March 13, 2016

Lifetime Value - Free Shipping

This one is interesting. Look at a customer acquired in June.



Ok, now let's see what future value looks like for those who took advantage of free shipping.



This company generates an average of $10.00 of shipping/handling revenue.

In other words, free shipping caused the company to lose $10.00 ... and the customer paid back $6.15 of incremental profit in year one.

If I ran the analysis forward another year, we'd probably see that all ten dollars have been recouped. But it took two years to recoup the profit. Two years! And in so many of my projects, the profit is NEVER recouped.

Make sure you are measuring what you lose up-front with free shipping.

Make sure you are measuring what you gain, downstream, from a customer acquired via free shipping.