Monday, October 21, 2013

Free shipping promotions - One of the most effective promotional tools

The whole purpose of promotions is to ultimately do one thing: spur sales. Promotions can range from super simple to extremely complex with offering free item(s), dollars/percentages off, etc. Whether the promotion is supposed to sell a certain type(s) of item(s), raise the amount of the average order, or spur sales at a specific time, each type of promotion can help to achieve whatever end goal retailers are attempting achieve.

To note, there is one type of promotion that can be adapted to almost any promotion strategy whether it is on its own or supplementary to another sale: Free Shipping. It does not just have to apply to online sales as some big ticket retailers will also offer this promotion for customers purchasing within their physical stores.

It's one of my favorite promotions, and according to research I found online, it is for a majority of the population as well. While I normally don't trust 'studies' from online and other companies without more intimate knowledge, I believe this one because it resonates with my shopping habits and sales trends I have witnessed in my professional career. Everyone loves free shipping.

Here is a stat from I found online that helps provide additional validation:
"According to 64% of the respondents, free shipping—with or without minimum spend—is the most effective promotion an e-commerce merchant can offer to drive sales during the holiday season.  Coming in second place was another shipping-related promotion. 26% of the respondents chose discounted shipping as an effective tool to drive sales.  Note:  survey respondents were allowed to choose multiple answers."

Below are four personal instances of when free shipping has worked for me in different promotion types:
  • Free shipping for reaching a sales total dollar (or percentage) amount
    • I have spent $100 on stuff instead of only $50 just because I can get free shipping. 
  • Buy a certain item, get free shipping
    • I was buying something online last week and also ended up buying an additional item I liked but didn't really need because buying the item gave me free shipping. 
  • Free shipping for members of a service
    • When I'm looking to purchase items, I also look on Amazon and attempt to get free shipping on 'Prime items' because I pay for a yearly membership to the Amazon Prime service. Plus its two day shipping!
  • Free shipping during a certain time
    • On 'Black Monday' sales, a lot of online retailers will offer free shipping without any strings attached. I don't have to leave my home to take advantage of Black Friday like sales.
So why is it that its so effective? At a philosophical level, people seem to shop based on the saving money, whether it is actually saving money or merely the illusion of doing so. Technically you are saving money by buying $50 worth of product and $10 of shipping ($60 total) instead of purchasing $100+ worth of product and $0 of shipping. Then again, if you buy everything you need to buy in one sales order, you may not have to pay for that $10 shipping charge for two orders (which is technically saving you 20% on items that aren't on sale). Then again, would you actually purchase the items on that second order if you didn't talk yourself into taking advantage of the free shipping?

When you ask someone what are some of the cons of ordering online (or a large item that can't be carried out of the store by the customer), one of the main points will probably be paying for shipping. When you eliminate shipping as one of the cons, it makes the purchasing experience seem so much more attractive as it allows you to to buy the products from a group of companies at low, competitive prices that can be lower than some of the prices you find in a physical store. Plus it saves you time from going out and searching for the items of interest in stores which may or may not have the items in stock and maybe at a higher cost. Additionally, when purchasing from within a store with free shipping, it lets you realize how much time and effort you are saving by not lugging a large item around on your own. Team lifts are really bad single lifts...

Hope that the above provides some additional insight into the awesome 'free shipping' promotion.

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