The Psychology Behind Free Shipping: Does It Work?

by 2 02/24/2014

Does free shipping really work? This is a question that keeps coming back to me every time I look at a shopping website or consult with a client on their e-commerce site.

Because free shipping is so widespread, one would think that it’s the only way to do e-commerce. I wondered…

Is free shipping really the way to go?
Does free shipping truly compel the customer to convert?
Could free shipping be a gimmick?
What’s the psychology behind free shipping?

My curiosity got the better of me, so — true to form — I researched the heck out of the subject. In my research, I left no stone unturned and no avenue of exploration untouched. In the content that follows, I’ve laid out what I think is the most important fact you should know about free shipping.

Allow me to sum it up in its most cogent form:

Although free shipping encourages the user to convert, it DOES NOT always match where the customer is at in their buy cycle.  Also, overwhelmingly overlooked is a users search intent. In other words, free shipping works for some people, sometimes.

Free Shipping Is Everywhere

You’ve probably seen it as much as I have. Even a simple “clothes shopping” query turns up this kind of result — “free shipping” is everywhere!

Free shipping example in Google search engine results page

It seems like everyone has free shipping — from mega brands to mom & pop shops.

Nordstrom home page showing an example of free shipping

Here is Target’s main landing page:

Target's valentine day special offering free shipping

 

6pm.com advertises it on their top banner:

6pm.com advertising another type of free shipping off all orders

 

Zappos is well-known for their use of free shipping.

Zappos offer showing free shipping and returns for all purchases

But it’s not just the online clothiers. Apple gives you free shipping, as long as you spend over $50.

Apple's free shipping offer after you spend 50 dollars or more

 

Examples could be provided ad infinitum, but you get the point. Free shipping is ubiquitous.

During last year’s holiday season, the most popular promotion was free shipping. A full 39% of all retailers surveyed stated that free shipping would be their marketing tool of choice. Another group of e-commerce retailers stated that “free shipping…is the most effective promotion they can offer.”

Stamps.com statistics showing percentages of people who buy because of free shipping
Image from stamps.com

Even as long ago as 2009 — a darn long time in the fast-changing e-commerce world — retailers were honing in on free shipping tactics:

This graph is from a 2009 Stamps.com study:

Stamps.com 2009 study of percentages of companies that will offer free shipping

Today, it seems like everyone and their e-commerce mother seems to think that free shipping is the holy grail of success. For a merchant to score sales, is free shipping really that important?

What Is Free Shipping?

Even though free shipping is so widespread, it’s worth taking a look at the actual practice of free shipping. What is it?

My definition:  Free shipping is a marketing technique that removes the stated cost of shipping charges for qualifying purchases.

According to Wikipedia:

Wikipedia free shipping definition

Wikipedia’s definition rests on the marketing side of the equation, while my definition tilts toward the actual cost-reduction component. However, there are so many variations of free shipping, any definition requires nuancing.

Here are some of the different free shipping techniques:

  • Free shipping, no qualifications. Buy anything, and it gets shipped to you for free. No limitations.
  • Free shipping if you’re a member. If you join the merchant’s club, only then do you qualify for free shipping.
  • Free shipping if you spend enough money. Some merchants provide a minimum order threshold. If you spend above a specified amount, you qualify for free shipping.
  • Free shipping if you buy the right stuff. With this approach, buyers qualify for free shipping only when they purchase select items.
  • Free shipping if you have it shipped to a brick-and-mortar store. This pseudo-free shipping lets you have products shipped sans cost to the store, ideally serving as a double carrot to get you to spend more.
  • Free shipping if you buy before a certain time or during a certain time. Many free shipping promotions are constrained by time, meaning that you have to buy during a certain promotion in order to qualify.

And, of course, there are legion in-betweens that combine various angles and emphasis to come up with a free shipping mashup.

Free shipping is as variegated as any other component of e-commerce. The point about free shipping is this — it’s a psychological ploy. Free shipping is designed to attract shoppers by a specific method. “Free” anything is good. Add this “free” buzzword to “shipping,” and you’ve somehow scored a success in the mind of the shoppers.

