People tend to attach a high value to things that have zero-dollar prices, no matter what they are. Did you ever wait in line for free swag at a conference? It would be a mistake to go to a shop to purchase a branded t-shirt for XYZ company. Is it’s for free? Sign me up. Get one for your money and get another one! Purchases of $50 qualify for a free tote bag
We love freebies. Period. Why do we love them so much? How should they influence the choices you make for your online shop?
The zero-price effect
Although the psychology behind consumer buying decisions is complex, the appeal of the word “free” is universal. This could be due to the zero-price effect. Consumers will choose the product or service that offers the greatest cost-benefit ratio when faced with the decision of buying one or more products.
People don’t usually subtract unspoken costs from benefits when it comes to free services or products. They see the benefits as significantly greater. This is the zero-price effect.
Our brains have a way of making us crave valuable commodities, services, and merchandise for no price. It makes us feel special like we are being rewarded for our loyalty to a brand or for being good people.
Zero price shipping
We made that up. “Zero-price shipping” is not a thing. But, it is FREE shipping. It’s now the norm thanks to companies such as Amazon. A Shippo survey found that 93% of shoppers would take action to be eligible for the program. That’s quite a number if you think about it. This means that they will add more items to the cart which leads to more sales.
Kobe Digital stores can make it easier for customers to shop by allowing the Free shipping counter extension to display the amount they need for them to qualify for free shipping.
Notable is also the fact that 70% of online shopping carts are abandoned due to unexpected costs. These costs often relate to shipping fees. However, shipping free of charge is not for everyone. Your most loyal customers should stay loyal as long as they are honest with you.
There is no single shipping strategy that works for everyone.
No one strategy will work for all online businesses. It is crucial to choose the right eCommerce fulfillment strategy. This could include free shipping, or it might not. It may include both free and paid shipping, depending on the order size, delivery address, customer loyalty, or customer loyalty.
Let’s look at the pros and cons associated with free shipping. What types of businesses could benefit? How do you develop the best shipping strategy?
Customer behavior is influenced by offering something free of charge
Customers love the feeling of getting a great deal. Even though shipping costs are often included in product prices, customers can still be influenced by the mere mention of “free shipping” when making a purchase decision.
Let’s examine two simple scenarios. The first scenario is where you sell an item online for $32 and then charge $6 shipping. The second case offers free shipping and the same item at $38. Both prices are the same, but which do you think the customer will choose? It all depends on the customer. However, if you apply the zero-price effect, it appears likely that more customers will choose the second option.
Some businesses cannot afford free shipping 100% of the time.
The zero-price effect is a powerful strategy for some businesses. However, it won’t work for all. Be realistic about your margins. For example, if you sell a product at $5 and shipping is $6, you may not be able to charge $11 to ship the product. However, most customers won’t pay $6 to ship $5 products.
This could be solved by meeting your customers in the middle. This could mean that you charge $8 for the product, and then pay $3 for shipping. While your profit margin will still depend on packaging and handling costs and other factors, this allows you to make money while still offering “free” shipping. You could also charge $8 and then add $3 shipping costs. You will likely be able to sell more products to your customers by charging $8 for the product and shipping it at $3.
You can also let your customers decide what options you offer. You might offer ground shipping free of charge with paid upgrades to speed up delivery. Flexible table rates are available where multiple shipping rates can be calculated based on price, weight, and item count. You have choices.
Your shipping strategy must make sense for your business.
It is vital to have the right shipping strategy in place for your business. It’s very popular to offer free shipping, and people love it. However, happy customers are not going to be a benefit to your business if your company goes bankrupt.
A Geekwire analysis shows that Amazon lost $7.2 billion in shipping costs in 2016. They offer it to their customers so that they can compete with other companies and gain new customers.
Although you might be selling on a smaller scale than Amazon, you could still use a similar strategy: listing products at lower prices to promote your brand to potential customers. This is called a loss leader strategy. It allows you to entice customers with great deals in the hope that they will add more profitable items to their cart.
This is not possible at Amazon’s scale, but it could be a viable strategy in a market with high competition.
Another strategy to be competitive is to sell the lowest-priced product at face value. Your ads may appear alongside those of other competitors if you sell the same product. It might be a good idea to display the lowest price possible so that potential customers click on your ads and not someone else’s. You can then add shipping costs to your checkout.
Luxury brands may not want to reduce their production costs as it could lower the perceived value of the items. Free shipping is a great way to increase conversion rates. Consumers don’t see cheap shipping as a compromise on the quality of the product.
Free shipping is great. However, it is not always the best solution. You need to balance your conversion strategy with your actual bottom line if you offer free shipping
Do your research and be familiar with your numbers
Find out the shipping costs for each item in your inventory. Next, create a shipping strategy to keep your customers happy and continue making a healthy profit.
What you ship, how it’s shipped, and whether your items are perishable can all impact shipping costs. Consider how long it takes to package your products, and what you will pay for labor. It doesn’t mean that you have to offer free shipping for every item.
Free shipping can often be an effective way to sell your products. To qualify for free shipping, customers might be motivated to buy more products if they have to spend $250. They will have to pay if they do not meet the minimum $250. It’s a win/win situation.
To make this strategy work, it is important to consider your margins. Shipping costs can vary based on factors such as weight, size, or location. Please be careful with your calculations. You can also adapt your shipping strategy based on the responses of your audience. You are the boss. Try different strategies. Also, you can offer free shipping at specific times of the year like Black Saturday or Labor Day.
Ensure that you get the best shipping price possible. It might take some time to shop around but you will be able to pass on your savings to your customers through free or low-cost shipping. The best strategy is to find the sweet spot.
After all, “free shipping” doesn’t mean that it is free. It must be paid for.
Which is better: free shipping or lower prices? This question is difficult to answer. Finding the perfect balance between what is best for your company and what will keep your customers happy, is the key to your success. You have the freedom to make your own decisions!
