More online retailers are offering free shipping as customers come to expect it. Last year, more than half of all online transactions during the holidays included shipping at no charge, a 10 percent jump from 2010, according to a survey of online shoppers by comScore.
While you may need to offer free shipping — at least as a promotional feature during the holidays — to retain and attract customers, don't jump into it too quickly. Here are five mistakes to avoid when offering free shipping to your customers.
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1. Assuming free shipping is your best promotional offer: While free shipping is often touted as the best way to lure customers, other promotional offers might help your business even more. David Kravetz, cofounder of Fairytale Brownies, a Phoenix-based baked goods company, began offering free shipping in 2005. But two years later, he decided to do an experiment. He made two different offers to customers — either 20 percent off their total purchase or free shipping — and was surprised that almost twice as many customers chose the discount. Even better, Kravetz says, those customers bought more because they wanted to increase their savings.
2. Going into free shipping whole hog: Small businesses make a huge mistake by offering free shipping year round or for all purchases regardless of price, said Chris Malta, an Orlando, Fla.-based shipping expert. "People think, 'If I'm not making sales now, there must be a magic switch I can turn on,' and they think that it's free shipping. They go from nothing free shipping to everything free shipping." Instead, Malta recommends starting out with a limited-time offer on free shipping that will entice customers to buy. For example, every six to eight weeks, Kravetz offers free shipping deals that last only about three days. He also sets a minimum threshold so customers get free shipping only if their purchase totals $35 or more. "If you send a $15 item [free of charge], you can really lose money on the order," he said.
3. Making your minimum threshold too high: While free shipping on small purchases can eat away at your profit margin, it's a mistake to set your minimum qualifying purchase price too high, said John Lawson, an Atlanta-based e-commerce consultant. He recommends figuring out your average order size and making your minimum threshold 10 or 15 percent higher to encourage customers to buy a little more than they normally would. For example, if your average order is $20, consider making the minimum purchase eligible for free shipping $25 rather than, say, $50 or $100. "If no one ever orders from you for $100, that's not realistic," Lawson said.
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4. Touting free shipping as your main marketing message: Retailers often rely too heavily on free shipping to sell their products. While you should certainly make "free shipping" a prominent element of your home page, don't overdo it and drown out important messages about your brand and specific products. "You are selling the product, you are not selling free shipping," Malta says. "Every product has to have a consistent message that goes with their branding. …When you overstate something like free shipping, it just takes away from everything else." Kravetz, whose website is filled with large flashing photographs of brownie gift boxes, also warns against trying to compete on free shipping alone: "I don't want to be the company that people come to because of free shipping."
5. Failing to remind customers how much they're saving: Once you've made free shipping part of the deal, be sure to let customers know exactly how much they are saving, says Matt Silvers, CEO of seo4anyone.com, a Miami-based Internet marketing company. Most online shopping carts automatically calculate shipping fees, so customers can see how much they would have spent without the freebie. "That's another validation for the customer to buy," Silvers said. "It goes from a perceived savings to an actual quantitative savings in the customer's mind."