Why does free shipping hold so much value to customers?

[olimits7]

Hi,

I'm running a basic poll on my website asking customers what they value the most when they shop online, and it seems like so far I got the most replies for "free shipping".

However, I looked up a bunch of different items on my site and for the most part I'm still very competitive even including shipping against my other competitors.

So I was wondering why do customers value free shipping so much even if my prices including shipping are still very competitive? Do they just like seeing the terms "free shipping"?

For me, as long as the total order price including shipping is still competiive against other competitors it doesn't matter to me what the shipping cost is.

For example; retailer A could have item price of $50 and free shipping, but retailer B could have item price of $30, and shipping cost of $18 and I would most likely buy from retailer B.

Thank you,

olimits7

[toplisek]

Do they just like seeing the terms "free shipping"? Yes, they like teases and one is FREE in many forms:
1. free shipping
2. discount for quantity for other products
3. discount for quantity for the same product

Reason is actually simple and confirmed by each day: People buy on feelings not actual price. In this way your example is actually usual:
retailer B could have item price of $30, and shipping cost of $18 and I would most likely buy from retailer B.

They do not show (hide)final price with additional cost. Feeling matters. It can be done by additional teases.

One good example is with brand names.
If you ask people what is search engine? They will reply Google. It is in the heart of feeling what is SE. This matters not the price. If you ask people what is social marketing. Maybe this will be replied Facebook. People do not decide with 30 USD or 50 USD. This is cost game and in modern times this is not important. When you have TV, will you ask producer for movie or internet and YouTube? Feeling...to have FUN.

[Lapizuli]

It's also because "free shipping" means customers don't have to search for the shipping cost. They may know it's built into the price, or they may not, but the key thing is that they know the cost straight out, without having to search, read help pages, enter personal data, etc.

[walkman]

Because they know how much the item truly costs, no surprises.

[rocknbil]

I'm going out on a limb here . . . but over the years I have heard things like

"Why is your shipping so expensive?"
"You charge too much for shipping."

Which leads me to believe customers think shipping is in our control somehow, when we query the API for every order and have very little "handling charge" (weight of the box and padding, period.)

It gets better when you receive orders with these instructions:

"Our house doesn't have numbers. Deliver it to the blue house on the right on Soandso Street, it's a blue house." (Is it the blue one? Oh, I see it, there it is . . .)

"Knock on the door and if no one is there, go through the gate and set it on the back porch."

"Bring it to the front desk and ask for Candy." (We had a laugh about that one . . . 'peppermint sticks please.')

These lead me to believe, as astounding as it may seem, that many customers think a company actually delivers it's own stuff. Like flowers or pizza, but across the country.

[LifeinAsia]

I agree with the total price issue. Many sites that don't offer free shipping make you go through the entire checkout process before letting you know the final price. Also, many sites with very low prices charge ridiculously high shipping charges (found one place that wanted to charge $18 to ship 1 small bottle of vitamins- for regular delivery, not even overnight or 2-day express). With free shipping, I know what the final cost will be (other than possible sales tax) without going through lots of screens.

[olimits7]

Do you also think having fixed shipping costs for all items helps with sales?

What I mean by this is let's say you charge $5 for ground, $10 for 2nd day, and $15 for overnight for all items on your website. I'm guessing a customer would feel more comfortable buying since they will easily know what the shipping costs are for every item based on having fixed shipping costs set.

Instead of having shipping costs that will vary depending on the actual item; so then a customer would probably see $5 for ground for 1 item but also see $8 ground for another item.

[dpd1]

To me, free shipping is most beneficial on stuff that is low cost to begin with. It's a drag when you're buying some stupid little $15 thing, and then the shipping is $10. I think free shipping would probably benefit people selling a lot of low cost stuff, the most. Or at least make it free past a certain amount... especially if it's products that are a leisure item. That way you at least prod people into buying more stuff to hit the free minimum. That way may even be better than totally free, because then it's like a tool you can use to make more sales. But when an item is $300 or more... what's $20 or so for shipping? Not really that big a deal at that point. I think people connect cost to size. Unless it's some item like jewelry or something, where they are already programed to know it's worth a lot. But everything else... Until it's over a certain size, I think they have a problem with cost, and also paying for shipping. The bigger something is, the more they are OK with cost. As irrational as that may seem.

