Warning: Not All Free Shipping Offers Are Created Equally
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Shipping costs are a common barrier to conversion. For better or worse, many Internet shoppers have come to expect free shipping as an element of shopping online. Facing a pull from consumers and a desire to push up conversion rate, marketers are willing to offer free shipping. Not all free shipping offers are created equal, however, and you could be losing money at the expense of pleasing your customers.
Do You Need To Offer Free Shipping?
You can run through a few basic questions that will help you determine whether free shipping is going to be a key factor in your marketing.
- What Is Widgets R Us Doing? - As you consider the competitive landscape, free shipping may be the price of entry to remain on par (B&N, Amazon) or it can serve as a point of differentiation (e.g., Zappos). Your customers are shopping around, so take a gander outside your silo.
- Am I A Beautiful, Unique Flower? - If people want what you have to sell, they’re going to be more inclined to buy on your terms, even if those terms include shipping. If people can only buy your products on your site, you might be able to avoid conceding shipping charges.
- Do They Need It Now, Now, Now? - Just like uniqueness, if you’ve made a compelling sales proposition and your prospect really wants what you have immediately, the shipping price may be less of a barrier. Of course, if you’re selling a commodity and your competitors are offering free shipping and a decent price….
- But, Can I Trust You? - The less well known your brand or your website, the more you have to work to convince people to buy with you and shipping fees are among those factors. Transparency and reassurance are influencing factors here, and nothing is more transparent or clear than free shipping. This doesn’t necessarily mean you need to offer free shipping, you can try simplifying your schedule of shipping charges.
Free Shipping Best Practices
If you’ve concluded that you want to dip your toe into the free shipping waters at least learn the rules of the pool. These best practices should get you thinking about how to intelligently try free shipping, but they’re no substitution for testing.
- Pick the Right Value - Choose a free shipping trigger value that is higher than your average order value (and that covers the cost of the free shipping), but not too high so as to be meaningless to visitors. Heidi Cohen at ClickZ takes it further with instructions for break-even calculations.
- Sing It Loud! - Make it easy for people to see your free shipping offer (on the homepage, category pages, etc.) and understand how to qualify (think Amazon’s “You only need to spend $XX more to get free shipping.”)
- Make It Achievable - Pick a value the visitor can attain with a reasonable number of products. I can buy a book and CD for Amazon’s minimum; they don’t force me to buy 3 books or a book and 2 DVDs.
- Free Shipping, Upgraded Handling - Marketing Experiments came up with a novel idea,Offer free shipping, but keep the total landed price less than your major competitors. Then offer a “rush order upgrade”. This would NOT be an upgraded shipping service; it would be an upgraded “handling” service (i.e. from 48-hour order processing to same-day order processing).They also recommend a handy formula to ensure you’re picking the right value:
(Minimum order value to qualify for free shipping - Current AOV) * Average Gross Margin - Shipping & Handling Cost.
If the resulting value is positive, you at least won’t lose money on the free shipping you’re giving away. - Target Your Free Shipping Offer - It’s possible that a one-size-fits-all free shipping offer could be right for your business, but you may also want to think about different ways to focus the offer to motivate key segments:
- Give free shipping to your best customers, new customers, inactive buyers or target specific channels (such as more comparison shopping engine visitors)
- Make the offer dependent upon key actions, like signing up for emails
- Offer free shipping on follow-up orders after initial purchase (of reasonable size) within a deadline (credit to MultiChannel Merchant)
What have you learned from your free shipping tests? For more academic reading, check out Wharton’s take on the topic.
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