Free Shipping!

**pluckyduck** · #1 03-05-2002, 07:37 AM

Okay, now, fess up.

How many people clicked on this thread just because it said "Free Shipping!"?

Free shipping (or free "freight" in the case of my business orders) draws. As an offer it outpulls anything, even free goods. (Buy 1 get 1, whatever.)

I find myself having to use discipline and not turn out Free Freight! every time I want to make a special offer, lest it lose its power for me entirely.

Here's the thing that amuses me:

If I put these two offers against each other - 10 percent off your order up to $100 off, or Free Freight up to $75 off, the Free Freight always wins by a landslide. Meanwhile, freight on a light $500 order might only be $20.

What do you guys think about the psychology of free shipping? Any other offers that are a sure grab for you?

Andrea
always looking for a sure grab

magenta321 · #2 03-05-2002, 07:44 AM

Ok, I admit I am drawn to "FS" as I call it

The reason is that shopping by catelogue and online is a luxury. You pay for the merchendise, then you pay for the shipping on top of it. It is like a hidden fee.

So, when that extra fee is gone, shopping online or by catelogue is no longer a luxury. It's just the same as running to a B&M store and buying it, only it is even quicker and easier, and you don't have to deal with crowds or cashiers. Nice!!!

I don't know why it works in the business world. I guess everyone, even corporations, are convinced that shipping is a very over-priced thing that none of us like paying. Like taxes

How much do you think people really save on tax free day, compared to how much extra they will spend, just because it is "tax free." Great business idea for whatever government type first came up with that idea. Was New York first? Smart state...

**taurusmoon** · #3 03-05-2002, 07:53 AM

Free freight in my business is a killer, but has become expected.
And, when you're shipping books it's not exactly small change.

However, we have entered an age when a handful of customers dictate your terms for you. If you want to do business with the B&Ns, Borders and Sam's Clubs of this world, you have to be prepared to whittle down your terms to something perilously close to the break even point. Not only do they expect free freight, you have to give them extra points and extended dating.

And, then you have to kill the freight charges for the little guys too. When you're buying books in onesies and twosies (rather than in case quantities) the freight represents a large, unrecoverable percent of your total profit.

So, free freight has become the norm. So has shrunken margins.

Sara

**pluckyduck** · #4 03-05-2002, 07:54 AM

Quote:

I don't know why it works in the business world. I guess everyone, even corporations, are convinced that shipping is a very over-priced thing that none of us like paying. Like taxes

I tried it the first time in business on a lark because I am totally drawn to free shipping offers in my personal life. I'll add to an order just to get my free shipping.

I didn't honestly believe that it would draw in the business world. I thought the harder 10% schedule was much better, because people could see precisely what they were getting free, and a hundred bucks off a thousand dollar order is nothing to sneeze at.

Margaret, I think you are right. I think that freight = tax, or close to it.

Andrea

quasar · #5 03-05-2002, 07:56 AM

Interesting. I am someone who, if faced with two coupons - even if one is free shipping and one is a percentage or $$$ off - compare the end results of using the two and use the one that saves me the most. I'm fascinated that others don't.

Janice

**pluckyduck** · #6 03-05-2002, 07:56 AM

Quote:

So, free freight has become the norm. So has shrunken margins.

Ahhhh! My fear!!!! Back!!!!

(I've been meaning to find a sign of the cross or garlic smilie, sigh)

This is exactly what I'm afraid of, and why I try to resist using the offer too often. Part of the reason it works for me is that nobody else in my industry is doing it.

Now, are they smarter than me or dumber than me?

Andrea

**pluckyduck** · #7 03-05-2002, 08:00 AM

Quote:

Originally posted by quasar
Interesting. I am someone who, if faced with two coupons - even if one is free shipping and one is a percentage or $$$ off - compare the end results of using the two and use the one that saves me the most. I'm fascinated that others don't.

Janice

I am fascinated by a lot of things, and yes, that's one of them.

If people have two offers from me (which happens), my CS people are instructed to help them find the best deal for them. They'll do a freight estimate and help the folks figure out what is the best offer.

Now, I'm often mystified by how many business customers just ignore the offer entirely and place their order. This happens more often than not. But the free freight is far and away the one they will take advantage of if they take advantage of anything.

Andrea
watching her margins shrink, but her business grow?

quasar · #8 03-05-2002, 08:13 AM

Hmmm, I could see one issue playing a factor with corporate purchases, particularly ones that may be repeat business.

