How to Lay the Foundation for a Data-Driven Business With A/B Testing Big Data offers tantalizing opportunities that can be seized with the right tools and culture.

By Brooks Bell

Opinions expressed by Entrepreneur contributors are their own.

Entrepreneur

As we click, scroll, swipe and tap our way across the Web, we leave a trail of data.

Entrepreneurs are rushing to figure out how to profit from this. Indeed, the promise of data, Big Data in particular, is that businesses of all sizes can now make smarter decisions, create more personalized experiences for each customer and grow faster than ever. The data-driven business is the proverbial city on the hill, an amazing place to reside and the aspiration of those watching from afar.

Realizing the promise of data, however, is harder than it looks. For one, making sense of this data requires specialized training and talent that is in short supply. Second, the entrenched processes that drive many businesses get in the way of new data-inspired approaches.

Finally, data is sometimes ignored when it challenges the intuition of executives and experts. All the data in the universe is useless without a practical, repeatable method for extracting insight from it and a culture that trusts and supports these insights.

Related: Web Startup Scores $28 Million to Simplify A/B Testing

Fortunately, A/B testing is a readily available approach for using data to immediately improve business performance while building an analytical culture at the same time.

A/B testing allows a business to make sense of customer data in a practical, measurable way. Far more than a comparison of button colors or badge shapes, properly executed web testing develops a better understanding of user psychology and reveals the unique needs of visitors, leading to the growth and profit promised by the data revolution.

Here are four ways to apply A/B testing to your organization.

1. Make data-inspired observations. The process begins with an analysis of existing data. Maybe returning visitors bounce from the homepage more than new visitors or a large percentage of users exit midway through a checkout process. Or maybe your business has a goal to increase average order value or free trial registrations built around an underperforming part of a website.These observations should inspire questions and help focus testing efforts.

2. Formulate a hypothesis about your customer. Once an area of focus has been identified, it's possible to make a prediction about how it could be improved.

Looking at average order value, for example, may reveal that it hovers around the threshold for earning free shipping. Increasing the free shipping threshold, a reasonable hypothesis might suggest, will increase the average order value. Such a hypothesis is interesting because it is inspired by previous research, impacts a key business goal, and offers insight into the purchase behavior of customers.

Related: More Online Publishers Ought to Try A/B Testing

3. Test a prediction. A testing platform such as Optimizely or Adobe Target allows for experimentation that tests a hypothesis by temporarily publishing a redesigned element on your website to compare with the original element. To do this, a portion of the website traffic is split randomly between the various test conditions. Behavior within each group is recorded and measured.

4. Tell the story. After running the test, it is critical that results are carefully analyzed. A test might reveal, for example, that increasing the free shipping threshold did indeed increase average order value but deeper analysis might reveal that it decreased overall orders. Changing the free shipping threshold, this suggests, was persuasive but perhaps not the best way to increase average order values and ultimately total revenue.

Even this simple example illustrates how testing is a practical tool that allows businesses to profit from the data they can easily collect. Each new test builds on the insight gained from previous efforts and contributes to a deeper understanding of the psychology of their customers.

The better a website addresses the mentality and needs of its users, the better it will perform. For many businesses, that means an increase in revenue, an undeniable bonus for a process that also creates a data-driven culture focused on experimentation, innovation and sustainable growth.

Related: How to 'Split Test' Your Website to Engage Online Customers Better

Wavy Line
Brooks Bell

Entrepreneur and Leader in Optimization and A/B Testing

Brooks Bell is the founder and CEO of Brooks Bell Inc. She launched the services company in 2003 by combining her study of psychology with a passion for digital design. In doing so, Brooks became a pioneer in bringing the scientific disciplines of A/B testing and optimization to the traditionally subjective field of marketing.

Editor's Pick

A Leader's Most Powerful Tool Is Executive Capital. Here's What It Is — and How to Earn It.
Lock
One Man's Casual Side Hustle Became an International Phenomenon — And It's on Track to See $15 Million in Revenue This Year
Lock
3 Reasons to Keep Posting on LinkedIn, Even If Nobody Is Engaging With You
Why a Strong Chief Financial Officer Is Crucial for Your Franchise — and What to Look for When Hiring One

Related Topics

Growing a Business

The Best Way to Run a Business Meeting

All too often, meetings run longer than they should and fail to keep attendees engaged. Here's how to run a meeting the right way.

Fundraising

Working Remote? These Are the Biggest Dos and Don'ts of Video Conferencing

As more and more businesses go remote, these are ways to be more effective and efficient on conference calls.

Growing a Business

My Startup Scored a Multimillion-Dollar Contract With a Fortune 100 Client in Just 3 Years. Here's What We Learned.

There's no perfect litmus test to gauge if you're ready to go after big business or not — but if you don't take the risk, you'll never realize the reward.

Marketing

5 Questions to Ask a PR Pro Before Hiring Them

You probably haven't considered asking these questions, but they're a great way to find the right PR firm for your business.

Marketing

This Location-Based Marketing Technique Is the Key to Boosting Retail Sales

Let's take an in-depth look at geofencing marketing and how it's helping retail locations drive foot traffic and boost sales.

Growing a Business

The Inevitable Challenges You'll Face as Your Business Grows — and How to Handle Them

There's going to be some discomfort as your business expands, but it doesn't have to stop you from achieving massive success.