What is practical significance?

Answer 1

There is statistical significance, an arbitrary limit whereby an observed difference could reasonably be assumed to be due to some factor other than pure chance. Then there is practical significance, an arbitrary limit whereby an observed difference is of some practical use in the real world. Let's say you add Ingredient X to your car's oil that is supposed to improve fuel efficiency. You conduct a careful controlled experiment, measuring fuel efficiency before and after introducing the additive. You find that the difference before and after is statistically significantly better, and conclude that the additive does indeed improve fuel efficiency. However, Ingredient X costs $1000 a bottle - effectively negating any fuel efficiency savings. You don't really drive your car that much so conclude that the difference is not practically significant.