Why does free shipping work?

Published on June 08, 2012 Why does free shipping work?

All offers are not created equal, and an offer with free shipping is often considered better to consumers than a different offer with the same amount of total spend. This is a fact well established in buyer behaviour research, and first reported in a free shipping study from the Wharton School of Business published in 2005. It’s just as relevant today as when it was written six years ago because technology changes products, but it doesn’t change people’s minds.

Why does free shipping work?

• Customers feel better about the transaction. Even if the shipping costs are effectively covered in the prices of the goods, and customers know that, they still respond more positively to free shipping. People feel shortchanged when they purchase an item for $10 and pay $10 postage. They would rather purchase the same item for $20 with free shipping. While logic suggests that this is not rational, the reality is that consumers are not rational. Emotion and psychological liking can play a big part in an online purchase decision.
• It levels the playing field between the store and the online store. People forget that when they go to a store it costs them petrol and parking. They just think about what they spent on the item. By offering free shipping you make postage another cost that the customer doesn’t think about, and therefore makes the customer feel better about the transaction.

Should you offer free shipping for all products or establish a threshold?

There are no hard and fast rules here, and what will work for a business depends on the products that are being sold, and the types of orders that are fulfilled. Higher free shipping levels will encourage customers to buy more in bulk, whereas lower levels will encourage smaller more frequent purchases.

For example, if you are offering lower free shipping limits then you may be able to cross sell items or show off new arrivals more frequently, as you’ll get people coming back to your site more often. This is even more true if you combine free shipping with a deal of the day type offer. If you are offering higher thresholds then two for one offers might be appropriate – as it well help move more stock in an order and make customers feel like they’re more likely to reach your threshold. You want the threshold to feel attainable or customer’s won’t be adding items to the cart to try.

Whatever strategy you adopt, free shipping on specific products on all items, as a sale promotion, or after a certain amount of sales can all help you drive extra traffic and convert more browsers into buyers for your shopping cart website.