How do threshold offers work? It's simple.
Let me explain in one GIF.
You can't deny the truth... People love free shipping and discounts.
And as an ecommerce store owner, you will also face the decision when to offer threshold offers to your customers.
Threshold offers are offers you present when your customers reach a minimum order value. And the two most popular (and effective) offers are free shipping and discounts.
For instance, you can set a minimum cart order value of $100. And when they reach that amount, they can have free shipping or discounts.
It's a pretty good deal, right?
In this blog post, we'll be going over important facets of threshold offer, such as...
- The benefits of doing threshold offers
- Challenges you might go through with these offers, and how to overcome them
- How to compute a free shipping threshold
- Difference between percentage-based discount and dollar value discount
- How to offer discounts
Are you ready?
Let's go over more reasons why you should offer free shipping to increase sales... and other threshold offers!
Why Offer Threshold Offers?
Besides being the norm and a standard, threshold offers can also...
Lessen Cart Abandonment
There are a lot of reasons why new and repeat customers abandon their shopping carts. But one of the most frequent reasons is unexpected added costs.
That includes shipping fees.
In fact, 65% of consumers don't finish their checkout because of the high shipping cost.
The good news is 93% of online shoppers would also add items to their cart in order to qualify for free shipping.
Offering free shipping can help you avoid cart abandonments. After all, it's already set as a standard for reputable businesses. Especially when you're still starting out.
Plus, free shipping thresholds also...
Encourage Shoppers To Engage More
Imagine your ecommerce business as a physical store.
You wouldn't just ignore your customers and let them be without any assistance. You would assist them. Or even inform your customers about sales promotions you have.
The same goes for your online business. Offering discounts and free shipping is a nice way of engaging your customers. It shows that you value them. And when they feel valued, they'll come back to your store again and again.
You can make loyal customers!
And when you do, it also...
Improves Your Average Order Value
When shoppers hit a minimum order value for free shipping, they spend 9.4% more.
There are a lot of strategies for free shipping thresholds and discounts you can use.
For instance, you can use it to get rid of a surplus in your inventory. You can also promote certain items that are not really selling well. And most importantly, you can get a higher AOV during your sales events.
If done right, you can also capitalize on the behavior of your customers.
For example, your customers are more than willing to shop or be in retail therapy mode. When you offer discounts and free shipping, they will feel that their purchases are justified.
Of course, there are a couple of snags you might stumble upon. It's helpful to keep them in mind to avoid them...
Drawbacks to Watch Out For With Threshold Offers
Decreased Conversions
Sounds like the complete opposite of what you want, eh?
When you often use free shipping offers and discount codes, your website visitors might get the wrong idea. How?
You might unconsciously train your customers to wait for offers.
How so? Your customers can get used to the idea that you always offer free shipping and discounts.
And when they do, that is revenue lost, and profit margins decreased.
As long as you implement your promotional campaigns with a clear message, then you can avoid this problem altogether.
Exclusive deals can also...
Attract The Wrong Attention
Promotional offers such as free shipping and special discounts can sometimes attract bad customers.
You might think that this is a good thing.
But sometimes, these customers are just driven by your price bargains. They appreciate that more than they appreciate what your online store can offer.
And that can set the wrong precedence in the future.
To avoid this, you should consider focusing your business goals on customer loyalty.
When it comes down to it, you should know what offers you can hand over to your customers. To help you make the best approach, keep reading to know...
How To Compute Your Free Shipping Threshold?
As we have discussed, a threshold offer means you can offer free shipping... As long as your customers hit a minimum order value.
At this point, you are going to need to channel that inner scientist out of you. Because we are going to calculate the threshold that is just right.
Not too high, and not too low.
You can start by knowing your median order value (MOV).
Median means middle. Therefore, your MOV represents the middle of a set of data. To be a true median, half of your orders should be above it, and the other half is below it.
An easier way to figure out what amount to put your threshold is through your average order value (AOV).
Once you have your MOV or AOV, you can figure out where to set your free shipping. Your threshold should be rightly set just high above your MOV/AOV.
Why, you ask?
It's the sweet spot where it's high enough to encourage your customers to add more products they were hesitant about.
To test this, you can run an A/B test on your ecommerce site to check the thresholds that drive sales better.
Before you start this type of sales promotion, you should keep some of these things in mind...
- Unexpected costs such as taxes and other transaction fees.
- Be careful of odd numbers in your calculation. This includes too-high or too-low SKUs. It can misrepresent your AOV.
