How To Make Money With Free Shipping Threshold

Offering free shipping volition meliorate your conversion charge per unit. Guaranteed! But, information technology besides tin can kill your profit margins if you're not conscientious.

So, how do y'all make free shipping profitable?

In this article, I'll review 4 unproblematic tests that any e-commerce shop owner can run to maximize profits on a free shipping offering. If you do this right, you tin can see 15-30% improvement in net turn a profit (non just conversion). The steps are:

• Institute a Baseline: Compare conversion with and without a free shipping offer.
• Create Thresholds: Increase the minimum order value required for gratuitous shipping, and test the improvement in margin.
• Fix Restrictions: Encounter what kind of improvement you'll get by offering free shipping merely on select products where it is profitable.
• Enact Cost Increases: Increase all your product prices to compensate for the loss you take on free shipping, and come across how your profit compares.

We'll apply real data from an e-commerce site that ran these experiments. To maintain client confidentiality, I've drafted some sample screenshots using a generic logo rather than the visitor-specific folio. The tests and data, though, are real.

Permit's dive in!

Why You Should Offering Complimentary Shipping

Adding free shipping to e-commerce sites is a surefire fashion to improve your conversion rate. Do a quick search on "Free Aircraft Conversion Charge per unit" and y'all'll notice enough of instance studies:

• Red Door found that adding a free shipping threshold to NuFACE increased orders by 90%
• 2 Big Feet did a similar experiment on their own and increased orders by 50%
• Comscore establish that Free Shipping Day increased sales past 16%

Whatever e-commerce owner is going to exist thrilled to raise orders/sales by this much. Withal, unless repeat purchases drive a big portion of your sales, offering costless shipping may not be assisting. It's non worth offering free shipping unless you lot tin make the offering profitable.

Many shop owners take tried free aircraft in the past, gotten burned past depression profit margins, and simply pass up to practice any further testing. This is a common objection, and I desire to review how you can overcome this to truly maximize your site.

How to Ready Up Your Tests

Earlier you do whatsoever blazon of A/B testing, yous have to be clear on what you are optimizing for. In due east-commerce, this is specially of import, equally at that place are tradeoffs betwixt optimizing for net margin versus optimizing for lifetime value.

For the tests below, I strongly recommend optimizing for net profit per visitor. While both Visual Website Optimizer and Optimizely make optimizing for acquirement piece of cake, optimizing for cyberspace profit per visitor is more hard considering yous need to really track what products are purchased in order to understand your margins on each production.

To optimize for net profit, you should create two different site versions and do a split URL exam rather than a standard A/B test using CSS overrides. This will make the cyberspace profit calculations much easier.

Here'south what I mean:

Yous could do a "hack" and do a simple CSS override where you change the prices on the front-end, but not on the dorsum-end. But, that's kind of a bad customer experience, so it's much better (at least I call up) to create two separate site versions.

OK, now the actual tests:

1. Plant Your Baseline

Before even worrying nigh whether you can make complimentary shipping profitable, you need to test how much making the offering will lift your conversion rate in the first place. If offering costless shipping won't raise conversion, why get through all the problem?

Showtime, you should A/B examination your conversion charge per unit with and without the costless aircraft offering. Here'south an case test:

Original Header

Test Header – Free Shipping Added

This test is easy to implement visually. You simply need to brand a gratuitous shipping offer in the header. But, to be able to offering this, I'd recommend coding up 2 different versions of the site so that you tin more hands rail which orders yous offering shipping on and which you lot don't.

Here are the results:

• Conversion Improvement: +26%
• Average Lodge Value: +5%
• Internet Margin/Society: -32%

Full Comeback in Turn a profit = (1.26) * (ane.05) * (0.68) = -10%

This is what I label your "baseline improvement" in conversion. It shows you how much "potential" you lot accept to boost conversion rate/profit. Looking at the numbers to a higher place, nosotros know we have a big opportunity. A 26% lift in conversion is huge! Now, it'due south just a matter of running a few more tests to encounter if nosotros can get profits upwards at the same time.

(Boosting conversion at the expense of turn a profit may not be a bad thing if you are looking to optimize toward client LTV. For instance, if repeat business is a large portion of your sales, it's worth taking a lower upfront turn a profit to get new customers, and maybe you lot could even dynamically offering free shipping depending on whether someone is an existing or new customer. But, to keep things uncomplicated, we'll assume that internet turn a profit is the goal.)

Hither's what you do next:

2. Shipping Thresholds

The most obvious way for you lot to salve your margins while offering free shipping is to raise your threshold. This "forces" customers to spend more than to get gratuitous shipping and helps to raise your margins.

