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|Free Shipping, just doubled the orders|
little changes, making big difference?
We always offered free shipping but we never displayed it as boldly as it is now, and the orders nearly doubled for over a week now. I need to check if there is nothing else affecting it, but I was wondering if little changes as such made a big difference in your case?
[edited by: Habtom at 9:06 am (utc) on June 25, 2007]
For many years --not just one week-- we've tested in various ways bursts of free shipping which amounts to a hefty 10-15% discount off our average order.
We currently email repeat customers a monthly 6-day coupon good for free shipping. We get a nice kick in orders at huge expense.
Pretty much a wash.
jsinger - just curious if you tried free-shipping for all products for all customers straight off, and plastered across the site?
I've offered unconditional free shipping before, and it definitely causes orders to pick up, but it really goes against the grain. The first pound costs a lot to ship, but subsequent pounds cost much less. Unconditional free shipping doesn't take that into account so, for me, things don't work out very well.
My shipping charge is about 15% of my average order size, so with unconditional free shipping, the price of every item has to increase to make up for it, even though only the price of the first item purchased really needs to be increased. I've tried free shipping and x% off 2 or more items to balance that out, but it didn't work so well. I think it was too complicated. People like policies like this: Free Shipping.
Something that I found that worked well to increase sales was a flat shipping rate for a group of small items. This is a whole section of the site that to some extent has a different customer base than the rest of the site. It just barely covers the shipping and packing costs on those items. It would be a loss to do this with other items on the site, though, because they are all different sizes and weights. I have found that people do order a bit more knowing they won't have to pay any more in shipping. The hard part is just getting people to realize it's there.
With any offer of this type, good execution relies upon the loss you make on some small orders being offset by the gains you make on larger orders and the additional profit due to sales lifted overall. It takes balls, research, modelling and luck and you have to be careful you're not breaking the law by effectively selling some products below cost price.
A point I forgot to make is that unconditional free shipping doesn't encourage a large order size. Maybe I like three items on a site, but only one of them is a must-have. I can order the must-have today, order another of the items tomorrow after I sleep on it, and the third item another day after I think it over even more. Not only does that mean the other two items might never be purchased, but even if they are, the store owner will make much less than he would have if I had ordered all three items at once to save on shipping.
it just depends on the order size how can give it for small value payments
It's a difficult issue, especially when you factor in customer loyalty. Is the customer who was pleased to get free shipping on something small more likely to come back at Christmas time and get a load of presents at the store?
Customers love free shipping. I can't argue with that.
I take it free shipping is only for domestic customers? Do you offer free shipping for international customers as well?
I'd like to do it, but our products range from 8ozs to huge furniture-type stuff. And many of the businesses buy certain products by the pallet-load.
We've tried the 5 and 10% discounts, and those work okay; we've tried free shipping on some items, and it didn't seem to make a big difference. We tried gift cards, but those tanked - I'm thinking of trying gas cards, though. More useful for B2B customers maybe than a gift card.
A point I forgot to make is that unconditional free shipping doesn't encourage a large order size.
Right, look at Amazon. I'm sure shipping costs for them are MUCH less than for any of us because of their distribution network. And they require at least a $25 order. Offering free shipping on an item that costs $7 is a monumentally bad idea ;)
Free shipping has become part of our brand identity. Our customers love it. We've had to do a *lot* of modeling to get it right though. We had to drop or bundle low price point items. And, obviously, it's only as good as you market it. We offer free 2-day at a certain basket size and free international (to some countries) at a certain baseket size too.
We're currently testing free 2-day shipping, but I think the incremental gain is much smaller and it has a lot of negatives that need to be worked out too (like the lack of upwards pressure on basket size).
|Offering free shipping on an item that costs $7 is a monumentally bad idea ;) |
Except for the fact that (our) customers respond much better to "free shipping" without a bunch of caveats. Our solution has been to simply not have $7 products.
You could compare it to a B&M store. B&M always provide the equivalent of 'free shipping' as there is no service or overhead charge per customer. Stores which did do that mostly died out a long time ago.
A customer can come into most stores, spend half an hour browsing and asking your staff questions, and then leave without paying. Likewise, a customer may buy something worth pence/cents having taken full advantage of your air conditioning/heating, lighting, off-road parking, and possibly even toilets - you are almost certainly at a significant loss.
But that electricity, parking space, and staff wage would be paid whether the browser had walked in or not. When a customer buys something from my online store, I spend at least $5.00 I wouldn't have spent otherwise. I have to try to make up for it with the profit from the item(s) sold and the shipping charge.
[quote] Tonearm - The first pound costs a lot to ship, but subsequent pounds cost much less.[/quote}
You should look into shipping usps for 0-5lbs. 1lb costs only 4.60 to ship anywhere in the us including puerto rico, guam, hawaii and alaska.
