Tiered Cart Discounts on Shopify: Setup

Tiered cart discounts sound simple: spend 100 dollars and save 5 percent, spend 200 and save 10, spend 300 and save 15. They work, and they are also the discounts most likely to give away more than you meant to. The reason is not the rates. It is the edges, the cart values where one tier ends and the next begins. This page covers what Shopify builds in, how tiers combine with codes, and a table of what each edge costs, so you can pick a ladder before you publish it.

What Shopify builds in

Shopify's Help Center describes an amount off discount as a percentage or a fixed amount off, which can apply to a specific product, a collection or an entire order. For an order discount you set a minimum purchase requirement. The page says the minimum purchase amount counts product prices only, so shipping costs and taxes are not included, and that for an order discount the subtotal is measured after product discounts, while other order discounts do not reduce the subtotal used for that minimum.

Each discount carries one minimum and one rate. So a ladder is built as several discounts, one per tier, each with its own minimum and rate, or with an app that holds the whole ladder in one place. Nothing about this is hidden: three tiers means three discounts.

Which tier wins when several qualify

A cart worth 250 dollars qualifies for the 100 dollar tier and the 200 dollar tier at once. Shopify's discount combinations page covers this. It says that when discounts cannot combine, the best discount for the customer's cart is always applied. So if you set each tier's combination options so that they do not combine with each other, a cart that clears two tiers gets the better one, not both.

Two limits are worth knowing before you plan a long ladder. Shopify allows a maximum of 25 active automatic discounts, and that total includes app-based discounts. And a customer can use at most 5 product or order discount codes and 1 shipping discount code on one order. A ladder of five tiers uses a fifth of your automatic discounts before any other promotion exists.

When a tier meets a code

Whether a tier and a code apply together depends on settings you choose. The combinations page says multiple discounts apply to an order only when the setting on each discount allows the combination, and that an automatic discount and a code both apply only if each is configured to combine with the other's discount class. Two things follow.

• A tier set to combine with order discount codes will stack with a 10 percent welcome code. Decide that on purpose, because a cart at the second tier would then carry both rates.
• The reverse is also true. A tier that does not combine will lose to a code if the code is better for the customer, since the best discount applies.

Before you launch, test a cart at every tier edge with your most common code. The stacked rate is the number to check against your floor, and Discount Floors So a Promo Never Loses Money shows how to compute it.

The leak at every edge

Here is the part most guides skip. The tier changes the price of the whole cart at once. Take a ladder of 5 percent at 100 dollars, 10 percent at 200 and 15 percent at 300, and assume a 55 percent gross margin on products. The table shows a cart one cent below each edge and a cart at the edge.

Read the 200 dollar row. A shopper who spends one cent more pays 9.99 dollars less and you earn 10 dollars less. The same happens at 100 dollars and at 300. Each edge gives away the rate difference times the edge value: 5 dollars at 100, 10 dollars at 200, 15 dollars at 300. A shopper can also see it: a 190 dollar cart pays 180.50 dollars and a 200 dollar cart pays 180.00, so adding 10 dollars of product lowers the total. Some will add exactly that, which is the behavior you wanted, but you pay for every one of them.

Where the tier pays you back

After the edge, a bigger cart earns margin again. The recovery point is the cart value where your margin at the new rate equals what you earned one cent below the edge. At the 200 dollar edge, a cart just under earns 100.00 dollars and the new rate leaves 45 cents of margin per dollar, so you need 100 ÷ 0.45 = 222.2 dollars of cart before the tier has paid for itself. Here are the recovery points for the ladder above and for a gentler one that takes 5 percent at 100, 8 at 200 and 10 at 300.

Between an edge and its recovery point, a shopper who qualifies earns you less than one who stopped just short. That stretch of cart values is the dead zone, and it is wider the bigger the step between rates. The steep ladder's dead zone at 300 dollars runs 37.5 dollars. The gentle ladder's runs 13.3.

Designing a ladder from your order spread

Export your orders and count them in bands, the same method used for free gift thresholds. For each edge you are considering, count two things: orders in the band just below it, the shoppers the tier can nudge, and orders in the dead zone just above it, the shoppers who would have qualified anyway or who will qualify at a loss. If the dead zone holds more orders than the band below it, the tier mostly discounts people who were going to spend that much, and the step should be smaller or the edge should move up.

Three rules fall out of that:

• Make the steps between rates small, 2 or 3 points, so the dead zone stays narrow.
• Place each edge just above where a lot of your orders already cluster, not on top of the cluster.
• Stop the ladder where the margin runs out. Use the break-even approach in Break-Even Discount: Extra Volume You Need to find the deepest rate you can afford, and check it against Why a 15% Discount Costs More Than You Think.

Copy for each tier

Say the condition where the offer is stated. Because the minimum counts product prices only, write that the amount is before shipping and tax: "Spend 100, save 5%" with "before shipping and tax" beside it. A progress line that names the next tier is enough: "Add 24.00 more to save 10%." Shoppers do not need the dead zone explained, but they should not be surprised by a total at checkout.

The Illinois page works through a cart discount plan for a destination-tax state, where the same cart can carry different tax from one address to the next.

Build the cart tiers

Create one discount per tier, set each so that tiers do not combine with each other, and decide deliberately which codes they combine with. The Cart discount tiers template in Freebies Engine by Log Studio Lab is described as a discount on the whole cart that grows with spend. Test every edge with your top code before you publish, then recompute the dead zone from your first month of orders.