So, does the mind trick work? Let’s peek into the psychology of free shipping to really uncover the truth.

Free shipping works only if the buyer is in the right phase of the buy cycle.

Every purchaser visiting any e-commerce site is at a certain stage in the buy cycle. Understanding the buy cycle will give you a deeper insight into how a user perceives “free shipping” and whether or not it translates into a value add.

The traditional buy cycle looks like this:

1. Awareness: identification of a need or an emotion that needs to be filled
2. Interest: how does your offer meet this need
3. Learn: features and benefits, what else does it do
4. Shop: a customer’s emotional inclination towards one solution or another
5. Buy/Loyalty: purchasing and repurchasing

The digital buy cycle is tightly integrated with the user interface of the e-commerce platform. This key difference leads me to restate the buy cycle in this way — a digital interpretation.

1. Problem:  “What’s wrong, problematic, or missing?”
2. Google search:  “What can I do about it?”
3. Evaluation:  “What are the pros and cons of my various options?”
4. Decision:  “This one fits my criteria. It is the best option.”
5. Purchase:  “I will click the big orange button to buy it.”
6. Remorse:  “Oh, crap, did I just spend $289?”

Although this is a simplified cycle, it nonetheless reflects the broad phases of how a user thinks as they seek and find a solution to their problem.

So, where does this digital buy cycle intersect with the free shipping technique?

It happens at number five — purchase. Although this is the most important point, it is but one point in the cycle. There are five other phases that matter in the entire cycle.

Free shipping will only be appealing if the user is in the right phase of the buy cycle. Psychologically, the word “free” implies no risk or downside. But that doesn’t mean that it will hook every user. The shopper has to be in buy mode in order to be lured in by the offer of free shipping. You can’t make someone purchase just by saying “free shipping!” if they’re not even sure that your product is the right one.

Let’s overlay the “free shipping” technique on each of the phases, and imagine what a psychological response might be:

1.  Problem:  “What’s wrong, problematic, or missing?” I have no idea what my problem is, so why am I going to be interested in free shipping?!

2.  Google search:  “What can I do about it?” Free shipping means nothing, because I’m just looking for a solution rather than a product!

3.  Comparison and evaluation:  “What are the pros and cons of my various options?” I have so many things to evaluate. My mind can hold a maximum of six comparison criteria at a time, and free shipping is not one of them!

4. Decision:  “This one fits my criteria. It is the best option.” I have settled in on a retailer. Though I came at this decision independent of a free shipping offer, I am nonetheless interested in saving a few bucks. Show me how to get free shipping.

5. Purchase:  “I will click the big orange button to buy it.” Okay, you’ve convinced me. Now I’m going to proceed through the checkout process. I’m sensitive to extra charges, and aware that I am spending money. If I’m wired for free shipping, I’m going to abandon my shopping cart if I see extra charges.

6. Remorse:  “Oh, crap, did I just spend $289?” Now, can I return this piece of junk for free, or do I have to pay?

Here’s the bottom line:  Free shipping will only be effective for shoppers who are in purchase mode.

That’s why free shipping becomes so rampant during the holiday season. A vast array of shoppers are firmly in stage five, and will be swayed by the appeal of free shipping.

Keep in mind, however, that a shopper has to pass through every other phase. If the shopper is in any other phase, he or she will be impervious to the psychological allure of free shipping.

How to do Free Shipping

Free shipping is a good idea. At least, it can be, as long as you do it right. Here are  tips for unleashing a free shipping policy that will make you successful.

