Drake, he’s just like us and loves free shipping. The psychology of free shipping is perfectly depicted in the most accurate meme in the history of ecommerce. And admittedly, it resonated a little too much.
The desire for free shipping can be explained by consumer psychology. First, let’s start with the why.
Why Is Free Shipping Important?
Companies, like Amazon, have ignited a universal expectation for free shipping. According to NRF, 60% of shoppers expect free shipping from retailers. Online purchases are actually encouraged by free shipping. 79% of consumers say free shipping makes them more likely to shop. It’s because the incentive improves the online experience and removes the barrier shipping costs create.
Most importantly, shoppers believe free shipping to be convenient. And convenience shapes shoppers behavior. NRF states that 9 out of 10 people are likely to choose a retailer based on convenience. With convenience shaping the future of retail, the incentive has become a necessity.
Although free shipping seems to be for consumers, it greatly benefits businesses. The incentive contributes to brand loyalty and awareness. It’s known to increase average order value and conversion rates.
Arguably, percentage discounts can benefit ecommerce businesses as well. So what’s the difference between free shipping and a percentage off discount?
Free Shipping vs Discounts
Humans, in general, prefer the word “free.” Consider the following offer:
Would you prefer a free pair of socks when you buy two, or 34% off when you buy three?
You probably want the free socks. Most people do! Even though the discount would save you more money, humans don’t process fractions the same way they do the concept of “free.”
Fractions and percentages require our brains to process something logically, which people don’t enjoy doing while shopping. Getting something for “free” is largely emotional, and highly preferable to the discount. Give us a calculator, and we’ll just hurl it at the discount and take the free socks.
Let’s explore 4 reasons that explain the logic behind consumer’s habits.
The Psychology of Free Shipping
1. Shoppers fear hidden fees
According to Statista, 56% of shoppers abandon their online shopping carts when they encounter unexpected costs.
By clearly displaying free or discounted shipping, businesses remove the fear of hidden fees. Therefore, shoppers are subliminally pushed towards conversion.
If you offer free shipping on certain cart thresholds, let shoppers know at the start. And if you don’t offer anything, be transparent about shipping costs up front.
2. Free shipping reduces friction and encourages consumers to shop
Shoppers are on your site for a reason…they’re interested in your product. Give them a reason to convert!
According to a survey conducted by Forbes, 84% of shoppers have specifically made a purchase because shipping was free. And 30% of shoppers say they are likely to increase their order size to qualify for free shipping.
Considering these statics, shoppers are more likely to try products or make repeat purchases if the business offers free shipping.
3. Shoppers expect the utmost convenience at all times
Online shoppers love convenience and we often get what we want. Consider the following services:
- Amazon Prime
- Warby Parker’s free home try on service
- Subscription services that deliver trending items or refills of items
- Drive up services at brick and mortar stores
- Food and grocery delivery
- Online booking services
It’s likely you’ve used one or more of the above services. And you’ve probably questioned why that level of customer experience isn’t found elsewhere. Once we have convenience, we expect it.
As previously stated, shoppers believe free shipping to be convenient. They are given this level of convenience from countless services. Leading us to reason number four.
4. The incentive is everywhere (and it’s a 2020 ecommerce trend)
UpSellit’s 2020 ecommerce trends blog lists free shipping as a way to remain competitive in an increasingly saturated ecommerce space. The incentive has been referred to as a trend to look out for and try in 2020.
Companies such as Nordstrom and Zappos have been leaders in the ecommerce industry. The companies have offered free shipping and returns on all orders for years. Zappos even offers free next day delivery at no additional cost.
Gap and Altheta do things slightly different. Orders over $50 get free shipping, requiring shoppers to meet a shipping threshold. But, all shoppers get free returns on all orders.
Gap and Altheta showcase one of the many alternatives companies can offer. And alternatives aren’t a bad thing. Remember, 30% of shoppers say they are likely to increase their order size to meet shipping thresholds.
Free shipping and their alternatives can be used as a marketing strategy. And their effects can be great. Let’s take a look at 5 ways the incentive can benefit businesses.
Effects of Free Shipping as a Marketing Strategy
1. Boost average order value
Offering delivery free of charge is a great way to tap into the concept of free. But, having a shipping threshold and making shoppers qualify for free shipping gives businesses the opportunity to boost AOV.
Take a look at this example:
Palm Beach Jewelry offers shoppers free shipping on orders over $40.
Although jewelry purchases are normally over $40, Palm Beach Jewelry offers items under $40.
When the cart doesn’t quite meet the threshold, Palm Beach Jewelry displays the amount needed to qualify.
In the case of Palm Beach Jewelry, shoppers can find upsells and cross-sells adjacent to their cart.
2. Create a personalized experience with product recommendations
Companies can recommend best sellers, new arrivals, or personalized products to help shoppers meet the shipping threshold. Even if a threshold isn’t required, businesses can still recommend products.
Take a look at the example below from Virtue Labs. The business invites shoppers to “complete your regimen,” suggesting two shampoos and a serum to go with the conditioner in their cart.
If shoppers were visiting Virtue labs with the intent to purchase only the conditioner, the business is bringing attention to supplemental products and instilling the idea to purchase a complete regimen.
Although new arrivals and best sellers are valid items to recommend, adding a touch of personalization goes a long way. After all, advanced product recommendations mean more revenue.
3. Increase customer retention
A survey conducted by Material Handling and Logistics found that 91% of shoppers are likely to become repeat customers if a business offers free shipping. Which means the incentive, actually increases brand loyalty.
The incentive can also be used to build loyalty programs. For example, Madewell offers free shipping and returns for Madewell insiders, but charges for shipping and returns to all other shoppers.
Madewell requires an email address and few items of personal information, but there is no fee to join. If 60% of shoppers expect free shipping, they will likely join a loyalty program to receive the perks.
Alternatively, brands like Amazon Prime charge an annual fee. However, by the end of 2019, Amazon Prime had an estimated 112 million members. And that’s just in the United States. Clearly the benefits outweigh the cost in some programs.
4. Build brand awareness
Free shipping taps into consumer psychology to create an emotional connection between online shoppers and online retailers. When customers are emotionally connected to a brand, they recommend services at a much higher rate.
75% of consumers trust their friends more than any other source for shopping recommendations. That means word of mouth advertising is still a valuable source of marketing.
So if you already provide a top notch customer experience and exceptional customer service, add free shipping to the mix. Give shoppers another reason to recommend your brand to their friends, family, and colleagues.
5. Reduces coupon hacking
Coupon statistics states that 51% of shoppers search for coupons online before making a purchase. If an online retailer is not offering unique coupon codes, shoppers could potentially find additional promo codes in their search for a shipping incentive.
By removing shipping cost or discount shipping charges, you keep shoppers on-site, reducing the chance of coupon hacking and shopping cart abandonment.
The Trending Incentive
It’s clear, the shipping incentive is expected in 2020. And there’s no limit to the ways the incentive can be offered.
The psychology of free shipping is beneficial to businesses who use the incentive as a marketing tool. For online retailers, removing shipping charges can enhance increase customer loyalty, boost average order values, and spread brand awareness.
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