Chewy.com is a pet products website, which allows customers to shop for pet prod

Question

Chewy.com is a pet products website, which allows customers to shop for pet products online and have product shipped to their home. Their policy is that for orders over $50 the shipping is free. They are testing a higher dollar amount ($75), and one of the metrics they are looking at is the number of abandoned shopping carts among the test and control groups. The data is shown below:

The concern of the marketing team at Chewy.com, is that they will see a higher rate of shopping cart abandonment if they adopt the new price threshold for free shipping.

Construct a 99% confidence interval for the shopping cart abandonment rate under the two shipping offers and fully interpret your results and their implication for the Chewy.com business.

Panel number of customers customers placing items in shopping cart number of abandoned shopping carts Control Group --free shipping for $50 or more 3000 750 200 Test Group --free shipping for $75 or more 3000 765 233

Explanation / Answer

p=proporiton of abonodened carts

(1-alpha)*100% confidence interval for population proportion (P)=sample proportion (p) ±z(alpha/2)*SE(p)

p1=x1/n1=200/3000=0.0667, SE(p1)=sqrt(p1(1-p1)/n1)=sqrt(0.0667*(1-0.0667)/3000)=0.0046

99% confidence interval for P=p±z(0.1/2)*SE(p)=0.0667±2.5758*0.0046=0.0667±0.0118=(0.0549,0.0785)

p2=x2/n2=233/3000=0.0777, SE(p2)=sqrt(0.0777*(1-0.0777)/3000)=0.0049

99% confidence interval for P=p±z(0.1/2)*SE(p)=0.0777±2.5758*0.0049=0.0777±0.0126=(0.0651,0.0903)

since both the interval is not disjoint so it cannot said that higher rate of shopping cart abandonment if they adopt the new price threshold for free shipping with 99% confidence

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