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Power Analysis for Small Lift Experiment

MediumStatistics & Probability00:00
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Problem

Business Context

StreamCart is testing a new personalized recommendation widget on its mobile home screen. Product expects only a small improvement in purchase conversion, so the main question is whether the experiment can detect that lift with reasonable power.

Problem Statement

You are planning an A/B test on purchase conversion rate. The baseline conversion rate is 8.0%, and the team wants to detect a minimum meaningful lift of 0.4 percentage points (from 8.0% to 8.4%). Assume a two-sided test with significance level 5% and target power 80%.

Given Data

MetricValue
Baseline conversion rate p1p_1p1​0.080
Expected treatment conversion rate p2p_2p2​0.084
Absolute lift Δ\DeltaΔ0.004
Relative lift5.0%
Significance level α\alphaα0.05
Target power $1-\beta$0.80
Daily eligible users120,000
Traffic split50% / 50%

Requirements

  1. State the null and alternative hypotheses.
  2. Compute the required sample size per group for a two-sample proportion test.
  3. Estimate the total test duration in days.
  4. If the team can only run for 7 days, compute the approximate power with that smaller sample.
  5. Explain how small expected lift affects sample size and what trade-offs you would discuss with the product team.

Assumptions

  • Users are independently randomized and counted once.
  • Equal allocation to control and treatment.
  • Normal approximation for two proportions is appropriate.
  • No major seasonality or novelty effects beyond the planned test window.