Cuddle Clones’ founders always had a hunch: because of how unique their products are, the sentimental value it provides, and the fact that they scarcely have a competitor that offers the same level of quality and service, they may be able to price their products much higher than the current prices. But for months, they were engaged in a drawn out acquisition process — as soon as the acquisition was completed, Cuddle Clones’ founders were eager to prove to their new parent company that Cuddle Clones’ products have significant pricing power that can, and should, be exploited. They came to Tontine with just one demand: show me how high I can price my products without losing conversions. Tontine delivered, and more.
From the outset, Tontine’s Price Optimization Experts realized that tackling the challenge set forth by the Cuddle Clones team would be challenging for two reasons: (1) the company’s data warehouse was messy and largely unstructured which makes it difficult to conduct in-depth analysis; and (2) any test that involves testing the upper bounds of a product’s price elasticity curve cannot correlate to a higher CPA on paid social channels, since they had strict CPA targets to prevent margin compression. Tontine’s experts tackled the first issue by applying a data model that had been previously built for another client in the pet accessories vertical — this quickly illuminated the fact that, based on historical shoppers behavior, there’s significant price insensitivity when it comes to add-ons and upsells (which 55%+ of customers choose to add to their orders), but may face resistance if the baseline prices were manipulated in any way. Secondly, in collaboration with Cuddle Clones’ engineering team, we developed a custom analytics tracker to ensure there’s no positive correlation between an increase in experimental prices and CAC reported by various paid social channels.
Upon the conclusion of the initial price tests, it became clear that Cuddle Clones could increase the price of the most popular add-ons and upsells (i.e. the Custom Pet Bandana and Zipper Pouch — both of which are featured prominently in the checkout flow) by up to 610% without seeing a dip in conversions. This translated to a 14%+ increase in company-wide gross revenue while CPA remained constant; marketing budget as a percentage of sales decreased from 38% to 31%. In short, Tontine drove a 21x ROI within just 90 days of working together.