Every customer appreciates free shipping! Although free shipping thresholds are an incredibly effective method of boosting AOV, it is also expensive. Due to this- getting your free shipping threshold right is a big deal: what amount should the threshold be and what factors should be considered to determine this threshold?
The Free Shipping Threshold report identifies the sweet spot where customers are motivated to spend a bit more to qualify for free shipping without making it so high that they abandon the purchase completely. Let's take a look at your data and check if your free shipping threshold is set too low, too high, or just right!
Definitions
The Free Shipping Threshold report allows you to understand the value of which you should set your free shipping threshold to.
For this analysis, by default, all transactions of the last 6 months are considered. For this dataset, we first compute the median order value to identify the usual buying behavior of your customers.
For brands that installed RetentionX after August 3rd, 2022, the report is populated with all the data from the last 6 months. If RetentionX was installed prior to this date, the report fills with data starting on August 3rd.
Based on this median order value, we propose where to set your free shipping threshold. As this value is set just high enough to your customers to spend more than they typically do in order to receive the offer, but not too much to where the customer would feel as though the threshold is not worth reaching for.
The AOV used for this calculation is based on the order value the customer sees at checkout; independent from the revenue definitions set in RetentionX.
| Median Order Value | The middle value of your customers' order values (last 6 months) |
| Threshold Proposal | Our suggestion for setting a threshold for free shipping. This value should always be to the right of the median. |
| AOV | Average order value; divided into 25 buckets |
| Orders | Number of orders with this rounded value (last 6 months) |
| % | Share of orders with this rounded value (last 6 months) |
Use Cases
The Free Shipping Threshold report reveals whether your free shipping threshold is set too low, too high, or just right.
1. Your free shipping threshold is set too low.
If your free shipping threshold is set too low, you will see a large number of orders at and beyond your threshold level. Your data may look like this:
In this case, there is a large number of orders before the threshold that qualify for free shipping. This means you're giving free shipping away too cheaply, so a large number of your customers have no motivation to reach for it.
Solution: Raise your shipping threshold to the threshold proposed by us. This is a potentially unpopular move, but one that could have a big impact on your bottom line.
2. Your free shipping threshold is set too high.
If your free shipping threshold is set too high, you will see a large number of orders at and before your threshold level. Your data may look like this:
Implementing a free shipping threshold which is too far from the median order value can ultimately lead to driving customers away as they value free shipping and aren't encouraged to add extra items to their cart to qualify.
Solution: Move the free shipping threshold lower, which should result in a significant increase in order values.
3. Your free shipping threshold is set just right
If your free shipping threshold is set just right, you will see a dip between the highest number of orders and the threshold, but it will be a small one:
If you're on the right track, congrats! The highest number of orders fall below the threshold, but not far below it. The threshold is set just far enough from the median order value that customers are still willing to add an extra item or two to their carts to qualify for free shipping, ultimately increasing AOV.
What You Need
For this report to work properly, the following data must be imported:
- Order ID
- Order Date
- Stock Keeping Unit (SKU)
- Items Sold
- Item Price
- Customer ID
- Discounts
- VAT
How to Get More Details
The distribution of your customers’ AOVs is shown as a line chart split into 25 buckets followed by a table with the absolute figures.
Boost your efficiency by using the general RX report functionalities.
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