So, you have a good product and your website is getting good traffic, should you offer free freight in order to convert that traffic into sales? This is a longstanding dilemma, made more difficult by the pressures of increased energy costs. Eating freight can offer up some unpleasant surprises, but do you have to?
The Psychology of Paying Freight Charges
The idea of free freight makes intuitive sense: give someone something for free and he will buy more. If you’re clever, reduce your costs of freight by buying in bulk, drop shipping, or making special arrangements with your suppliers for a limited period of time or on specific products. It makes sense, but does it work?
John Morgan, an economist with the University of Berkeley, conducted studies through eBay that showed some interesting results relative to people’s expectations about freight. He discovered that people who received a great deal on a product were willing to pay very high, even prohibitive rates for freight to get it into their hands. Compare this with the experience of giants like Amazon, who offer fair but not exceptional pricing, but are under intense scrutiny by customers relative to freight.
Strategies for Pricing Freight
This suggests that consumers compartmentalize product and freight purchases into different mental ledger sheets when determining what constitutes good value. Great deals provide a higher buying impetus than correspondingly lower or free freight. This means that the umbrella that you are selling for $12.00 with free freight, may sell better for $10.00 with a $2.00 shipping and handling charge, provided you have the best product price around. This is good news for you if you’ve been at the mercy of spiraling freight costs, or your products have unique freight related challenges.
Be Careful of Abusing Shipping and Handling Strategies
This opens the door for abuse, and you’ve probably seen it in TV ads that offer ridiculously low prices with outrageous shipping and handling charges. Understanding the psychology of what pushes buyers’ buttons doesn’t mean that you’ll make it rich abusing the knowledge. People catch on eventually, and your best strategy is to cultivate repeat business by observing fair business practices. CKB
If you are offering a good product at a good price, strategizing the way you are going to market the pricing is as important as the other promotional strategies you are employing. What’s important to realize is that in the global marketplace there’s always competition for the cybershopper’s dollar. The strategies that give you a leg up by knowing the best way to package your offerings are the ones that are going to keep you in business.