Understanding Zone-Based Shipping Pricing and Why it Matters for Your Crowdfunding Campaign

When launching a crowdfunding campaign, creators often spend weeks fine-tuning their product pitch, building momentum for what will be their marketing campaign, and planning out their manufacturing. But one major pitfall still catches many off guard: shipping costs. And not just the high and wildly varying costs of international shipping, but the varying costs of domestic shipping. Specifically, zone-based shipping pricing; a method used by major carriers like USPS, UPS, and FedEx; can make or break your campaign’s budget. 

Zone-based pricing means that shipping costs aren’t determined solely by package size and weight, they also depend on how far the package has to travel from its point of origin. Domestic U.S. shipments are typically divided into zones numbered 1 through 9. The zones represent a mileage range and are based on the distance between the origin and the destination zip codes, with Zone 1 being the closest and Zone 8 being the farthest. Zone 9 is typically used for U.S. territories and some military addresses outside of the mainland. 

If you view the map we provided here, we created an example scenario to illustrate a variance in shipping cost. In this scenario, a small package is being shipped from the Whalebacker warehouse in Saginaw, Michigan. When shipping via USPS Ground Advantage to a nearby address (Zone 1), the package costs $5.95 to ship. But, as you can see on the map, when that same package is being shipped to someone in California (Zone 8), the cost is $9.21. In the case of this package and this carrier, that’s a 55% increase in price. Other packages can vary even more in price across the zones, depending on their size, their weight, and the carrier used. 

Here’s why that matters: If you charge a flat shipping fee, or worse, offer “free shipping”, you might be absorbing large losses on distant backers without realizing it. Multiply that by hundreds or thousands of pledges, and suddenly your campaign’s profit margins start to disappear.

To avoid this, savvy creators should:

• Speak with your logistics partner, such as Whalebacker, in advance to formulate a smarter flat shipping fee. Using data from past campaigns, past web sales, or your own predictions about the geographical reach of your marketing campaign, we can create a rubric that estimates what percentages of backers will be coming from which zones. This will help to create a more accurate average domestic shipping price that will help you decide the flat shipping fee you want to charge. (You might be surprised to find the average cost may not be what you expect!) 

• Your logistics partner, armed with the projected weights and dimensions of the packages, will also know which carrier and shipping services will be most cost effective for your campaign. Every tier is a different weight and potentially a different size box. That information, combined with projections on which tiers are likely to be the most popular and which geographic locations are likely to support your campaign more, will help your logistics partner determine the best pricing for you based on their negotiated rates with each carrier. 

• If you’re planning to ship all your packages yourself, check the shipping calculators from each carrier to estimate rates to each zone based on your location you will ship from before setting shipping tiers. 

• If you are likely to have a good number of heavy and/or large packages, consider using regional fulfillment centers to minimize the shipping distance to backers. 

• Consider charging the customer shipping after the campaign has ended, so you can segment shipping charges by zone and charge the customers accurately. This can make a big difference, especially for heavier items, but also relies on trust from the consumer that they will not be stuck with an outrageous shipping charge they hadn’t planned for. Working with a logistics partner like Whalebacker can help create that trust, as you can explain to backers that pre-negotiated shipping rates have ensured a lack of surprise pricing, and even advise an estimated shipping range on the campaign page itself to ease their fears. 

Shipping costs are one of the top reasons crowdfunding projects end up in the red. Understanding zone-based pricing helps ensure your backers get what they paid for, and you didn’t have to lose your shirt to make that happen.