‘Free Shipping’ As A Sales Tactic

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Smartiac - Free Shipping as a Sales Tactic

Does free shipping get you more sales for your business?

Think about this. When you’re doing your online shopping, how many times have you abandoned your cart simply because of the extra shipping cost? Or if you ended up paying for your items anyway, how many times has the shipping cost made you think twice or even hesitate a little?

We are 100% aware that when we go to buy a good from the supermarket, or a shopping mall, they don’t charge you extra for shipping because the shipping costs are already included in the selling price. Think about the amount you spent on gas or public transport while you made your way to the store. You probably would’ve spent $5 to make your way to the shop. But if you were shopping online and you saw the $5 as a shipping fee, you’d rethink your entire purchase decision.

What Actually Happens?

Look at the example here. A dress that you’ve wanted to buy costs $15 and the shipping cost is $5. So your total will be $20.

Viewing it like this, your brain will immediately compare the $5 shipping charge against the $15 which is the actual price of the dress. You might even think “I might as well go and get it myself!” without remembering that in order for you to make your way to the store, you’ll most likely end up paying $5 for transportation.

Now let’s take a look at another example. This time, the advertisement says that the dress costs $20 and the shipping cost is $0.

Smartiac - How much does 'free shipping' impact your buying decision

You will definitely notice that the dress is $20. However, your focus will be on the ‘free shipping’ sign, which will make you remember all the hassle that you will have to go through if you went to the store and got it yourself. How much time and money is being “saved” because of the free shipping is where your focus will be.

 

This train of thought is caused by a psychological flaw. The “free shipping” sales tactic works by using this flaw that makes you perceive something as more valuable than it actually is. The shipping on that item isn’t actually free. They simply added the shipping cost to the price of the product to make the shipping cost zero.

Is It Unethical?

Shipping is mandatory and is always included in everything that we pay for. Customers are actually aware of this basic concept. However, we humans prefer to see shipping as ‘part of’ the product rather than a separate service. So when we see the shipping cost itemized, our brains tend to think twice.

Adding shipping costs to the payment that the customer has to make, isn’t wrongful of retailers. The stores should definitely include the shipping costs in the payment process. How the shipping cost is perceived by the customer is what the retailers should be mindful of.

Smartiac - Buying goods from an online store

How Much Do Shipping Fees Impact Companies?

A study done by Clutch on the impact of shipping costs on online shoppers proved a powerful point. They studied how customers behaved if the shipping was free, compared to if the shipping was priced at just $2.99 ($2.99 is one of the lowest shipping costs in the US). There is only a very small difference between the two costs. However, only 77% of customers were willing to purchase the items if the shipping wasn’t free. This meant that 33% were not willing to proceed with their payment simply because of the extra shipping fee.

Companies lose around 1/3 of their customers to extra shipping fees

– Clutch

This is a good point to take note of when pricing your products for your business. This study showed that regardless of how low the shipping cost is set, there still is a massive difference between there being a shipping cost and it being free.

A third of your customers is an entire chunk of potential sales that your company could be generating. If the shipping cost has this big of an impact on businesses, it is very important for companies to pay attention to it.

Another study that they conducted showed that an equal percentage of customers expected free shipping on small items as well as large items.

Free Shipping Study Conducted By Clutch
Source: Clutch 2019 Logistics Survey

This shows that regardless of the size of the item, people expect free shipping on items of all sizes.

Smartiac - Generating more sales for your business

How To Use This Sales Tactic

Step 1:  Find the total amount that the customer would most likely have to pay for each item. To find this, add up the actual cost of the item and the shipping cost for that particular item. This will be the final price for your item.

Step 2: Price the items with the value calculated in step 1 and set the shipping cost for the entire store as ‘Free’. This will allow customers to notice the free shipping and will remove their focus from the price of the item.

Step 3: Include a ‘discount’. For customers who will be purchasing more than one item, offer a discount. Give them more discounts if they buy more. This is to cancel out the extra shipping costs that you’ve added to the other items.

Step 4: Present the information well. This is where you make use of ‘sale’ signs and ‘discount’ notices all over your online store to get customers to check out your items.

Smartiac - Free Shipping - Delivery

In general, there are many types of offers that you can make to entice customers to purchase your products. Free shipping is one of the strategies that marketers can use to generate more sales. Aside from using this sales tactic, it’s also important to present your information nicely to attract the attention of customers. There are several articles on my blog that you can use to make your business more successful. They explain many different sales tactics for you to read up on. Make sure you check them out!

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