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Optimizing the free shipping threshold to maximize conversions AND revenue

When Less is More: Lowering the Free Shipping Threshold Leads to increase in Conversion Rate and Revenue

When a leading retailer of environmentally friendly detergent and dishwasher pods partnered with Addison Applications for Conversion Rate Optimization (CRO), we recognized an opportunity to further enhance their already successful online shopping experience. Their shipping rate seemed high for users who didn't meet the free shipping threshold ($10 dollar shipping on orders less than $29). We wanted to test a lower shipping threshold, while measuring the impact on Conversion Rate, revenue, and shipping profit. The results showed a 6.6% increase in conversion rate across the board, an increase in orders below the free shipping threshold of 49%, which meant that shipping revenue was flat. This was a huge win for getting new customers to try the product, and increase revenue significantly.

~49%

49%

6.4%

6.4%

3.01%

3.01%

Problem:

One potential issue the Addison team highlighted was the high shipping charged to the customer, when their order was below the free shipping threshold.  Addison wanted to fine tune the balance between the extra revenue generated from shipping charges versus the potential negative impact on conversion rate that the high shipping charge may have had.

Solution:

We tested lowering the charge for shipping, while increasing the threshold for free shipping, to see the impact on conversion rate.

Results:

A 6.4% increase in Conversion Rate, a 49% increase in orders below the free shipping threshold generating shipping revenue, and a 3.1% increase in Revenue per visitor to this site. This impact on Revenue per visitor would equal a $135K increase in annual revenue for the retailer, as well as an increase in the number of people buying the product for the first time, which was another goal of the company.

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