For case, this store originally offered free shipping on orders over $100, but what if you offered:

• Complimentary shipping over $125
• Free shipping over $150

Setting up an experiment for this is simple. Just alter out the header values and edit the code to change the toll at which gratis shipping is offered. Here are screenshots to illustrate this:

Exam Headers – A and B

Gratis Shipping Over $125 – A

Free Aircraft Over $150 – B

Here are the results:

Version A – $125

• Conversion Comeback: +20%
• Average Order Value: +ten%
• Internet Margin/Society: -xiii%

Full Improvement in Internet Profit/Visitor = fifteen%

Version B – $150

• Conversion Comeback: +eight%
• Average Lodge Value: +8%
• Internet Margin/Order: -5%

Full Improvement in Net Profit/Visitor = 11%

Yes! Adding thresholds beats the original Complimentary Shipping Over $100, with a lower threshold actually performing ameliorate on net profit and conversion improvement.

This type of "tipping indicate" is common when testing thresholds. If you ask customers to brand likewise high an investment, yous scare them abroad; likewise low and you don't accept plenty margin. The name of the game is to figure out the exact price at which to offer free shipping in order to go your all-time threshold.

Yous can imagine limitless possibilities here for prices, just I strongly recommend keeping things uncomplicated. Offers similar "Gratuitous Shipping Over $105!" tend to confuse consumers as information technology'south not a standard price.

At this signal, you could stop testing and use Free Aircraft Over $125 as the winner. Merely, with a "test everything" attitude, there withal are 2 other things yous should endeavour in club to get your highest total profit:

iii. Restricted Shipping

A third easy way for you to brand gratuitous shipping offers work for you is to offer them but on products where y'all know the shipping cost is low. Hither's an example:

Brake – Shoes Only

This blazon of offer is "safe" because you know you can afford to brand this type of offer long-term. Information technology's besides like shooting fish in a barrel to implement. Over again, but a visual change in the header, and then some coding in the cart to exist certain you're offering gratuitous shipping only on orders with shoes.

Here are the results:

• Conversion Comeback: +8%
• Average Order Value: +ii%
• Net Margin/Guild: -2%

Full Improvement in Net Margin = 8%

A brake worked improve than the original free shipping offer in this case only because it didn't cut into the margin. But, it stinks when compared with the threshold. It's also interesting to notation that in this examination, sales of shoes compared with the other product lines remained flat.

Restrictions generally piece of work best when you have one type of product that dominates your sales and has a depression shipping toll. For example, if most customers are coming to your site to buy shoes, then of course offering free shipping on shoes is going to appeal to a large number of your customers. If, on the other mitt, you have a variety of products, then you shouldn't await a huge improvement from offering shipping just on one product.

One time y'all've reached this bespeak, you've got one examination left:

4. Test Higher Product Prices

The last "trick" in your pocketbook is to try combining college product prices with an offer of free shipping.

Generally, increasing prices will lower conversion, just the primal here is the total combined cyberspace effect of the price increase with the conversion subtract.

Enough theory, here'due south an case:

Original

Test – Higher Prices and Free Aircraft

The store increased prices on all items in the test version with free shipping by ~10%. (The higher prices were to offset the shipping costs.) Annotation that you lot absolutely must design 2 different versions of your site to truly implement this test. It's much easier to create two unlike versions of the site and test them against each other in a split up URL test than to practice a "hack" with standard A/B testing software.

Hither are the results:

• Conversion Improvement: +18%
• Average Lodge Value: +15%
• Net Margin/Order: -5%

Full Net Improvement = (1.18) * (1.15) * (.95) = 26% Improvement in Net Margin

(Smash!!)

Doing a elementary toll increase beyond the lath decreased conversion rate improvement but raised average guild value and net margin per order enough to brand up for this. This test crushed the previous baseline and showed a 26% improvement in internet margin. Winner!

Will this work for you? It depends on how competitive your niche is:

• Unique, Non-Competitive Niche: You lot likely tin can combine free shipping with a price improvement and see a full internet improvement in margin. This is because customers aren't "price shopping" and you lot have some leverage with your product.
• Commodity/Competitive Niches: If you're selling used laptops, car parts, etc., then this strategy may not work likewise for you lot, although it's still worth testing. Consumers aren't always rational when making a purchase. And, if your competitors are non offer free shipping, it's worth trying it out.

Once more, because toll testing requires a bit of coding work, it's all-time to leave these tests to the end. But with results similar this, it'south well worth the effort.

Summary

Don't stop at free shipping lone! In one case you lot've determined how much complimentary shipping lifts your conversion rate, try adjusting your thresholds, using restrictions, and increasing your prices to clasp some additional profits from your complimentary shipping offer. Come across if yous can detect the platonic combination of higher conversion rate and profits that give you lot a profit boost and new additional acquired customers.

About the Author: Andy Chase is the lead optimizer at Uplift, where he oversees all optimization challenges. For more CRO tips, you tin follow him on Twitter @upliftroi.

See How My Bureau Can Drive Massive Amounts of Traffic to Your Website

• SEO - unlock massive amounts of SEO traffic. See real results.
• Content Marketing - our team creates epic content that will get shared, go links, and concenter traffic.
• Paid Media - effective paid strategies with clear ROI.

Book a Call

Source: https://neilpatel.com/blog/make-free-shipping-profitable/

Posted by: taplincappillemper.blogspot.com

Share this post