How this CPG brand boosted revenue by 3% by testing their shipping threshold

Background

This company sells non-alcoholic beverages in 12-packs. These 12-packs are available as one-time orders or as a subscription with a 10% discount. The company also works alongside wholesalers (like Whole Foods) to sell their product in bulk. 

Challenge

Shipping was their biggest cost driver—they needed to find a solution

Since initial shipping costs drove the majority of their costs, but adding incremental 12-packs to their order had a non-linear increase in cost, they knew they wanted to work towards reaching a higher AOV and more units per order. When they worked with an e-commerce consulting firm on CRO, site improvement, and more, price testing was identified as an essential lever and a key next step for the company.

Key goals

With all of that in mind, they came to Intelligems with a few clear goals in mind:

1. Increase their AOV and units per order to offset shipping costs

2. Maintain a minimal impact to their CRO

3. Increase revenue per visitor 

Solution

This company recognized the impact of shipping costs on their prices, so they came to Intelligems wanting to test their prices to find the right ones for them.

Here’s what they did:

The first test they ran in Intelligems was free shipping as the control, and two groups with free shipping over a $50 threshold (one with a $4.99 shipping rate under the threshold and one with $9.99 shipping rate). With the customizable features of Intelligems testing, they excluded subscribers and wholesale purchases from the test groups to provide the best user experience and ensure that the data was reflective of their target audience.

While using Intelligems, the brand was able to split traffic in real time, sending 33% of site visitors to each group. When one group fell behind in performance, they were able to easily modify the test in the Intelligems app to redirect traffic from that group into the other groups in order to get significant results more quickly.

Not only was Intelligems able to change the shipping rates customers were actually charged, but also the marketing/merchandising of the shipping offer on-site (i.e. all text that referenced the shipping threshold).

Results

Thanks to the data provided by the shipping tests they ran in the Intelligems app, the brand was able to implement a significantly better strategy for their shipping rates, boosting revenue by 3%

Here’s what they found:

The free shipping threshold with a $4.99 shipping rate under the threshold resulted in:

• An increase in units per order of 6.3% (from 1.74 to 1.85)

• An increase in AOV of 6.5% (from $57.87 to $61.66). Tip: Check out the image below to see the shift in order value distribution - pretty cool!

• AOV was increased through both the addition of shipping revenue, as well as a higher average units per order as people reached to achieve the threshold.

• They also found that the higher threshold did not have an outsized impact on conversion (with an impact of only ~3.5%), and had an increase in monthly revenue of ~3%.