[jecasc]

Asking people in a poll how they value free shipping is one thing.

Nevertheless many of those who voted that free shipping is very important for them will still buy the "$199 + $15 shipping" item from your competitor instead of taking your $210 offer that includes shipping.

The problem with free shipping is that it either cuts into your profits - and it can cut deep into your profits. Or - if you compensate it by calculating it into your prices - it can bite you when the customers buys multiple items.

Because if your competitor offers $199 + $15 and you sell for $210, you are cheaper.

However when the customer buys 2 items and the shipping costs remain the same
For example:
$199 + $249 +$15 = $463

and you charge
$210 + $260 = 470

Then suddenly you are more expensive.

[votrechien]

Because they know how much the item truly costs, no surprises.

I agree with your overall idea although free shipping does tend to give a much less clear idea of the overall price of the item as shipping is being blended into the price.

As other's have said, free shipping eliminates the investigative cost. We clearly lay out our costs for shipping but I can't tell you how many calls we get asking how much shipping is.

[SilverShine]

The answers you get will depend on how you have asked the questions.
(If you want to know about the end, look at the beginning).

[SilverShine]

"Why is your shipping so expensive?"
"You charge too much for shipping."

Which leads me to believe customers think shipping is in our control somehow, when we query the API for every order and have very little "handling charge" (weight of the box and padding, period.)


The actual shipping process may not be in merchants control, but the prices everyone quotes are.
Just look at the infomercials charging "just" $10-$20 for S&H.

[olimits7]

I feel there are people out there that will always try to nickle and dime merchants to get the best deals, and it doesn't matter what price you have set for the item and shipping cost because they will always try to save more.

For example:
- You have a great item price on your website; customer: why is your shipping so high?
- You have low shipping costs on your website; customer: why is your item price so high?
- You have a great item price on your website; customer: why don't you offer free shipping other websites do?
- etc...

[LifeinAsia]

And...
They always had great prices and free shipping: why aren't they in business any more?

[olimits7]

hahaha...that's another accurate scenario; trying to please customers ends up putting merchants on the endangered species list! haha...

[dpd1]

I had a customer complain today, when I sent him a $4.75 replacement part he needed, for shipping of $5. The exact cost of actually shipping it. He said "Wow, shipping is kind of high". Even though he paid exactly what it costs. Why did it bug him? In his mind, he was comparing it to the cost of the part. If the cost of the part was $20, he wouldn't have thought twice about it. So yeah... Even when you are completely honest to the point of loosing money, it's still not enough. I basically made nothing on the deal. Then this is the kind of thing that forces you to do stuff like over charging on shipping for people who spent a lot, so you can make up for all this little stuff... and they're the people who SHOULD get the breaks. It's all backwards.

[Essex_boy]

I had a site once har dto sell products, so I increased the price 300% and listed all shipping costs as $1 per item, sales increased.

True costs are expensive in relation to the product so I think that turned people away, free shipping means thats in teh price they pay anyway. Having $1 shipping means Ive got a great deal on shipping from somewhere says teh customers.

[snoopy1122]

I think it is because shipping is seen as a waste of money by the average consumer. I suspect people think you are absorbing that cost as opposed to adding it onto the price of the time.

[piatkow]

Asking people in a poll how they value free shipping is one thing.

What people answer in a poll does not necessarily reflect real world behaviour. Example from a different field - a music promoter friend of mine ran a successful club on a Friday night. He had a lot of complaints from a vocal minority of customers who thought it should be on Saturday so he polled the customers. The response for Saturday was overwhelming so he made the change. Attendance dropped by about 50%. He moved back to Friday but the regulars that he had lost didn't come back.

Certainly having to search for shipping on a site annoys me as does a high flat rate charge when I want a single, small, light item. The best that I have seen with shipping was in a printed catalogue. Each item was either flagged with a picture of an envelope, a parcel or a truck to indicate how it would be shipped with appropriate shipping rates.

[rogerd]

"Free" is fundamentally different from "low cost" or even very cheap. Two examples:

1. A major ecommerce retailer has a standard shipping charge of $2.99. Almost not worth worrying about, right? In fact, according to a conversion expert, their most responsive promotion is "free shipping."

