This is a guest blog post by Qubit, a Demandware certified partner.
As an online retailer, if you’re not offering free shipping, you’re most likely thinking about it. A recent Comscore study found that nearly half of all online stores offer a free shipping option. Customers are starting to expect it everywhere they shop, and will accept longer delivery times in exchange for free shipping. In fact the study also found that 61% would consider abandoning their cart if free shipping isn’t offered. Customers often earn free shipping by reaching a certain minimum order value, but every store has to find the right threshold for their brand, their customer, and their market. How did you set your free shipping threshold to satisfy your customers and maintain profits?
You might have picked a number by considering what the competition is doing or how much it costs you to ship products. Or maybe you just went with your gut. Your customers might not consider your competition the same way that you do. In fact, you might be undervaluing or overvaluing your brand in comparison. And determining the threshold based only on your shipping cost overlooks the value of free shipping as a marketing tool. Eighty-one percent of customers say they’re willing to wait two more days for delivery if shipping is free, so it’s not just a matter of saving a few dollars—it’s a big part of the customer experience.
There’s no simple formula for calculating the right place to set a free shipping threshold. If you want to make a verifiable impact on customer behavior, the only way to find the right number is to test. Using good testing methodology, you can find the policy that attracts the most incremental revenue while keeping costs in check.
There are, however, a few common pitfalls to avoid when testing a free shipping policy. Here’s what you need to know:
Look past the obvious metrics. If you’re testing free shipping for the first time, conversions are virtually guaranteed to go up. But by how much? Is the effect as big for loyal customers as it is for first time visitors? Focus on incremental value instead of getting distracted by large trends.
Maintain identical experiences. When you’re testing new thresholds against your existing policy, make sure that every customer has the same experience. If the customers seeing your test offers have to enter a promo code, for example, your control group must enter one as well. Otherwise, you won’t know if customers are responding to the free shipping threshold or to the user experience of entering a code.
Continue to iterate. The biggest mistake you can make is to stop testing and innovating as soon as you find the most profitable threshold. That’s only the beginning! Test different ways to display the promotion to visitors. Use dynamic messaging to show how close the shopper is to qualifying for free shipping, then add product recommendations so customers can hit the free shipping minimum without leaving the checkout process.
Thanks to Amazon, online shoppers have come to expect free shipping, but retailers don’t have to give up something for nothing. Test your free shipping threshold to find a policy that attracts customers and makes money at the same time.
Learn more about free shipping and free returns Get Your Ship Together, Qubit’s deep dive into the four most common shipping problems facing online retailers.