Not sure how to work out where to set your free shipping threshold?
Here’s a simple way to work it out 👇
Do you know your AOV? Good. Let’s take that a step further.
Next, take the last 90 days of orders (and their values) and plot out the distribution of these orders. I’d suggest you segment these into bands of £9. This would look something like this:
£0 – £9 – 20 orders £10 – £19 – 30 orders £20 – £29 – 30 orders £30 – £39 – 100 orders and so forth…
Drop these into a graph to make it easier to understand the distribution.
Do you have a natural peak where the orders are concentrated most?
If so, here’s your spot. You should place your free shipping threshold £5 or £10 higher than this. The aim is to incentivise customers who were ready to purchase at that level already to spend a little bit more to hit the the free shipping limit.
That’s it! That should get you started.
Once you have your target level you should start to explore questions & topics such as:
- Is this level profitable?
- If it’s not profitable, how can you make it so without offering a poor shipping experience?
- Is there a secondary peak on the graph?
- If so, explore the idea a secondary threshold that offers free express shipping or a free gift to incentivise increased basket values
- Is £10 higher than the spot to high? What’s the impact if I drop this to £5?
And finally from me – you should be looking to analyse and test the threshold reguarly. The distribution of order values can change regularly, adapt your strategy each time to maximise your AOV.
Are you struggling with free shipping thresholds or how to scale your DTC business and don’t know where to start?
Then it sounds like you need an eCommerce consultant to help you get started. Drop me a contact form and let’s have a conversation today!