Threshold top-up

A customer adding to their cart to reach a free-shipping or gift threshold. What it gains depends on how far below the threshold they started.

In plain words

A threshold top-up is the extra a customer adds to reach a threshold: free shipping above $75, a gift above $100. It is the whole purpose of a threshold. Orders that were already above it take the reward and add nothing.

A top-up is not automatically a gain. The customer adds some products, on which you keep a margin, and stops paying for shipping. If they were only a few dollars short, the margin on what they added is smaller than the shipping they no longer pay, and the top-up loses money.

Formula

  • Gain per top-up = (threshold − order value) × product margin rate − shipping no longer charged

Worked example

With a $75.00 threshold, $7.00 shipping and a 55% margin on added products, an order of $45.00 that tops up gains $9.50. One that started at $55.00 gains $4.00.

An order of $70.00 that adds $5.00 to qualify comes out at −$4.25: it gives up more in shipping than the extra products earn. Across the example's orders, 2.4% of those below the threshold have to top up for it to pay.

The example order

A $40.00 bag of coffee, shipped free, every cost counted

Revenue $40.00 to contribution margin $15.36 (38.4%)
Revenue
$40.00
Cost of goods
−$12.00
Pick and pack
−$1.18
Packaging
−$0.50
Shipping label
−$7.50
Card fee per order
−$0.30
Refunds
−$2.00
Card processing
−$1.16
Contribution margin
$15.36

2 declared kinds cost nothing on this option

Computed by the margin engine in Offer Suite's own code, in whole cents, from a $40.00 bag of coffee with a $12.00 unit cost.

A higher average order is not proof that customers topped up

A threshold can raise average order value simply by being launched in a strong month, or by drawing a different customer. To know whether customers topped up, compare the orders just below and just above the threshold before and after. That is where the movement shows.

Using it

Set the threshold far enough above your common order values that the top-up is worth having, and near enough that it feels reachable. Then give customers something sensible to add: a product priced close to the usual gap. A threshold with nothing suitable to add mostly rewards the orders already over it.