates. This can be done through randomized experiments known as “A/B” Testing.

Shoppers are randomly assigned to one of two groups:

• a group using the current process
• and a group where minor changes are made to the process which may improve customer retention.

Changes that result in significant improvement are kept, and others discarded.

Week1.5-动态指标案例Amazon.com：The video, Revenue Metrics: Amazon.com as a Leading Example of the Use of Dynamic Metrics discusses Amazon as an example of the sophisticated use of A/B testing for revenue optimization.

Amazon策略

To be a best-seller on Amazon, your book needs to be one of the top selling books in its Amazon topic subcategories.

Amazon defines its “best-sellers” as books that are selling at the highest rates when compared only to recent sale of other books in the same Amazon-defined subject area categories. Also review Amazon’s “frequently bought with” feature.