BOGO vs 50% Off the Second Item

"Buy one get one free" and "50% off the second item" sound close enough that many stores treat them as the same promotion. They are not. Buy one get one free takes half off the pair, which is 50 percent off the whole purchase. Half off the second item takes a quarter off the pair. On a product with a 55 percent gross margin, that gap is the difference between keeping 4 dollars on a pair and keeping 24. This post puts numbers on both, shows which wording the FTC's guide on the word "free" cares about, and explains how to choose.

The effective discount: 50 percent versus 25 percent

Start with a pair of identical items at 40 dollars each. Full price for two is 80 dollars.

• Buy one, get one free: the shopper pays 40 dollars for two items. The discount on the pair is 40 of 80 dollars, or 50 percent.
• Buy one, get the second 50 percent off: the shopper pays 40 plus 20, or 60 dollars. The discount on the pair is 20 of 80 dollars, or 25 percent.

The same arithmetic applies to the other common variants:

A shopper who sees "free" will feel a bigger deal than "half off the second", and the gap in your margin is bigger than the gap in the shopper's perception. That is the first reason to run the numbers instead of picking the word that sounds best.

Margin per pair at three gross margins

Margin depends on what each unit costs you. The table assumes a 40 dollar product and three gross margin levels, so the cost per unit is 24, 18 or 12 dollars. These are illustrative assumptions, not benchmarks: replace them with your own landed cost.

Read across the 40 percent row first. Buy one get one free on a product with a 40 percent margin loses money on every pair: you collect 40 dollars and spend 48 dollars to buy the two units, before shipping, payment fees or packaging. Half off the second item still earns 12 dollars.

A second way to read the same table is to ask how many offer pairs you need to sell to earn what one full-price pair earns. It is the full-price margin divided by the offer margin.

This comparison is deliberately harsh, because it assumes the shopper would have bought a full-price pair anyway. In practice some of your BOGO buyers are new customers or would have bought one unit, which is the argument for the offer. The general method for that judgment is in Break-Even Discount: Extra Volume You Need. The point here is narrower: at a 55 percent margin you need eleven times the pairs for the free version to match the margin, and under two times for the half-off version.

Which to pick by catalog margin

• Gross margin under 50 percent: buy one get one free gives away half the pair's revenue, so the pair loses money before shipping and fees. The break-even is exactly 50 percent because the discount is 50 percent. Use a smaller discount, or make the free item a cheaper product.
• Gross margin between 50 and 60 percent: buy one get one free earns a few dollars a pair, as the 55 percent row shows. Half off the second item, or buy two get one free if you want to keep the word "free", keeps far more per pair.
• Gross margin of 65 percent or more, or a slow-moving product you want to clear: buy one get one free can work, especially if the second unit has a low cost.

These come from the arithmetic above, not from a study. Check them against your own cost per unit, shipping and returns.

Which variant fits which problem

Same item, buy one get one. Simplest to explain, and the free unit costs you the same as the first. It suits products where you can afford to give away half the pair's revenue, which the margin table above shows.

A cheaper or different item as the "get". Shopify's Buy X get Y lets the "get" item differ from the "buy" item, so you can pair a main product with a lower-cost one. This is the cheapest way to offer a "free" item, because the free unit's cost is the cost of the cheaper product. When the same product appears in both the buy and the get lists, Shopify's Help Center says the lower-priced item the customer chooses is the item that is discounted.

Buy two, get one. A 33 percent discount on three units, with a larger basket than a single-pair offer. It is an option when buy one get one free is too deep.

The FTC rules for a "free" claim

The FTC's Guide concerning use of the word "Free" (16 CFR Part 251) names the wording in this post. Section 251.1(a)(2) says that because shoppers search for the best buy and regard "Free" as a special bargain, all such offers "must be made with extreme care," and the language it lists includes "Buy 1-Get 1 Free", "2-for-1 Sale" and "50% off with purchase of Two". So "50% off with purchase of Two" is in the same list as buy one get one free, and the guide treats "Half-Price Sale" as a related representation that raises many of the same questions. Four points from the guide matter most to a store:

• The regular price is real. Section 251.1(b)(1) says a purchaser has a right to believe the merchant will not directly and immediately recover the cost of the free item by marking up the price of the article that must be purchased. Section 251.1(b)(2) defines the regular price by what the seller actually sold the product for over a 30-day period, so do not raise the price of the product just before a buy one get one free offer.
• Conditions go up front. Section 251.1(c) says all the terms and conditions of the offer should be set out clearly and conspicuously at the outset, in close conjunction with the offer. A footnote reached by an asterisk does not count. If the offer is limited to one pair per customer or to selected sizes, say it in the headline or next to it.
• The frequency guidance. Section 251.1(h) says a single size of a product should not carry a "Free" offer in a trade area for more than 6 months in any 12-month period, that at least 30 days should pass before another such offer, that no more than three such offers should be made in the same area in any 12 months, and that sales of the promoted size under the offer should not exceed 50 percent of the total volume of sales of that size in the area. For an online store the trade area is a judgment call, so it is safer to treat your whole market as one area and to keep a permanent "buy one get one free" offer on the same product from becoming your normal price.
• A different word does not fix a failing offer. Section 251.1(i) says that replacing "Free" with words such as "gift" or "bonus" does not cure an offer that fails the requirements.

This is not legal advice; confirm the wording of any "free" offer with your own counsel.

Setting it up in Shopify

Shopify's Buy X get Y discount covers both versions. Under Customer buys, set a Minimum quantity of items of 1 and choose the product or collection. Under Customer gets, set the quantity to 1 and choose the same product. Under At a discounted value, choose Free for buy one get one free or Percentage and enter 50 for half off the second. You can also Set the maximum number of uses per order and limit uses per customer. Our guide to creating a BOGO offer on Shopify goes through every field and a test-order checklist.

Shopify's page also notes that customers must add all items to their cart manually and that the free or discounted item is never added automatically. To run it as an offer outside the native discount, start from the Buy one, get one (BOGO) template in Freebies Engine by Log Studio Lab, which is described as "Buy a product, get another copy free." For a gift of a different product rather than a second copy, see Free Gift With Purchase on Shopify: Setup.

Pick, then test

Choose the version, write the margin per pair for your own product using the method above, and decide the stop date before you announce it. If the numbers only work as a limited-time clearance, say so in the offer and end it when you said you would.