At most of the places I've worked getting a purchase order approved, even for something that everyone agrees is a must-have, isn't easy. And once one has been established for a certain product it's used as the basis for additional purchasing in that area (Why is this $100 more than the last time we bought it? I can't approve that. etc.). Also, budgetting for marketing giveaways and such (which I assume would include most purchases made from you) seems to be based on past cost to at least some extent. So if you gave people 10% off at some of these companies and they know they can get it approved at the full price, it might be in their best interest to not take the discount (as awful as that is - corporate beaurocracy can be insane).

Janice

**Joubert**[$] · #9 03-05-2002, 08:55 AM

I don't work at a place that has shipping costs anymore, but I spent five years toiling in operations at a b2b company that had these very same issues.

What our marketers found after some decent analysis was that perception of the product diminished with price cuts. Giving away 10% - even on a $200 book - was not as powerful an incentive as shipping costs. We sometimes used free shipping as catalog bait, but found something that worked even better -- flat rate shipping.

Order as much as you want and shipping is just $4.95 (later $6.95).

People, especially those in purchasing departments, understand and know that they have two tracks to leverage: shipping and materials. They also know what shipping costs so if you are already heavily discounting everyone, they understand they're getting a deal.

I've seen organizations that would typically place 20 orders in a year cut that to one or two in order to save $100 on shipping. The mentality was, "I (purchasing agent) can save a hundred bucks from our order if you'll all order now." Combine that with a volume discount, say $3 per unit if ordering more than 10 and the purchasing agent saves $160 and becomes a hero. Their goal is to wring incremental savings. If those 20 books cost $4100 last year when ordered separately and now cost $3940, well, life is good. You've made them heroes by knocking 4% off their costs without violating your pricing structure's integrity.

As others enter your business (or are already there), that becomes important, particularly if you differentiate on service or quality. Now you can sit back and let someone try to steal the low end of your business, but you have a consistent pricing strategy that you can rest on. Yes, you may lose some deals, but you won't be taking unprofitable deals. In the long run (and no quote long dead economists, please), you're better positioned then the folks who have been operating at a loss if your product offering (including service) is truly differentiated.

poseidon · #10 03-05-2002, 09:32 AM

I'll look at "Free Shipping" when I'm shopping for something specific. Something that says, "Free Shipping" on it that I'm not needing I won't buy.

A perfect example of this occurred last night... I got an e-mail from some outfit saying that for $29.99 they'll send me Norton Systemworks 2002 Professional (which sells for about $99 at Best Buy) and they'll include free shipping.

I'm a huge fan of Norton Systemworks. I run the 2001 version. The $29.99 is an awesome price.

The problem is that I don't really need it. 2001 works just great. 2002 is an upgrade, but I'm not running Win XP. So, while the price is great, it would still be a waste of money.

Different scenario...

Last year I was shopping for a scanner. I used www.computershopper.com to do my on-line shopping and compared it to the ads in the Sunday paper.

They'll tell you on-line who offers free shipping and who doesn't, and if they don't, what their shipping rates are. Typically the companies that offered free shipping charged more for the same product than their competitors. Not all of them, but some of them. Some of the companies with very attractive prices gouged you for shipping (how come one company can charge you $5.99 for shipping and another charges you $29.99 for shipping the same article?).

So, yes, the Free Shipping will get me interested, but I'll still shop your competitors to see if it's truly a good deal.

Jeff

Redlass · #11 03-05-2002, 11:55 AM

George:
Fantastic points. We've always had to be careful about discounting our products because we do a fair amount of government business. Many of the government contracts (especially the military) stipulate that we have to give them the lowest cost we give anyone. So if we offer even a one-day sale at 50% (to use an extreme example), we then have to give that cut-rate price on that product for all future sales to our government markets.

Free shipping, as you point out, protects the pricing integrity.

**pluckyduck** · #12 03-05-2002, 08:15 PM

Have I ever told you guys how much I love you? It helps me so much to hear what people I trust are doing or what they've experienced.

George, I need to start paying you a consulting fee.

This has my wheels spinning. I don't know what to do with the information, because my shipping charges/costs vary wildly... 2000 squeeze bottles from one end of the country to the other is a little different from 500 lapel pins, ya know?

But, my wheels are spinning. Look out!

Andrea