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What is free shipping – An ultimate guide to attracting customers and boosting sales

What is free shipping – An ultimate guide to attracting customers and boosting sales
Author Maciej Swoboda
Updated:
2019-05-20
Reading time:
5 minutes read
Category:
Blog

Every owner of an eCommerce business knows, that having a good product is very important. All in all, you cannot sell if you do not have anything to offer. However, thanks to the internet, our times have become heavily competitive. Companies fight for every inch of a market. It is extremely difficult to survive without understanding the modern marketing and sales tools. A good CEO has to provide more, than just a good. Even the best quality product might not catch on if it’s package is not palatable. Therefore, in this ultimate guide to attracting customers and boosting sales we would like to focus on a certain way of becoming more appealing. We will answer an important question – what is free shipping and how does it increase conversions in your retail store.

Free shipping – a magic trick

How many times have you seen a lot of potential revenue in abandoned carts? Every time somebody does it, your shop misses some profit. It must be very frustrating to notice it happen so often. Nevertheless, have you ever considered working on increasing your conversion rates? There are some special marketing and psychological tricks to influence decisions of customers. Some of them are very well known and frankly speaking often misused. For example: loyalty programs, discounts, referral systems and such. On the other hand, there is a special magic trick called free shipping. Not only it visibly boosts the sales, but also attracts customers and makes them irrationally satisfied about purchasing more than planned.

The conversion rate is the number of conversions divided by the total number of visitors. For example, if an eCommerce site receives 100 visitors in a month and has 25 sales, the conversion rate would be 25 divided by 100, or 25%.

What is the reality of free shipping

Let’s be honest. Entrepreneurs work hard to set and achieve their profit goals. Business is not a charity. That is why, a lot of managers have a strong bias against offering anything for free. However, in this case the expression is purely a marketing tool – used because it can significantly increase your sales. The truth is, that free shipping is not entirely free. Additionally, it is a great incentive to encourage customers to spend more. You should approach it as a business model. Merchants simply hide the costs in product’s price, rather than being upfront about it.

The research data behind free shipping

Research data behind free shipping

It may sound bizarre, but customers actually prefer the shipping cost to be hidden in the price. The research data does not lie. Let’s take a look at some interesting facts:

  • 96% of people surveyed by Lab42 said, that they would be more likely to make a purchase online if a shop offers free shipping.
  • 93% of participants for a Return Customer survey chose free shipping when given a choice between discounted items or a bonus good with their purchase, assuming the same value for each. People prefer free shipping over discounts!
  • According to One Marketing Land’s survey, 90% of customers think, that free shipping is the best incentive to shop online. That is most surely a huge percentage.

Clearly free shipping is by far the best tool to boost your sales and attract potential customers. Real money lies over there. Thousands of shops offering weird discounts are actually missing the key to increase the conversion rate. What is most interesting, all the research data points out an astonishing tendency. Online users would still prefer to chose an item with free shipping, rather than a discounted item with shipping costs even if the total value of the cart is still the same!

The psychology of free shipping

Free delivery uses the psychological power of the word ‘free’. It is a strong psychological bias towards receiving something offered for free, even if it is purely irrational. Customers love to think they just made a great deal, because shipping costs have always been strongly associated as a common disadvantage of shopping online. That is what this eCommerce sales strategy focuses on. Despite the fact, that a customer pays for the delivery in a form of an inflated price, he still illogically feels he gets something for free, even though it does not make sense! Therefore, as David R. Bell (an associate professor of marketing at the Wharton School of the University of Pennsylvania) says, a free-shipping offer that saves $6.99 is more appealing to many customers than a discount that cuts the purchase price by $10. “Psychologically, shipping is seen as an extra, removed from the cost of the good,” he claims.

persuasive psychology behind free shipping

Shipping costs are an obstacle in sales

Of course it is not only about the transcendent power of language. As simple as it is, people really hate shipping costs. High delivery charges are the number one reason causing consumers abandon online purchases, according to a survey by PayPal and comScore. A shocking 43% of those surveyed didn’t pay for items in their shopping carts, because shipping fees were too high. Nobody likes extra costs. It is quite understandable why free shipping would make customers feel safe about no additional fees. To put it simply – it makes the cost calculation steady from product
page to checkout.

How to pay for it

Having established the fact that free shipping is the best solution to make your profits higher, we should consider the financial and marketing side. A great sales idea needs a precise execution too. You do not want to end up offering a free shipping for a single 0.99 $ purchase. Moreover, as simple as it is, somebody has to pay for deliveries. It is a matter of eCommerce know-how to optimize this sales strategy. How to affordably offer free shipping?

  • Include shipping in your financial models, right when you receive your inventory. Make some calculations and incorporate costs into operation and pricing. Be realistic about it.
  • Set a minimum cart threshold. This method cannot be more foolproof. Setting a minimum order value is a great eCommerce strategy encouraging customers to spend more. This way your profit margin is guaranteed, while still providing free shipping. It is a great solution for some cheaper items and a cross-selling tool. Obviously, shipping gets more efficient as items are added. We explain how to set the free shipping threshold option in your WooCommerce.
  • Free shipping per certain products. In other words, experts call it ‘order-level shipping’. Imagine you are selling an extremely popular smartphone with a high price. Offering a free shipping with the purchase works exceptionally well when it comes to best sellers with a great profit margin. We explain how to configure free shipping per product in WooCommerce.
  • Loyalty programs and membership. You can offer free shipping, if your shoppers sign up for a free membership, mailing list etc. What a great marketing tool!
  • Free shipping to certain locations. While domestic fees are usually low, some delivery destinations are extremely expensive. Keep that it mind.

Shipping to different locations

To conclude

To sum everything up – eCommerce is extremely tricky and full of different marketing and sales tools. The most important thing is to figure out the solutions, that will fit your business well. Free shipping is most certainly worth considering. All the data proves, that it is a great strategy to give your sales a large boost. Be creative and do not fear trying out different ideas. For example set a minimum order threshold and see the results. You know your shop well – decide what is best for your own. If you want to learn how to configure this option in your WooCommerce business or just simply read about marketing ideas, make sure to check our blog frequently.

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