We have found anything less than 5lbs is much cheaper to ship postal with delivery confirmation. They also have flat rate boxes and we have shipped VERY heavy items that way for about 9.00 in the us.
On the rest of the subject, we have found that free shipping on expensive items does help boost sales but when we did free shipping for all we basically lost money or broke even across the board unless we raised the sale price.
While trying to understand our UPS costs, it turns out they use a per box and per pound model. For example, we are in Arizona (USA) and the rate to ship within one zone is $5.50 per box and $0.30 per pound. So obviously the number of boxes can have a great influence on the shipping bill - espcecially if you have light items.
For those shipping UPS over 200 pounds per order (not per box) then I would urge you to consider Hundredweight pricing. We have found it can be even cheaper than shipping by the pallet.
Doubled your orders, but did it double your profit, or make any significant increase in profits?
One of the sites I develop operates "free delivery all orders over £70" and have found it encourages orders for multiple items.
UPS is a bit more but they offer more flexibility,
we could have an order at 5:59, call it in at 6:30 and the driver be there at 7:45 and USPS Driver be going at that pizza slice, fearlessly, and sipping BUD at that time, at least where we are.
And Yes Free shipping does indulge more orders, but it puts a dent on the profit margin.
From NJ to VA, 2LB package, $100 value
Delivery 2 days (not 2day – but ground) ===$8.47
With signature confirmation and insurance for 100 buks is $ 9.05
But then again, ALASKA or overseas USPS is a WINNER
The US Postal Service introduced what they call Shipping Assistant [usps.com]
Prints the label.
Delivery confirmations are 1/2 price.
Calculates multiple costs.
Creates Customs forms.
You have to apply your own postage.
Does not calculate insurance.
|jsinger - just curious if you tried free-shipping for all products for all customers straight off, and plastered across the site? |
Our free shipping coupon doesn't appear on the site. Mailing list customers get a coupon that applies to any purchase over a certain minimal amount.
Don't assume The Big Boys use free shipping for merchandising or "bottom line" reasons.
IMO, publicly owned Dot Coms use such gimmicks to "manage" revenues at the end of a financial reporting period...often to meet Wall Street expectations or to juice bonuses (gasp!)
(sorry if I've said that often before, but I think its worth repeating)
You can not just introduce free shipping, and expect to come out ahead. You must do it in conjunction with other marketing strategies, such as a sale.
This is the problem. If the average order is only one or two items, the cost per item for shipping is very high. You need to increase the number of items in an order. so the cost for shipping them ppc, goes down, and profit goes up.
For exmaple. Let's say you sell vitamins at $6 bottle that cost you $2 a bottle wholesale. How much does it cost to place one bottle in a 6"x"6"x6" box with packing, versus 6 bottles in that same box with less packing?
Let's say it is $8 just for example to ship one bottle with the cost of the package, packing and the weight of the bottle. Is your consumer going to pay you $14 for that bottle of vitamins? Not if he is smart.
But, if you can add another five bottles to the package, the cost of shipping this package will likely be $10, only $2 more. This makes the cost per bottle only $1.66 per bottle instead of $8 per bottle.
Because vitamins are light weight, the cost goes up very little when you add more bottles to the package. But, you now have the profit of $4 per bottle on six bottles of vitamins, or $24 profit for one package to be shipped, instead of $4 for one bottle in a package. Now... you can offer free shipping and make more profit on that order, than if you sold only one bottle for the order.
So... you offer a sale. Buy 5 bottles get 1 bottle free AND as an added bonus you get free shipping.
You have now tempted the customer beyond what he can resist, and have made your product a better deal than your competitors'.
Let's break it down. Most customers visiting a website to make a purchase, make one purchase and don't return. There are many reasons they dont' return. Some no longer need or want the product again. Some can't find you because they forgot to bookmark you and lost the receipt. Some bookmarked you but changed computers. Most can't remember your site name (that is your fault entirely. You could have avoided that by selecting a better 'sticky' domain name). The reason doesn't matter. Return visitors who repeat buy are a low percentage across the web. This is why you need to make as much profit off each CUSTOMER as possible not make as much profit off each PRODUCT as possible,for the best possible monthly/annual bottom line.
Taking the example above, you would have made $4 on the customer IF he bought only bottle. But, now, he has bought 6 bottles.
6 Bottle Order Total: $30 ($6 x 5 bottles, one free)
Cost of 6 bottles wholesale $12
Profit before shipping: $18
Then you paid for shipping, which we said was $10. Your profit off this customer is now $8 instead of $4 AND you paid for shipping. Multiple that by 100 customers in the month because your sale is hard to resist, and you have now earned $8000 off that one product for the month ($8 profit on 100 customers)
If without the sale, you might have sold only three bottles of vitamins in the month, because with the shipping the total cost is outrageous, you have just cleaned up big time. Plus, instead of the visitors coming, seeing vitamins they like, then discovering the shipping made them beyond reasonable, and they start clicking that BACK BROWSER button fast and furious to go back to the Google search results to find a competitor, they will come back, even as a low percentage, instead of never coming back at all.
