Should I Offer Gift with Purchase?

$20 off. A free $20 gift. 20% off your order.

They all deliver roughly the same value on a $100 purchase. But one creates something the others don't: an arbitrage opportunity. A gift that costs you $5 might feel worth $25 to your customer. That gap between your cost and their perceived value can be incredibly powerful.

But does it actually drive more profit than a simple discount? For your specific customers, with your specific products, at your specific margins? You can't know until you test.

What Actually Happens When You Offer a Gift?

A gift costing you $5 can feel worth $25 to your customer

You're not just offering a discount. You're offering something tangible. Something they can hold. Something that feels like a bonus rather than a price cut.

When a customer sees "Free tote with orders over $75," they're not doing margin math. They're imagining owning that tote. If it's well-designed and useful, the perceived value can far exceed your cost. A branded accessory costing you $5 to produce might feel worth $25 in their mind.

But this arbitrage only works if the gift feels valuable. If it feels cheap or irrelevant, it can hurt your brand instead of helping it. A low-quality gift signals low-quality standards. An irrelevant gift signals you don't understand your customers.

What Are Your Options for Increasing Order Value?

You have several ways to encourage larger orders, each creates different psychology

You'll see plenty of advice about increasing average order value. Some strategies focus on discounts. Others focus on removing friction. Still others focus on adding value.

The temptation is to stick with what you know. If you've always offered percentage discounts, that's probably what you'll keep offering. If free shipping has worked before, you'll default to that again.

But gift with purchase operates differently than discounts. It doesn't feel like you're lowering the price. It feels like you're adding something extra. That psychological shift can change behavior in ways pure discounts don't.

Here are the common approaches:

Percentage discounts: "Save 20% on orders over $100" is the scalable default. Feels fair across price points but trains customers to wait for sales. Each discount type creates different psychology.

Dollar amount thresholds: "Save $20 on orders over $100" creates concrete value but doesn't scale as elegantly across different product categories.

**Free shipping thresholds:** Set a threshold that encourages customers to add more to their cart. Removes friction but compresses margins.

Gift with purchase: "Free gift with orders over $75" leverages perceived value arbitrage but only works if the gift resonates.

Each approach works differently depending on your products, margins, and customers. Gift with purchase stands out because it doesn't feel like a discount. It feels like earning something extra. That psychological difference can matter more than the math suggests.

Alex and Shane discuss real-world gift-with-purchase execution challenges and how to implement these offers without operational nightmares. Learn from Shane's four years of BFCM experience, including warehouse coordination issues and automated solutions.

Why Does Profit Per Visitor Matter More Than Average Order Value?

Gifts increase order value but also increase costs

You might see average order value jump when you offer a gift. Customers spend $25 more to hit the threshold. Success? Not necessarily.

If that gift costs you $8 and your margin on the additional $25 in products is $15, your net gain is only $7 per order. Meanwhile, a simple $15 off threshold with no gift cost might have driven similar behavior while preserving more margin.

Profit per visitor is your North Star metric. It accounts for the full picture: revenue gained, product costs, and gift costs.

Profit per visitor = (Revenue - Product Costs - Gift Costs) ÷ Total visitors

Only profit per visitor tells you if you're actually winning. You might grow average order value while compressing margins so much that profit goes down. Or you might discover the perceived value of the gift drives significantly more orders, more than offsetting its cost.

Consider a scenario: You offer a free gift that costs you $5 when customers hit $75. If that threshold encourages customers who typically spend $60 to add $15 more in products with 60% margins, you gain $9 in margin minus $5 in gift cost, netting $4 extra per order. But if it simply gives away a $5 gift to customers already spending $80, you just lost $5 in margin.

Testing reveals which scenario dominates for your specific customer base.

What's the Simplest Test I Can Run?

Test your current AOV builder against gift with purchase

Step 1: Identify Your Order Value Clusters

Analyze a representative period of orders. Look for where orders naturally cluster. If many orders fall between $60-70, that's your starting point.

Step 2: Choose Your Gift and Threshold

Pick a gift that feels valuable but doesn't break your margins. Branded items, product samples, or accessories work well. Set your threshold slightly above your natural cluster. If orders cluster at $65, test a threshold at $75.

Your gift should have high perceived value relative to cost. A $5 item that feels worth $20-25 is ideal.

Step 3: Set Up Your Test

Run an A/B test comparing your approaches:

• Control: Your current AOV builder (e.g., free shipping at $75)

• Variant: Gift with purchase at the same threshold (e.g., free gift at $75)

Split traffic evenly. Let both run simultaneously so you're comparing performance under identical conditions.

Step 4: Measure Profit Per Visitor

Track these metrics:

• Conversion rate: Are more people buying?

• Average order value: Are orders larger?

• Percentage hitting threshold: How many stretch to earn the gift?

• Profit per visitor: After accounting for gift costs, which approach wins?

Run until you have enough orders to feel confident in the pattern. High-traffic stores might see clear results in weeks. Lower-traffic stores need more time.

What Mistakes Should I Avoid When Offering Gifts?

Gift selection matters as much as the offer structure

The difference between gift with purchase working and backfiring often comes down to execution. You can get the threshold perfect, run a clean test, and still hurt your brand if the gift itself sends the wrong message.

Quality signals everything. A cheap-feeling gift tells customers you cut corners. An irrelevant gift tells them you don't understand what they value. But a well-chosen gift that aligns with your brand can turn a transaction into an experience.

The mistakes you want to avoid aren't about the mechanics of the offer. They're about how customers perceive the gift itself and whether your test accounts for its true cost.

Choosing gifts that feel cheap: A flimsy tote or low-quality sample signals low standards. If you wouldn't be proud to use it yourself, don't offer it. Quality matters more than quantity.

Setting thresholds unrealistically high: If your average order is $50 and you require $150 for a gift, customers won't stretch that far. Set thresholds within reach of your natural order clusters.

Not accounting for gift costs in your analysis: Track the full margin impact. A gift that costs $8 needs to drive enough incremental revenue to justify that cost. Run the math before and during your test.

Testing only during promotional periods: Holiday behavior differs from everyday behavior. Test during normal traffic periods to understand baseline impact, then layer in seasonal tests.

Offering irrelevant gifts: A fitness brand offering kitchen accessories confuses customers. Your gift should align with your brand and appeal to your customer base.

Stop Guessing. Start Knowing.

You're probably guessing whether gifts drive more profit than discounts. Maybe you're basing it on what feels right, or what you've seen other stores do.

Gift with purchase creates unique psychology. Customers aren't calculating margin compression. They're imagining owning something extra. That emotional response can drive behavior differently than pure discounts.

But whether it works better for YOUR customers, with YOUR products, at YOUR margins? That requires testing.

Stop guessing and start testing:

• Identify where your orders naturally cluster

• Choose a gift with high perceived value relative to cost

• Test gift with purchase against your current AOV builder

• Measure profit per visitor, not just average order value

• Understand what discount depth drives the most profit

• Let data guide your decision

Don't guess whether gift with purchase works better than discounts. Know.

Ready to discover whether gifts or discounts drive more profit for your business? When you're ready to know for sure, let's get you testing beyond what's typical.