Of the many reasons for cart abandonment, the shipping fee is among the biggest. It plays a crucial role in influencing consumers’ online purchasing behavior and decision making.
The truth is that today’s customers don’t appreciate a separate cost being added to their products at checkout.
In the Amazon era, customers are spoiled for choice by businesses offering free shipping and faster deliveries.
So, should you include the shipping cost in your product price?
The answer actually depends on a few factors.
What does including the shipping cost in the product price entail?
By making the shipping cost part of the product price, you totally blanket your customers from the idea that they are paying an extra amount apart from the product price, and provide the impression they are getting FREE SHIPPING for purchasing from your brand.
And boy is “FREE SHIPPING” a major hook!
According to Berman and Wharton marketing professor Barbara Kahn, there’s a certain psychology behind “FREE SHIPPING” that makes it almost mandatory to include shipping cost in overall product price. Kahn calls it the “pain tax.”
Pain tax: As humans, we have a tendency to segregate gains and take pleasure individually in each positive benefit, but when it comes to dealing with a loss — in our case paying an extra amount for shipping — we’d rather take it in one lump sum.
This means when the shipping cost is charged separately, customers perceive it as a loss on the whole, neglecting the benefits of the product they wanted to purchase, and they end up abandoning their carts.
Will free shipping impact my margin?
The answer depends on the choices you make.
Giving away shipping 100% free, which means you bear the full shipping cost from your margin, can hurt your business unless you charge a premium on your products from customers.
This is because shipping charges are dynamic and differ from location-to-location. Even the eCommerce giants, who get better shipping rates from shipping carriers, struggle to provide free shipping on all of their goods because it is still expensive.
In order to make optimal use of free shipping, you need to get the balance right.
Threshold-based free shipping or “condition-based free shipping,” where a minimum purchase limit is set, has seen good success among retailers.
In fact, 60% of eCommerce companies cite “free shipping with conditions” as their most successful marketing tool.
The reasons are obvious. On the one hand, it satisfies customers’ need for free shipping and on the other it increases the Average Order Value (AOV) of purchases by motivating customers to meet the threshold for free shipping.
You can also opt for shipping options that are less expensive or which have an extended delivery period. Based on the fact that free shipping is provided, customers who are not in immediate need of a product will still choose to wait it out.
So, what are the different ways of providing “free” shipping?
1.Increasing your product price to cover the cost of free shipping
You could include the shipping cost in the product price, making the customer pay for shipping. This way, the customer is technically paying for shipping, even though it feels free.