But, please, do not stop there. Don't just put one item on sale and offer free shipping. Offer it on every other light weight product you have, where adding a few more in a package will increase the shipping only slightly.
Place a box on every page of your site that lists the product that are included in "Today's Free Shipping" promotion, to cross market the theme.
Also remember this. While your supplier may have been charging you $2 for a bottle of vitamins when you were selling only a few bottles a month, what kind of deal might he offer you if you were selling 600 (100 orders of 6 bottles) bottles a month? Maybe you would get them for $1.80, saving another $120. You now have $120 to help cover the cost of those free bottles you gave in the promotion.
For the 600 bottles ordered, you gave away 100 free. Your cost at the old wholesale for the free bottles was $200. But, at the new wholesale price, you lowered your cost not only on the 100 free bottles you gave away, but also on the 500 you sold. The cost of the free bottles to you now is only $80 after you negotiated the new price of $1.80ppc for the 600 bottles.
Your supplier doesn't care if you are selling the bottles or giving them away free of charge. That free bottle in every six you sell in the promotion, still counts toward your total volume with the supplier. Ask for a deal now that you are ordering more from him/her and increase your profit some more.
Not only that, you will likely get a better deal on the shipping supplies, as you buy in higher volume, further reducing your overhead, and increasing your profit.
Now, I hear the nay sayers, I've heard the whining a thousand times before. "Yeah, but I am working my fanny off for only double the profit off this customer." Yes, you are. I will remind you that you are doing that sitting at a machine in your leisure, likely at home, in your pajamas, and your life is pretty easy if only you could make more money.
If you refuse to work the business and put the extra effort in, where will you be a year from now? Waiting tables, digging ditches in the heat, working 12 hour shifts in a hospital, all for THE MAN.
Either you will do what you need to do in order to survive on the web, or just run back to THE MAN, and let him make his profit off your back.
Interesting thread, but I'm missing who is THE MAN.
The ruling class.
I'd love to sacrifice profit per item for volume if it meant greater net income. I've tried free shipping promos over different dollar amounts and lowering prices way down, but I can't get people to jump on it in the kind of way you're describing. Not even close. Has anyone been successful trading off profit per item for greater volume?
We have learned to be very careful when offering free shipping. As for increasing sales, it does that but as pointed out ...it's for less profit.
So while the profit is up slightly, the extra work and time is not worth the cash.
Jane, thank you for such a thorough outline of this topic and marketing 101 in general.
My wife and I have been at this (web biz) since 95 and have tried almost every thing legal (no spam lists etc) to try to make sales grow on purpose. Our good news/bad news is we make and sell items to a niche market, a subset of the jewelry and gifts market. Some special pieces we make at our home shop, some we buy for resale. Many are one of a kind items. Unfortunately most of our products are not what I'd call consumables, a customer just needs / wants one or two for a self treat or gift giving occasionally. They do not get used up like candy, makeup, or vitamins etc. There are some add ons we sell to go with the main items but even they are not always needed or necessary for the customer.
There in lies the rub. Jane's observation in regard to the customer finding your site and making a purchase , then going away, maybe for ever is very true. We always pack in at least two or three business cards with each order and recently started adding our simple logo to the gift boxes we put the products in, and added the stickers to the outside of the shipping padded envelope or box.
Low and behold I have started to see more and more searches from Goog and the like with just our website name - as the search term. I'd like to think its a result of postal , office employees or friends that have seen our shipping packages laying around.
Jane's model of making the most profit from each customer rather than each product is very sound I and I will think on that seriously for a while, thanks again Jane.
Our current free shipping offer is if order is over x$
then free S&H, our least costly items sell for $5.00 and most costly several hundred, and weight is from 3 ounces to over 20 pounds plus, very difficult to balance out that kind of spread with S&H offers, but Lord knows we've tried over the years. We are trying a new thing for us which should help with more robust repeat sales, going to make instruction DVDs and maybe even put them online in password protected area for immediate viewing after purchase while they wait for the DVDs to be mailed. Also sell supplies and tools and kits needed to make the projects. Have already invested $2K in new HD camcorder, lighting, sound equipment etc, still not done , need more PC horsepower and newer video editing SW. When will it ever stop?
Offering free S&H across the board has never doubled our sales just a slight up tick maybe. So I'm not a big fan.
Good luck to all.
And Jane, you're GOOD!
Mike McKnight, frying in old Sun City AZ - 110 today and tomorrow and the rest of the summer!
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