MailchimpWhy shipping moves the target
Shipping paid by the store is a cost on every order. It comes out of the contribution that pays for the ads. A rise in shipping raises the break-even ROAS, even when product prices stay the same.
Recalculate in four steps
- Take the average shipping cost per order from the last 30 days of orders, not from the carrier's price list.
- Subtract it from contribution per order, then divide by average order value to get the margin rate.
- Recompute break-even ROAS as 1 divided by that margin rate.
- Write the new target with the date and the reason, and keep the old one in the notes.
Made-up scenario: average order value is 60, and contribution before shipping is 34. Shipping paid by the store was 5 per order and is now 8 after a change of carrier. Contribution falls from 29 to 26, the margin rate from about 0.48 to about 0.43, and break-even ROAS rises from about 2.07 to about 2.31.
Free shipping thresholds
A threshold changes the average order value, not only the cost. Check both before you set the target.
Customers who add items to reach a threshold may lift order value. Check the order data before you claim a margin gain, because the extra items may carry a lower margin.
Rules for the target
- Change the target only when the new cost has held for at least a month.
- Tell the client the old and new line in the same message, with the reason.
