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E-commerce  |  

Free Shipping or Discounted Price?

2018-12-03
E-commerce
free shipping, promotion, discount, discounts

One of the most difficult choices online trades have to face is deciding whether to offer free shipping or discounted prices. The truth is - everything depends on:

  • The financial stability of the online store;
  • The preferences of customers;
  • The type of items you sell;
  • The desired business goals.

That’s why we are going to analyze the two methods with no strings attached. You can choose the better solution depending on the business you run.

Read more: 6 Shopiko Tools for Boosting Your Sales

1. Free Shipping

Free shipping is a favourite benefit for most customers when shopping online. Numerous studies show that:

  • 9 out of 10 consumers would buy an item if it's offered with free shipping. (Walker Sands Communication, 2018)
  • 25% of users prefer to visit a physical store to buy a certain item because of the extra shipping costs for their purchase. (Global Online Consumer Report, KPMG International, 2017)
  • 23% of users abandon their shopping cart at the final step when shipping costs are added to the final price. (Baymard Institute, 2018)
  • 58% of users would add more products to their cart to reach the minimum order required for obtaining free shipping. (ComScore, 2018)
Psychological impact

Free shipping influences impulsive online shopping in a positive way

It works great for products that your clients can find in a physical store or buy from your competitors. Although shipping is a compulsory element of online shopping, most users treat it as unnecessary expense. “Why should I pay for shipping if I can go and buy it for the same price from a physical store?”

Remember: Users are driven by their impressions. The argument that traveling to a physical store also costs some money is not persuasive enough!

Free shipping increases users’ motivation to buy items online since:

  • It creates the impression that consumers save money and time.
  • It suppresses the feeling of taking a risks.

It activates the brain's reward system through the power of “free”

We are all raised with the believe that there is no such thing as a free lunch. So when we see something for “free” we get really excited. Everything "free” is worth it. Even if we practically don't need it. Have you noticed how many people taste food and drinks with no need to do it. They do it just because it's free.

It lowers the risk of dissatisfaction

A lot of users refuse to shop online because they are afraid  that the product won't meet their expectations. Free shipping helps in such cases. It blocks thoughts like: “I’m not even sure what I will get. On top of it I have to pay for shipping.”

Disadvantages of the free shipping

It's not free at all...

Or at least not for you. If you are going to use this tactics, do have in mind that you need to make up for the difference. Focus on good planning and choosing a successful business strategy for free shipping.

It doesn't necessarily make you competitive

Free shipping is is not a one-way ticket for success. It's a tool to help you boost your sales, but it's not a permanent and fundamental competitive advantage. If you want to be better than the competition you need to also work on:

When this tactics works best?

You can achieve success offering free shipping with customers who know what they want and are figuring out from where to buy it. The method doesn't work if a user hasn't already realized their problem or how to solve it. Also if a user doesn't need the items you offer in your store.

2. Discounted price
Important: While free shipping can be used only by online stores, discounts can be applied by every business.

Discounts are one of the most widespread methods for attracting and/or retaining customers. Figures speak for themselves:

  • Discounts increase the total average of the shopping cart with up to 46%. (2018 Coupon Code Statistics)
  • 35% of the millennial users (aged 20-30) look for the best promo deals daily. (emarketer.com 2018)
  • 54% of shoppers would buy a product upon retargeting if they are offered a discount. (VWO, eCommerce Consumer Survey, 2017)
Psychological impact

It attracts attention and has the potential to keep it

Promotions always attract attention - no matter the their type. Depending on the visualization (percentage from the price, fixed amount from the price, promo code, voucher, etc.) you can influence your customers to stop looking for offers elsewhere.

Well-planned and well-positioned discount usually gets customers focused on buying and leads to the following:

Creates urgency

Very often discounts have specific conditions:

  • Time frame;
  • Defined amount;
  • They apply to certain products;
  • Or sometimes fixed quantities.

Well-communicated promotion makes consumers act, because if they don't - they can miss the good deal.

Very often this is enough reason to stop looking for better offers. Especially if they are satisfied with the price-quality ratio.

It increases satisfaction from the purchase

Everyone likes to search and find good deals. Discounts very often create the feeling of satisfaction that the user:

  • Saves money.
  • Has found the best offer on the market at this specific moment;
  • Felt appreciated by the company that offers the discount (if it is personal).
Disadvantages of discounted prices

They can “teach” your customers to expect promotions by default

Making the same discounts too often may teach your customers to expect promotions all of the time. Little by little the feeling of immediacy can fade away if they haven't been carefully planned.

There is not just one right approach to applying discounts

There are many approaches. Nobody can define which is the most suitable for your business until you try all strategies. What will work for the competition might not be appropriate for you. So you are will definitelt go through a process!

When is the best time to offer a discounted price?

Each promotion has a different purpose as this completely depends on your business purposes. Promotions work very well if you apply the right one for the right purpose. Goals might be:

  • Attracting new customers.
  • Stimulating inactive customers to purchase.
  • Selling out old or unpopular items.
  • Increasing the total average amount of the shopping cart.

And so on.

Important: Free shipping and different discounts of the product selling price don't exclude each other. You can use those two approaches separately or together. It all depends on your business’ goals and needs. You are the one who decides.

Share as a comment below this article which of the two approaches works better for you. We will be happy to exchange ideas and experience!

Good luck to everyone!

Marketing Specialist

Didi is part of the SuperMarketing Team. One of her many SuperPowers is her ability to cope with any challenge she faces on her way to success. Her positive attitude, wide smile and absolute professionalism, immediately gains the sympathy of everyone – familiar and unfamiliar with her personality. It doesn't matter if a friend or a client needs her help, Didi is always ready to cooperate and do whatever it takes to get the job done.

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