1. Test Overview
This A/B test aims to evaluate the impact of a proposed pricing adjustment for our 'Pro' and 'Business' plans on new user signup-to-paid activation rates and overall customer lifetime value. The goal is to identify a pricing structure that optimizes conversion while maintaining or improving long-term value.
2. Hypothesis
Primary Hypothesis (H1): By increasing the 'Pro' plan price from $29 to $35/month (while enhancing features) and maintaining the 'Business' plan price (while enhancing features), we expect to see a statistically significant increase in the Activated Paid Conversion Rate (new sign-ups converting to any paid plan within 30 days) by at least 15% for new sign-ups in North America, leading to a net positive impact on 90-day ARPU and LTV. Null Hypothesis (H0): There will be no statistically significant difference in the Activated Paid Conversion Rate, 90-day ARPU, or LTV between the current and proposed pricing structures.
3. Test Design
- Target Segment: All new sign-ups from North America (US, Canada) who register via our primary web signup flow.
- Test Duration: 4 weeks, followed by a 90-day monitoring period for LTV and ARPU.
- Cohort Split Rule: 50/50 split based on the new user's first session ID, ensuring sticky assignment by user ID for subsequent sessions and purchases.
- Control Group: Users will see our existing pricing: 'Pro' plan at $29/month (5 users, 10GB storage) and 'Business' plan at $99/month (20 users, 50GB storage).
- Variant Group: Users will see the proposed pricing: 'Pro' plan at $35/month (7 users, 15GB storage) and 'Business' plan at $99/month (25 users, 75GB storage).
- Exclusions: Existing users, users signing up through partner channels, or users outside North America.
4. Primary Metric
- Definition: Activated Paid Conversion Rate (APCR) - The percentage of new sign-ups who convert to any paid subscription plan within 30 days of their initial signup.
- Measurement: (Number of new sign-ups who activate a paid plan within 30 days) / (Total number of new sign-ups).
5. Guardrail Metrics
* 7-day Churn Rate: Percentage of activated paid users who cancel their subscription within 7 days of activation. * Average Revenue Per User (ARPU): Average revenue generated per user within 90 days of signup. * Signup Volume: Total number of new sign-ups during the test period.
* 7-day Churn Rate: Must not increase by more than 5% relative to control. * 90-day ARPU: Must not decrease by more than 2% relative to control. * Signup Volume: Must not decrease by more than 10% relative to control.
6. Stopping Criteria
- Statistical Significance: A p-value < 0.05 for the primary metric (APCR).
- Minimum Detectable Effect (MDE): The test is powered to detect a 15% relative uplift in APCR. If the observed effect is less than 15% even if statistically significant, further analysis will be required.
- Practical Significance: The observed increase in APCR, combined with guardrail performance, must indicate a clear positive impact on overall revenue and LTV projections.
- Early Stopping Conditions: If any guardrail metric breaches its defined threshold by more than 2x (e.g., 7-day churn increases by 10% instead of 5%), the test will be halted immediately.
7. Decision Rule
* Go: If APCR shows a statistically significant uplift (p < 0.05) and meets or exceeds the 15% MDE, and all guardrail metrics remain within acceptable thresholds, the proposed pricing change will be implemented. * No-Go: If APCR does not show a statistically significant uplift, or if it shows a significant decrease, or if any guardrail metric breaches its threshold, the proposed pricing change will be rejected.
* Go: Begin phased rollout of new pricing, update marketing materials, inform sales. * No-Go: Re-evaluate pricing strategy, analyze test data for insights, propose new hypotheses for future testing.
8. Required Resources
- Engineering Team (for A/B test implementation in billing/signup flow)
- Analytics Team (for dashboard creation, monitoring, and final analysis)
- Product Marketing Team (for messaging alignment and test design input)
- Billing System (for accurate price application and tracking)
Current Pricing Details: Our current 'Pro' plan is $29/month, offering 5 users and 10GB storage. Our 'Business' plan is $99/month, offering 20 users and 50GB storage. Proposed Pricing Details: We propose increasing the 'Pro' plan to $35/month, while increasing user limit to 7 and storage to 15GB. The 'Business' plan remains $99/month but now offers 25 users and 75GB storage.