Is Free Shipping Better for Business Than Lower Prices?
As humans, we tend to get attracted to commodities that come with zero-dollar price tags, regardless of what they are. It would be almost unthinkable to buy a company’s branded t-shirt. But if it’s a gift? You’ll easily hop in to get one. It’s an undeniable fact that, as a society, we love freebies. How does this attachment affect our decision when purchasing online? And what’s better for your business: sales or free shipping?
When operating an online store, you aim at making money and keeping your clients satisfied. These two form the backbone of your business existence. While there are many ways to do this, offering free shipping and online discounts are very popular. You’ll be adding business value to your customers’ orders and saving them money. However, a poor strategy in applying both free shipping and discounts can cost your business a lot of money.
We’ll look at the difference between free shipping and lower product prices, how they affect your business, and which one you should use.
Zero Price Effect in Online Pricing
Research suggests that when clients are shopping around and have several options to choose from, they tend to relate high prices with corresponding quality and greater value.
Online shoppers often welcome a higher price in any category. Here’s a scenario you want to avoid: a low-priced commodity that picks up value with shipping.
It’s evident that in the entire psychology of consumer behavior, “free” has a lot of connotations.
The above is considered part of the zero price effect, which states that: when consumers have to choose between several commodities (goods or services), they usually go for the one that provides the most favorable cost-benefit ratio.
Furthermore, when consumers consider free services or products, they don’t alienate the benefits from the cost: they view the benefits as being much higher.
This part of human psychology pushes us to desire value if commodities, merchandise, or services are at no cost. Consequently, we feel special and rewarded, which tends to turn the antenna of our loyalty to a particular brand.
Statistics reveal that consumers in the 46 to 75 age bracket mostly prefer free shipping. Consumers in the 56-65 age bracket are the biggest in favor of free shipping, composing 35.5%. Consequently, this demographic bracket least cares about online discounts.
Similarly, about 93% of consumers prefer free shipping to discounts. However, if you are all out for free shipping, it would eventually hurt your business because the accumulating costs will eat your profits.
If you target middle-aged and Baby Boomer consumers, you’ll gravitate towards free shipping rather than online discounts. This is because 69% of this mature audience doesn’t like to pay for shipping. 58% of consumers believe that shipping makes a product cost more than initially stated. As a result, free shipping has proved to curb cart abandonment.
A Shippo survey reveals that 93% of consumers on shopping sites like Amazon will do all they can to qualify for free shopping, even if it means adding more items to the cart. Numerically, this translates to many consumers and consequently more sales. A helpful extension like the Free Shipping Counter extension makes it easy to boost sales with free shipping. It shows the client how many more items they should enlist on their cart to qualify for free shipping.
On the same note, approximately 70% of online shopping carts face abandonment due to unprecedented costs. Shipping fees have been known to bloat actual costs.
The flip side is also true: free shipping isn’t for every buyer. As long as costs are easily understood, your loyal clients will stay, regardless of what commodity costs add up to.
There’s No One-Size-Fits-All Shipping Strategy
There’s no straight-cut strategy that shows how online businesses should handle shipping. You need a proper fulfillment strategy that works for you and your client.
It may involve free shipping or not, or a mix of free and paid shipping depending on a client’s profile like location, loyalty, and nature of the order.
The table below outlines the pros and cons of free shipping:
Lower Product Pricing
Lower product pricing also infers discounts.
One thing you should consider is mobile conversion. The young generation loves mobile: you can offer discount codes when customers checkout using their mobile phone.
As a result, you could reduce the average of 97% mobile cart abandonment prevalent today.
Other methods include returning coupons and flash sales. Adopt an email marketing strategy that makes clients aware of your 24-hour sales, thus creating a sense of urgency that attracts these users back to your store.
Coupons help you build loyalty. Consider one that lasts around two weeks from the date of purchase: you’re bound to keep millennials hooked to your store and increase their loyalty.
If you decide to go this route, here’s how to set up WooCommerce gifts and “buy one, get one” deals on your WooCommerce store.
Free Shipping Vs. Lower Product Prices: Which is the Best Pricing Strategy?
There’s no clear, upfront winner between lower product pricing and free shipping. Each is unique, and you should think through them as ways to add to your bottom line and boost your order value.
A customer could opt for bigger purchase volumes to save money. Consequently, they could hit their order threshold to qualify for free shipping.
Consider the following actions before choosing a strategy that wins for your digital business.
Conduct a Quick Cost-Benefit Analysis
Before adopting a strategy, thoroughly analyze its viability and how that approach can help boost your sales. Consider the scenarios below:
- If specific products show a dip in sales, increasing their price wouldn’t be wise.
- Avoid the risk of lowering a product’s perceived value by reducing its price when sales volume picks up.
- Consumers tend to spend more during the holiday season (Thanksgiving, Christmas, etc.). You can consider free shipping to boost the average order value (AOV), thus giving the shoppers a feeling that they are up to a good deal.
As you use free shipping, ensure your advertised minimum basket threshold is more than your average basket size. This approach will make free shipping beneficial and cost-effective.
Consider the Marketplace
Your ultimate strategy will lean on the type of marketplace in which you’re operating. It’s essential to vary your pricing strategy based on the eCommerce channel you adopt. For example, you could have a best-selling book on Amazon with different shipping options, while the price on your site may vary depending on traffic and buyer trends on both platforms.
Continuously diversify your prices to reach your audience with different needs and perceptions.
Additionally, use data to help you with shipping strategies. For example, Amazon offers a Seller Fulfilled Prime and Fulfillment by Amazon (FBA) as options for delivery. These two come with free, two-day shipping. How would you adapt this to your store?
One way would be through the WooCommerce Amazon Fulfilment plugin, which works with FBA to bring its fantastic features to your store while allowing you to reserve the rights to sell from your backyard and branding network.
One thing comes to mind: price.
Roughly 84% of clients deem price the greatest motivator for going through with a purchase. While discounts and free shipping are good, don’t over-rely on them. Adopt a flexible and dynamic pricing strategy that will always keep you ahead of the pack. To properly boost your conversion, consider combining free shipping and discounts with your dynamic pricing strategy.
Free Shipping Vs. Lower Product Prices: Which One Should You Use in Your WooCommerce Online Store?
It depends on your needs and goals; there’s no right or wrong.
Ultimately, finding the right balance between what’s best for your business and what keeps your customers happy is your golden ticket to success.
But whichever you choose, we at Bright Plugins have all the WooCommerce plugins you’ll need for your WordPress site. We can also develop custom plugins for you.
Contact us today for the best plugins and unmatched support.