  • Determine how much you need to sell in order to be able to provide free shipping. In other words, factor the shipping cost into your cost of the product, and find out if it’s realistic. You don’t want to lose money. This metric will help you discover whether you can afford site-wide free shipping or need to get creative with the options below.
  • Set a minimum purchase threshold. One of the most strategic innovations in the free shipping technique is setting a minimum order. In order to qualify for free shipping, the purchaser must buy $50-100 worth of merchandise. In this model, you can guarantee that your profit margin on each order will remain high, while still providing free shipping.
  • Use free shipping as an incentive to buy during a short marketing campaign. You don’t have to offer year-round free shipping. If you’re going for a seasonal push, try free shipping for a week or a month, or whatever makes sense for your particular product. Free shipping serves as a great incentive for buyers who are in buy mode, which meshes with your product’s seasonality. When you give them the “free shipping” offer while they’re in buy mode, you have a far better chance of scoring success with it.
  • Free shipping on certain items. In industry parlance, it’s called order-level shipping. If your goal is to sell a certain product, then you can offer free shipping on that particular product. If your Widget Number One is a hot seller with strong inventory and great profit margin, go ahead and swallow the free shipping cost.
  • Membership, loyalty programs, or email subscriptions. You can use free shipping for more than just a one-off sale. In order to qualify for free shipping, you can have shoppers join your loyalty program. This could be a free membership, or it could simply be signing up for a mailing list. If you’re really in a strong position, you could even have a paid membership. The best example of this is Amazon Prime. At a rate of $79 annually, members qualify for free two-day shipping on all Prime-eligible purchases, plus other perks such as free streaming on select TV shows and videos.
  • Free shipping on returns. One of the best ways to overcome buyer’s remorse is to offer free shipping on returns. It’s a huge relief to know you can easily send back that sweater you ordered which turned out to be too big. Free returns don’t have quite the same sizzling sell potential that free shipping does, but it can work. It works especially well if you are working with merchandise which has a high likelihood of buyer’s remorse or return rates (e.g., clothing, footwear, etc.)

Can’t do free shipping? Do these instead.

When you crunch the numbers and come away with a deficit for free shipping, you haven’t run out of options. There are still some quick and easy psychological tricks that you can pull that will bring in more sales.

  • Remove dollar signs. Dollar signs are scary. They acts as a friction element during the sales funnel and can potentially reduce customer spending. Numbers are fine (see below) but dollar signs are out.
  • Round numbers and easy multipliers are great. When you have deals such as Two for Two, or Five for Ten, people automatically associate that with a great deal. The nice round numbers make it easy to calculate, too. Both of these — the slogan-like message of the sales price and the easy calculation— can contribute to faster response times to a sale offer. Faster response times, thus, lead to higher conversion rates.
  • Limit the number of purchase per customer. When you limit the number of items that a customer can purchase, it sets off scarcity signals in their mind. The response to scarcity is hoarding, meaning that you not only can score higher conversions, but you may also gain bigger orders.
  • The left digit effect. You’ve seen this pricing strategy everywhere. Items are priced at, say, $9.99 instead of $10. You may think that you’re above succumbing to this juvenile trick. The truth is, we have a left-digit bias when we read material, even three-digit numbers like that. Because of the directional way in which we read text, the left digit is the one that makes the real mental impact. Thus, $9.99 feels much cheaper than $10, even though the price difference is negligible.

Free shipping is still an overall positive, but it’s not the panacea to all e-commerce woes.

Today’s online shoppers are a pretty discerning group. Plus, they’re probably expecting free shipping. Adobe’s Digital Marketing blog reported that “free shipping…is…an expectation from consumers all around the country.”

But just because some survey respondents said that they expected free shipping doesn’t mean that you have to offer free shipping. It is but one technique in your marketing arsenal. Free shipping is most successful if you engage the customer at the right spot in the buy cycle.

Don’t miss other Crazy Egg articles by Jeremy Smith.

About 

Jeremy Smith is a serial entrepreneur, trainer and conversion consultant, helping businesses like IBM, Dow Chemical, American Express, Panera Bread, and Wendys improve conversions and strategically grow their businesses. Jeremy’s experience as the CMO and CEO of technology firms has given him a powerful understanding of human behavior and profit-boosting techniques.

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2 COMMENTS

Tucker Williams

There are some really great points here. Thanks!

This is relatively minor nit-pick on the options when the business can’t do free shipping: removing the dollar sign may present an accessibility issue because the symbol provides a very clear purpose for the presence of the number.

March 12, 2014 Reply


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