- Standard shipping fees. This varies based on your box sizes, location, and your customer orders' product weight.
How To Offer Free Shipping?
Just check out how Birchbox highlights their exclusive offer to increase ecommerce sales.
Do you see how there's no way you can miss their website banners?
Their subject lines are strong motivations for their new visitors to meet the minimum order value. If that's not enough, there's also an extra bar at the bottom of their site.
It's not time to apply your free shipping threshold offer to your checkout pages.
You can easily do this in just a few steps with your Debutify Shopify Theme.
- Go to your theme settings > Debutify Add-Ons > check on Cart Goal.
- Customize it on the Cart Goal page.
- Set your prefix, suffix, and goal amount you calculated.
I told you... easy as pie, right?
Now let's move on to another threshold offer that can boost ecommerce sales...
Percentage-Based Discount Or Dollar Value Discount
These two types of discounts are some of the most common types you can offer to drive sales. Let's go over them one by one.
Percentage-Based Discounts
Percentage-based discounts incentivize percentages on your products.
You can go for a small discount such as 10% or 15% off. Retailers drive more sales by offering bulk discounts at 25% or 30% off. 50% off or more can be considered a special discount. It's to liquidate inventory that is old or not really selling.
To use it for threshold offers, you can set a number of products your customers can buy. They can purchase a couple of the same products and get a certain percentage off.
For instance, your certain store sells women's apparel. You can label a purchase with a "Buy two jeans, get 20% off any bag."
Dollar Amount Discount
A dollar amount discount goes through the same process. Well, except its value is in store credit.
That way, your customers feel the need to spend it, so it won't go to waste.
Once you set your threshold amount, you can include your dollar value discount. For instance, Sephora shows exactly how to promote ecommerce threshold offers the right way.
Sephora set its threshold offer at different dollar value-based offers. It makes use of a discount code to also check if their email marketing is set in place. You can also get a gift if you hit their highest threshold.
Tip: Ecommerce companies also offer free gifts, coupons, promo codes, and gift cards. You can make use of this business model to further increase your profit margins.
Still not sure what type of discount to use?
You can try the "rule of 100". Use a percentage discount for your products that cost less than $100.00. For products with higher value, use a dollar amount discount.
Once you are set, you can calculate how much discount you can give with your AOV. It's recommended to keep your discounts on all orders 20% or 30% over your AOV.
Want to see how it works for your Shopify store?
Let's find out...
How To Offer Discount?
When your customer shops, you can offer two types of discounts on their next purchase. You can either offer a discount code or automatic discounts.
Discount Code
As a threshold offer, use a discount code to increase sales. Give your customers a "buy X get Y" discount. To protect your conversion rates, apply a limited availability to your offer.
Debutify's Cart Discount can help you out. It allows your customers to enter their code in their cart before checkout.
- Go to Theme Settings > Debutify Add-Ons > Cart Discount.
- Go back to Debutify Add-Ons, then Cart Discount page.
- Create your discount code. Go to your Shopify page > Discounts > Discount Code.
- Customize your discount, then click Save Discount Code at the bottom.
- Customize your input label and placeholder. Hit Save.
Et voila! Your customers can now shop at a discounted price.
Automatic Discount
The next way you can use is Automatic Discounting.
Debutify offers automation with the different types of discounts we've discussed.
For it to be automatic, they need to add eligible products to their online carts before they can checkout.
You can include the Add-On Quantity Breaks to your arsenal. It rewards customers with codes when they purchase multiple items from your store.
- Go to Theme Settings > Debutify Add-Ons > Activate Quantity Breaks.
- Come out into the Theme Settings > Product Pages > Quantity Breaks.
- Set your minimum quantity of items and the type of discount.
- Hit Save.
And there you have it! Different threshold offers you can do to invite more traffic, more business, and more sales!
Now you're ready to...
Promote With Threshold Offers!
A word of caution... It can be difficult at the beginning of sales promotions.
It can directly affect your profit margins and sales, after all.
But don't let that stop you from trying. Because with thresholds, the benefit outweighs your worries. And when your profit margins are not that promising, threshold offers can be your saving grace.
Your sales promotions shouldn't stop at this point. Because even if you do it all correctly, there's one thing that can drive your customers away.
What's that, you ask?
It has a slow load page time, not a mobile-friendly ecommerce site.
Debutify brings you the solution!
It's not your run-of-the-mill Shopify theme. It's also your reliable Profit Optimization Partner.
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So it all adds up to this...
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