It struck me that Free Shipping may be a great marketing message for your site and for acquiring new customers – and it seems to be one of the first things clients consider when planning their website, but in the long term: Is Free Shipping Right for You?
At the outset it’s a great message to have on your site. You will have sat down and worked out shipping costs per item and created your pricing formulas, and thought yep, that works – the price, when you take shipping into consideration, is right. My quoted price may be higher than competitors because they do not include the shipping charges in their price but so long as I use my “Free Shipping” badge well I will maintain my chosen market position.
But if this calculation has been based upon the sale and shipping of a single item how does that affect your futue business? If you sell mostly single items perhaps it doesn’t matter, you are competitve, you are where you want to be in the marketplace: Here’s the delivered price, click to buy.
So what of the future? As soon as you start trading one key metric you will see is “Average Basket Value” and YOU WILL want to increase basket value. And to do that you will want to sell more items per customer. Will free shipping still be the best bet? At the outset you’ve almost definitely priced your products based on a single product sale including shipping and all overheads. But after a period of trading you’ll realise that you’re developing a picture of customers’ average number of items in the basket, and average shipping cost per order, and they don’t tally with your first calculations. The original calculation should actually be delivering you a slightly higher margin – if some customers do order more than one item and they are packed together, but they are not encouraging multiple sales compared with those sites that are now charging a flat shipping fee per order, because two items from you is now MORE than two items from them. This is the point, and being the progressive entrepreneur that you are, you should probably sit down, wrap a cold towel round your head, and have a very big think about your pricing structure.
Questions to ask yourself:
Is my sales model based on single item per basket?
Will Free Shipping model make me less competitive?
Which will best achieve my targets?
Whichever I do, How do I use it to my advantage?
How do I measure success?
Do I get economies of scale with postage/shipping?
If you choose not to offer free shipping where does that leave you? Firstly you can publish a lower product price so you appear more competitive – especially in crucial areas such as adverts on paid search where the key is conversion rates. Then you raise the question with potential customers: “Yes but how much is this going to cost to ship” and that answer is all too often only discovered at the checkout after registration. Good luck with that exeptionally patient potential customer.
If you do offer free shipping you remove that obstacle, but ultimately you are quoting a higher “first impression” price, which in the end leaves the customer trying to figure out – “Well, do I go for the free shipping price on you.com or do i go for the lower price on competitor.com and then add in the shipping costs and is it cost per order or per item?”
Or has their head exploded by then?
There is no right answer to this I am sorry to say, though new customers are much more likely to exercise caution and order a single item first time round. But that, you say, could favour Free Shipping, as a flat shipping charge per order would be perhaps be disproportionate on a single item. But later, if the first experience was good they’ll be back, and more likely to place larger orders.
So who will you choose?! The decision is yours, just be sure to optimise your chosen method properly and Sell the advantages to your customer – thats the first sale you need to make.