I think you can probably guess what the main reason for user abandonment during checkout is. Yep, it’s when customers see extra costs on orders as too high – notably, shipping. That, coupled with the fact that 85% (reference) of customers regarded free shipping as more important than fast shipping, makes it easy to see why free shipping is such a powerful tool.
But what else is at play?
Let’s look at the psychology…
The psychology behind free shipping?
There are a few things going on here that we’re sure you’ll be familiar with from your own online shopping behaviour. First up and building on the point we opened this article with – ‘added cost perception’.
How many times have you viewed a product and been happy with the price initially displayed, only to then be met with additional fees? This new total cost feels at best cheeky, at worse – underhanded. And if you deem the additional costs to be too high, you view it as being unacceptable and so abandon the purchase.
One way you’d be judging whether the additional costs are too high is by looking at the shipping fee as a percentage of the total price. For example, if you’re looking at buying something for £9.99 and then you discover it has a shipping cost of £5.99, you’ll be met with some serious friction. However, if the item you want to purchase is £399 and is £5.99 to ship, then the friction you’d experience wouldn’t be too bad.
What’s clear then, reducing the friction of cost perception is important. Yet, there is one obvious solution to this – free.
By pricing shipping at £0 you create a completely different outcome. The buyer gets all the benefits with no downside costs. It’s why as humans, we are drawn towards free offers, as we overvalue them.
What have we learnt so far?
- Users will evaluate additional shipping fees by looking at them as a percentage of the total price.
- Reducing the friction of cost perception is important.
- One way of reducing friction is to clearly display shipping costs throughout the customer’s journey when on your online store so that they don’t feel deceived (they avoid the ‘negative effects of sequential price evaluation’ during checkout).
- Another, more obvious solution is to not include any additional costs (i.e. make shipping free).
- Humans are drawn to free things. We overvalue them.
Clearly then, there is power in using free shipping.
Let’s look at some of the ways you can use it on your own online store.
Ways of using free shipping
Free shipping on all orders
No qualifications or restrictions, everything comes with free shipping.
Free shipping for members or subscribers only
Free shipping can be used as a good incentive to get customers to become members or buy subscriptions (repeat purchases).
Free shipping to increase product trial
Much like the previous way, offering free shipping is used as a tool to attract customers to try your product. There’s a high chance that when first buying something (that you’ll be buying monthly) you were given free shipping. This nudged you to buy the product, which (through experiencing the product) you subsequently liked and so next month were happy to buy it again with a shipping cost included.
Free shipping on orders that meet a minimum threshold.
How many times when you’re close to the order value that qualifies for free shipping, have you added something else to your cart to hit the target? Again, this is either you are overvaluing the ‘free’ offer, or simply trying to avoid fees (reducing the friction of cost perception) – it’s the psychology at play again…
Free shipping on qualifying items.
These may be higher-priced items, or when you buy a certain number. Like meeting a minimum threshold, but you can be more specific on what the items are.
Free shipping to a brick-and-mortar store for pickup.
Another way of reducing the friction of cost perception and helping to avoid courier charges by taking advantage of your own internal logistics.
Free shipping during a certain window only.
Black Friday, or other holiday/sale seasons. Placing a time limit on the availability of free shipping invokes scarcity – people won’t want to miss out and will feel compelled to act.
Limit free shipping offers to return items only.
If you can’t justify offering free shipping on all your orders, then doing it for returns is a good option to take. It gives customers reassurance that if the product isn’t right, they can return it for free.
Tips/considerations for when using free shipping
Multiple shipping options
When offering free shipping it’s good to also include other shipping options too so that customers have a choice. For example, last-minute shoppers might be grateful to pay extra to ensure their purchase arrives at a certain time.
Is free shipping profitable?
Yes, free shipping will likely increase conversion rates and revenue, but this doesn’t guarantee profit. Be careful and consider this. One way of doing this is to test the effects of free shipping on profitability during a short period of time – just run it as a promotion.
Look at what your competitors are doing.
Look at where other brands are shipping to, how much they are charging, the timeframes they are offering etc, and create hypotheses based on these that you can then test.
Be careful when offering free returns.
You’ll see ‘free returns’ promoted on a website, which will likely mean you’ll purchase more than you need, to test at home, with the plan always being to send some of it back. This type of customer behaviour increases service fulfilment costs and can seriously threaten profit margins.
Hopefully what we’ve shown in this article is:
- Free shipping is a powerful tool when it comes to increasing conversions. So much so, that its widespread use has almost meant customers have come to expect it.
- Despite its power and popularity, it isn’t for every eCommerce brand. Brands need to carefully consider if and when it is best used. If they get the use of it right, then of course it is a tool that will attract and retain customers. However, get it wrong and profitability is at risk.