How to Incentivize Your Customers with Free Shipping

  •    Mikhail is the Head of Marketing at Shippo, the shipping dashboard and API that connects you to multiple carriers.

Free shipping is the #1 concern for customers when checking out from your online store. In fact, according to a report by UPS, 93% of shoppers take action to qualify for free shipping, when the leading action is adding items to their cart. But we know that shipping is never actually free. In fact, data shows that shipping accounts for 12.5% of Amazon’s overall costs and an astounding 35% of an SMB’s cost.

So in a time where cheap shipping can offer a great competitive advantage to e-commerce stores, what can you do to use shipping to win customer’s business without completely eroding your margins?

With so much power behind “free shipping” businesses can use it to incentivize customers to purchase more by identifying key customer data and offering strategic shipping incentives.

Use Free Shipping to Incentivize Action

With shoppers’ willingness to add items to a cart to meet shipping requirements in order to qualify for free shipping, you can capitalize on this by incentivizing shipping minimums in several ways:

Minimum Purchase: Only offer free shipping with a minimum purchase value. One way to determine this threshold is to calculate your current average order value and set the free shipping minimum slightly above it, forcing the customer to add at least 1 more item to the cart in order to qualify. By doing this, you reap the benefits of a free shipping promotion but only have to cover shipping costs for your best customers. Just be careful not to set your threshold too high. If your average order value is $50 and you set your free shipping minimum at $90, you’re not offering enough savings to counteract the increased spend by the customer.

Category/Brand Purchases: Offer free shipping with the purchase of a specific category or brand of items. For example, you could offer free shipping with the purchase of a mug or free shipping on Nike shoes. This is a great way to promote new items or clear older inventory.

Free Shipping at Certain Times: You don’t have to offer free shipping year round, but seasonal free shipping can provide a welcome boost in sales. For example, to boost end-of-summer sales, promote and offer free shipping for a week during August.

Offer Various Shipping Options

​50% of shoppers will choose a slower transit time to qualify for free shipping, and 83% of them are willing to wait an additional two or more days to get free shipping.

The key is to be transparent about transit times for various shipping options so the customers can select the shipping that’s best for them. It’s fine to offer ground shipping as your free option as long as the estimated delivery time is clearly presented. Even if you’re a drop shipper, there’s are ways to make free shipping work for you.

Is It Working?

It’s important to measure any changes you make to determine the success of each approach.

Key metrics to track are:

  • Conversion Rate: Are more visitors converting into buyers with the free shipping offer than before?
  • Average Order Value: What was the average order value before the free shipping offer? How much has the average order value increased since implementing the free shipping offer?
  • Margin per Order: How much margin is the cost of free shipping eating up?

Evaluating these three data points will help you evaluate the success of your free shipping approach.

The main point here is for you to get creative. To grow your business, you should evaluate all aspects of your business and shipping strategy and select the most effective free shipping method for you.