2. I've blogged about this, but I think I found the original reference in Dan Ariely's excellent Predictably Irrational. Years ago, Amazon ran a free shipping promotion that spanned many countries. Only France seemed to have poor results from the promotion. It turned out that instead of free shipping, the offer had been translated into a charge of one franc, perhaps 20 cents at the time. Even this trivial charge depressed conversion - when it was turned into a truly free offer, French sales matched those in other areas.

There is clearly a preference for "free" - beyond shipping, I've never understood why stores advertise "buy one, get a second one for a penny!" IMO, going straight to free will convert better.

[dickbaker]

Put me down as a vote for "free shipping" meaning that I know the final price before having to spend half an hour checking out to get the total price. Being surprised at checkout often makes me abandon the cart.

Still, even though I show free shipping on every item, I get people who call to find out what the shipping cost is. It's like the accessory I sell for expensive widgets. I show the accessory on a widget in a photo, and have "Widget Not Included" in big bold red type. I still get people calling saying they received their accessory but didn't get their widget.

[rjwmotor]

As stated, the shipping cost is often looked at in relation to the product price, quality, etc...

Next time a customer complains about price, shipping, etc., simply say: "Fast, Cheap, or Good Quality...you can only pick two". If they want it fast and cheap, it's a "you get what you pay for" situation. Fast and good quality, it's probably gonna cost you. Cheap and good quality, it's gonna take a while. Simple economics ;)

[DLadybug]

When I shop, I consider the price is the result of a merchant deciding the cost of doing business, then make a profit. Cost of shipping is a cost of doing business. Just like I know the cost walmart pays to ship items into the store and stock the shelves is a cost of business rolled into their price.

To pay shipping on top of retail makes me feel like I'm being charged twice, once when they calculate the retail price, and again when they tack on shipping.

I still do price check final total between retailers, and if the shipping+price is better than the all in one price, I'll spend my money at the price + shipping place. But it irks me and I won't feel as positive about the seller.

[DLadybug]

Ooops, I just noticed I bumped an old topic. Sorry.

[oliondor]

Being a shop owner and customer I know exactly how much profit make shops and and find it unacceptable to have to pay for shipping to other greedy shop owners.

So I just add FREE SHIPPING on my shops and add the shipping cost to the product price to please my customers !

[SilverShine]

"To pay shipping on top of retail makes me feel like I'm being charged twice, once when they calculate the retail price, and again when they tack on shipping."

But you still have to go to the store to get the goods!. That is a cost to you, which you ignore in your analogy.
If you had to drive across 5 states to get to the store, you would face a large cost to do so but most people don't shop that way but somehow expect their online shopping to be the same as shopping locally.

Not a tenable position.

[pageoneresults]

Ooops, I just noticed I bumped an old topic. Sorry.

Most are ADD around here, it's no biggie. I'm sure all those who have implemented free shipping are now reaping the rewards. 'Tis the season... :)

[wheel]

For me, as long as the total order price including shipping is still competiive against other competitors it doesn't matter to me what the shipping cost is.

It doesn't matter what matters to you :). It matters what matters to the customers.

That's one thing I've learned through the years. I can figure my way through a problem and end up with the proper answer. But if most of my customers want the exact opposite, the money is in giving it to them. Some of my best ideas have come from doing the exact opposite of what I want, but doing what my customers wanted.

[toplisek]

This is true from Wheel. I agree. Some countries do not like credit cards. They pay by wire transfer on business account.
It is not the same to sell inside USA and Austria in a example. Conservative and opposite markets depend on customer behavior. If you have conservative market with large shopping locations than you will not sell with credit card. USA market will maybe work but you will end up with 0 in some countries.
Conservative markets like free shipping as competition from shopping locations will force internet companies to deliver within 24 hours and guess what? FREE shipping...

Check:
Google Prepping Answer To Amazon Prime?
December 02, 2011 03:59 PM
[informationweek.com...]

[incrediBILL]

Mostly it's an education thing.

If you tell people on your site why you charge shipping and your prices are still better, maybe they'll stick around.

Educate them "There is no such thing as free shipping, it's part of the product price. We have better product prices and cheaper shipping costs, so don't be fooled by marketing tricks, check the total price before purchasing."

I think the key to sites that don't give free shipping is to show shipping in the cart and/or display shipping costs on the product page. If you capture their postal code early in the process this can be easily done.