Free shipping: Does it actually boost sales?

Offers are an essential part of direct marketing and are at the heart of direct response advertising.

And few offers these days are as popular as free shipping.

Free shipping is often recommended by direct marketing gurus as a way to boost orders, but does this offer really work? It depends on who you ask. It seems to work for some and not for others.

A client recently ask me about free shipping, saying that it was getting harder to make it profitable. I didn’t have the answer and had a hard time finding any good data on this, but Marketing wizard Ted Grigg came through and directed me to an article about informal research on free offers from F. Curtis Barry & Company.

Remember that this information is from late 2008, so it’s possible something has changed since then, though I doubt it.

Here are some highlights:

Around 80% of all major businesses offer free shipping during the Fall and Holiday season.

Most free shipping offers are tied to a minimum order.

Success with free shipping varies widely from one company to another.

Free shipping seems to work better with products that can be shipped at a low cost.

Shipping costs have been going up, making it harder to justify a free shipping offer.

Conditioning customers to expect free shipping may be a counterproductive strategy.

50% to 70% of customers are one-time buyers, which raises further doubts about the benefits of free shipping.

Before reading this report, I had assumed that free shipping worked, given the frequency of this offer. But now I’m thinking that free shipping might be a little like sweepstakes, where the offer often pulls more orders but creates the risk of attracting low-value customers and creating a downward profit spiral that’s hard to escape.

As in all cases, testing is the only way to see if free shipping works for you, though according to the F. Curtis Barry & Company report, measuring results may be harder than it sounds.

Have you tested free shipping lately? Is it working for you?

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January 19, 2010 | Filed in Direct Marketing

9 Comments

Comments

9 Responses to “Free shipping: Does it actually boost sales?”

Mark on January 19th, 2010 6:51 pm

My clients have tested free shipping and it doesn’t seem to have much of an effect.

Also, we’ve found that it does condition customers to expect free promotions (as noted in the article.)

And very quickly at that. If we don’t offer a free promotion the following month our customers will ring up and ask us where it is or what we’re offering this month. Also, they will put off their purchase until a free promotion is offered.

But all this aside, I would have thought that if you have to offer something free to clinch the sale then the original offer, product or copy hasn’t done its job.

In other words, you may be better off paying the copywriter a bit more to do a great job, than wasting money on freebies.
Bill Gibson, II on January 21st, 2010 11:20 am

Over the holidays, I purchased a software package online. On the way to ordering, a popup suggested that I buy an additional unit, at a slightly reduced price, and if I did so, there would be no shipping charges for either. I didn’t actually need the additional unit, but, (and maybe this is the “holiday” spirit kicking in) I thought, “I’ll spend $10 less on shipping, and $10 less on the extra unit, and for that price, I can give it away to a friend.”

So, I bought two.
Dean Rieck on January 21st, 2010 11:26 am

Bill:
Amazon does the same thing. They’ll encourage you to order $X more to get free shipping.
Hans de Groot on January 21st, 2010 2:39 pm

Maybe it does not work because shipping costs are (almost never) shown with the articles. They only appear as soon as you check out. Therefore I think people take these costs for granted and do not mind much about paying them or not.
Jodi Kaplan on January 21st, 2010 4:39 pm

Well, it does irritate me when the shipping costs more (or nearly as much) as the item, particularly when it’s something light.
Dean Rieck on January 21st, 2010 7:03 pm

Jodi:
Yeah, but remember that while the postage might be less for small items, the cost of fulfillment is the same. There’s cost associated with taking the order, having someone pick it, package it, take it to a shipper, etc.
Jodi Kaplan on January 26th, 2010 9:57 am

True. However, take a real example. I need a new spatula. I can’t find what I want locally, but several vendors on Amazon have just the thing.

In one case, the spatula costs $4.29. The shipping is $10!

Another company has one for $2.95 and $7.00 shipping.

Wouldn’t it be better though (psychologically) to charge more for the spatula and less for the shipping?
Jodi Kaplan’s last blog … When is it Smarter To Have Two Web Sites?
Dean Rieck on January 26th, 2010 10:04 am

Jodi:
Not necessarily. People have been trained to pay extra for shipping and handing. So they look at the item price to compare. A $7 item with $10 SH could actually sell better than a $17 item with “free” shipping or a $10 item with $7 shipping.
Thomas on February 19th, 2010 2:35 pm

Great post! I feel if you use incentives to promote free shipping (buy 4 the 5th ships free kinda thing)you can greatly increase sales.
Thomas’s last blog … Good Content = Great SEO