The Psychology Of Free Shipping and How It Drives Customer Retention

The Psychology Of Free Shipping and How It Drives Customer Retention

eCommerce businesses need to work harder to retain their customers in order to thrive among the immense competition. Only then will they consider choosing you over another brand that offers the same products at comparable prices. No wonder their customers are willing to purchase Prime memberships that offer free shipping with same-day, 2-hour, or 2-day deliveries. How to reduce your shipping costs Free shipping can eat away at your profits. One way to do this is to include the shipping cost in the product price. Often, negotiation with the logistics service provider can help to reduce costs. For $119 a year, Amazon provides their Prime members with free two-day shipping along with other perks. Ease of return Despite delivering the best products within the promised time, some of your customers might want to return their orders. As a user, I am more likely to prefer an online store that offers a flexible return policy that includes a reasonably large timeframe for returning orders and a free pick-up service. Loyalty based programs and reward points can also tempt existing users to return to your website.

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The Psychology Of Free Shipping and How It Drives Customer Growth

Did you know that the cost of acquiring a new customer is 5X greater than retaining an existing one?

The fact that it costs much more to acquire new customers than to retain them holds true for businesses across all sectors. However, it is especially true for the ever-growing flock of eCommerce companies. eCommerce businesses need to work harder to retain their customers in order to thrive among the immense competition.

But how do you go about doing that? To prevent your customers from switching over to your competition, you need to create smooth and flawless experiences for them. Only then will they consider choosing you over another brand that offers the same products at comparable prices.

There are many different factors that set top eCommerce businesses apart from others. These include the user experience, product pages, shipping, and return policies. It isn’t enough to get your customers to browse through your catalog. To encourage them to buy, you need to offer them something attractive.

Let’s take a look at how free shipping can help you grow and retain your customers.

Simplify the shipping process

Good products and cheap pricing can help you grab the attention of consumers. You might even be able to encourage them to add products to their carts and proceed to place an order. However, on the checkout page, if they discover that they need to pay a hefty sum for shipping, chances are they will abandon their carts.

Usabilla conducted a survey of 2000 U.S. retail shoppers that found that high shipping costs were the biggest cause for cart abandonment. 58% of consumers in the survey said so. Many of these shoppers also reported that having to re-enter shipping information is their greatest cause of frustration.

Also, according to Statista, 63% of shoppers in 2016 and 54% of shoppers in 2017 abandoned their carts due to excessive shipping costs.

Free shipping is a great incentive for acquiring new customers as well as retaining old ones. It can go a long way to encourage your customers to remain loyal to your brand. And customer retention only comes from loyalty.

Amazon has largely popularized the concept of free shipping along with fast delivery. No wonder their customers are willing to purchase Prime memberships that offer free shipping with same-day, 2-hour, or 2-day deliveries. The benefits of this program clearly outweigh the cost.

Try to come up with similar innovative strategies to reduce your shipping costs to compete and survive.

Simplify the Shipping Process like Amazon for Free Shipping
Image via Amazon

How to reduce your shipping costs

Free shipping can eat away at your profits. So you need to develop strategies to strike a balance between free shipping and profitability. One way to do this is to include the shipping cost in the product price. This way, customers are not in for a shock when they head to the checkout page.

Here are some ways in which you can reduce your shipping costs:

Choose the right carrier

Invest some time and effort into finding a suitable third-party logistics company. The top-rated delivery services can seem to be expensive. However, there are many smaller providers which deliver quality services at great prices. But remember not to compromise on quick delivery for the sake of saving costs.

You must also account for contingencies such as fuel surcharges, Saturday deliveries, and residential delivery charges. Some carriers charge extra if you require a signature from recipients. It is useful to understand these costs in advance and rule out the ones that are not necessary.

Often, negotiation with the logistics service provider can help to reduce costs. They might offer discounts for bulk orders or high annual shipping volumes. It can also be helpful to get your shipping insurance from a third party, instead of getting it from the carrier.

Size matters

Another crucial factor that decides the shipping cost is the size and weight of your package. In order to reduce shipping costs, you can modify the packaging so that the overall size and weight decreases. In fact, many carriers also provide their own packaging, for which they don’t charge by dimensions. Of course, take care not to jeopardize the product.

Online and prepaid shipping

Online and prepaid shipping is a boon for small and niche eCommerce…

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