{"id":4767,"date":"2020-03-28T16:09:00","date_gmt":"2020-03-28T23:09:00","guid":{"rendered":"https:\/\/thegood.com\/?post_type=insights&p=4767"},"modified":"2021-05-10T13:13:43","modified_gmt":"2021-05-10T20:13:43","slug":"offer-free-shipping-right-way","status":"publish","type":"insights","link":"https:\/\/thegood.com\/insights\/offer-free-shipping-right-way\/","title":{"rendered":"How to Offer Free Shipping the Right Way"},"content":{"rendered":"\n

A guy walks into a restaurant, sits down at the counter, and asks the waiter how much a cup of coffee costs.<\/p>\n\n\n\n

\u201cThree fifty,\u201d says the waiter.<\/p>\n\n\n\n

\u201cHow much for a refill,\u201d asks the man.<\/p>\n\n\n\n

\u201cThat\u2019s free.\u201d<\/p>\n\n\n\n

\u201cFine, then, I\u2019ll just have the refill.\u201d<\/p>\n\n\n\n

You and I both know there\u2019s no such thing as a free cup of coffee. Somebody pays for every product or service you get.<\/p>\n\n\n\n

The incredible thing is that consumers know there\u2019s no free lunch, just as well as you know it. Then why do we like to pretend \u201cfree shipping\u201d really exists, and why is it so powerfully effective?<\/p>\n\n\n\n

In this article, we take a look at the free shipping paradox. We\u2019ll talk about how best to offer free shipping, and how, when done the right way, it drives conversions and boosts bottom line profit.<\/p>\n\n\n\n

Do You Really Have to Offer Free Shipping?<\/h2>\n\n\n\n

Studies conducted over the past five years consistently point to free shipping as the most effective promotional tactic available to ecommerce websites.<\/p>\n\n\n\n

Prior to the growth of free shipping options for ecommerce stores, local retailers could counter the \u201cI can get it cheaper online\u201d objection with \u201cNot after you add on the cost of shipping.\u201d<\/p>\n\n\n\n

Free shipping is a primary factor in the steady expansion<\/a> of ecommerce sales. According to YCharts, online business grew from $27.8B for 2Q 2006 to over $97.3B during 2Q 2016.<\/p>\n\n\n\n

\"offer<\/figure><\/div>\n\n\n\n

And while the reality is that free shipping plans often fail to provide significant cost savings to consumers (the expense must be covered somehow), conversion rates typically take a healthy leap forward when free shipping is featured.<\/p>\n\n\nConversion rates typically take a healthy leap forward when free shipping is featured. <\/a><\/span>Share on X<\/a><\/span>\n\n\n\n

Why do online sellers who offer free shipping get such great results? Here are some of the most cited reasons:<\/p>\n\n\n\n

  • Consumers don\u2019t like surprises.<\/strong> They want to know the total price upfront. Making them go through the entire checkout procedure, before they can find out how much shipping will cost, presents an added burden and potential disappointment. You set up a situation quite likely to waste their time.<\/li>
  • \u201cFree\u201d is a perennially sweet word.<\/strong> If I can purchase your merchandise online and not have to drive to the local retailer, I save time. If you will ship to me at no cost, I\u2019ve also saved money \u2013 certainly gas money, and it appears I\u2019ve saved the shipping expense as well. The consumer\u2019s inclination is, \u201cI\u2019ll pay a little more for the product, if you\u2019ll pay for the shipping.\u201d<\/li>
  • If you do something nice for me, I\u2019m more inclined to do something nice for you\u2026<\/strong> and free shipping is a really nice gesture. I will thank you with my business.<\/li>
  • The Baymard Institute<\/a> puts the average cart abandonment rate at 68.8%.<\/strong> That\u2019s more than two out of three. When shoppers were asked why they abandon the cart during checkout, 61% cited extra costs (i.e. shipping rate). The next biggest reason (account creation required) came in at 35%.<\/li>
  • Many consumers now choose where to shop based on whether or not free shipping is offered.<\/strong> A 2016 Walker Sands<\/a> study reported 88% of respondents say free shipping is the top incentive for shopping online.<\/li><\/ul>\n\n\n\n
    \"offer<\/figure><\/div>\n\n\n\n

    Given the almost undeniable conclusion that adding free shipping to the mix is a good idea for most businesses, the million-dollar question becomes \u201cHow can we offer free shipping and grow profitability at the same time?\u201d<\/p>\n\n\n\n

    Let\u2019s talk about that.<\/p>\n\n\n\n

    How to Offer Free Shipping While Increasing Profits<\/h2>\n\n\n\n

    You don\u2019t want to offer free shipping and lose money. Unfortunately, many businesses have done that, and some are still doing that. Your desire is to consider free shipping as an avenue towards a better return on investment.<\/p>\n\n\n\n

    Initially, you want to investigate the potential of free shipping for your particular business situation. You want to test free shipping or free shipping options before you make a commitment.<\/p>\n\n\n\n

    Free shipping, done right, typically boosts conversion rate, average order volume, customer retention, and profit.<\/p>\n\n\nFree shipping, done right, boosts conversion rate, avg. order volume, customer retention, and profit. <\/a><\/span>Share on X<\/a><\/span>\n\n\n\n

    That\u2019s your aim.<\/p>\n\n\n\n

    Here\u2019s a three-step process to get started:<\/p>\n\n\n\n

    First Step:<\/strong> Take a snapshot of your current metrics<\/a>. You\u2019ll want to track conversion rate, average order volume, and net profit (at a minimum). Establishing a baseline is always the first step in testing. To begin, you are experimenting to see how changes in shipping will affect profit. You aren\u2019t trying to optimize yet, you\u2019re only taking a look at your options.<\/p>\n\n\n\n

    Second Step:<\/strong> Decide which free shipping offers you want to test. Most companies will want to experiment with carte blanche free shipping, free shipping for a minimum order amount, and free shipping under special conditions. See below for a list of ideas.<\/p>\n\n\n\n

    Third Step:<\/strong> Run the tests, observe and compare the data. If results warrant, you should then set up another set of tests to either do more discovery or begin the optimization process.<\/p>\n\n\n\n