How Free Shipping Fits With Your Pricing Strategy

Consumers are the driving force for many of the great products out there. The people wanted a toothbrush that did more of the work for them and boom! The electric toothbrush. The people wanted a blanket with which they could still use their hands to drink cocoa or read a book. Boom! The Snuggie. Once groundbreaking ideas like these are options for consumers, they are not soon forgotten.

The same goes for free shipping. We don’t know who the first person to offer free shipping was, but they started a movement that has only picked up speed. Free shipping is now so common, that online retailers not offering the option must have their motives questioned. So why does free shipping matter so much in online retailing? Well…

Customers Want It

That’s the short answer. The numbers overwhelmingly support the idea that free shipping controls the behavior of online shoppers. 58% of all ecommerce transactions included free shipping in the first quarter of 2014, and 66% of online shoppers named shipping costs as their ‘biggest online pet peeve.’

These customers aren’t afraid to let this pet peeve be known. 63% of online shoppers abandon carts when faced with excessive shipping charges and 47% of consumers webroom to avoid any shipping charges. Free shipping is now less of a perk and more of a given, which can put stress on some online retailers. No fear though, as there are a few things retailers can do to both embrace free shipping and remain profitable. The first thing online retailers can do is…

Offer Free Shipping

… and make up the expense by raising the product’s price. That may seem like six in one hand a half dozen in the other, and… well that is exactly it. Dan Ariely, a behavioral economist from Duke University, found that people are roughly four to five times more likely to spend $5 for an item with free shipping than pay $2.50 for the same item with $2.50 additional for shipping. You would think that couldn’t possibly work, but you underestimate customers’ love of free.

By simply including the cost of shipping in pricing strategy, you can offer free shipping with no negative impact on your bottom line. Or you can…

Make Free Shipping an Incentive

If you don’t automatically provide free shipping, you can still offer it through goals the customer much reach. For instance, you could tie free shipping to a certain order amount. According to a comScore survey, 58% of shoppers are willing to make an additional purchase to reach the free shipping threshold. By setting the order requirement high enough, you can guarantee that any order with free shipping will not lose you money. If need be, you can always raise the order minimum as Amazon did recently, to ensure a profit. Speaking of Amazon, you can always…

Make Free Shipping a Subscription

We are aware that there are plenty of perks that come along with being an Amazon Prime member aside from free 2-day shipping, but let’s be honest; no one is signing up for Prime to catch the next season of Alpha House. And yes, we had to look up the name of an Amazon Original because we had no idea.

The free 2-day shipping is well worth the $99 yearly, for both Amazon and the customer. Amazon gets a segment of customers that spend 68% more than average, and those customers get free shipping on all those purchases. Well, that and the highly-anticipated season of Mozart in the Jungle.

With the big players of online retailing offering free shipping, it is necessary for everyone to get creative with their shipping strategies. Those who fall behind get left behind; pirate code still applies to this kind of shipping. Stay ahead by checking out our full infographic below on the benefits of free shipping

Shipping_pricing

Contributing Writer: Jack Symington

Min-Jee Hwang

Min-Jee is the former Director of Marketing at Wiser. She has extensive experience working with SaaS companies and holds a BA from Carnegie Mellon University and an MBA from NYU Stern.

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