How to Use Free Shipping to Increase your Average Order Value
Offering free shipping is probably one of the highest-recommended ecommerce marketing strategies out there. You’ve heard it before, and you’ll keep hearing about it again—it’s definitely something worth trying if you haven’t already.
The main reason behind this is simple—time and time again, free shipping has been proven to be the #1 incentive for customers to shop more on your store. Studies show that 9 out of 10 customers are more likely to shop at a site online if they’re promised free shipping.
No doubt about it, customers appreciate free shipping! That’s why we’ve prepared an overview on how free shipping works and how to use it for your store. We’ll also see if free shipping is really free and who actually pays for it.
The psychology of free shipping
The impact of free shipping on sales is not to be taken lightly. In a Statista survey on digital shopping trends in the US, 48% of respondents said they’ve added items to their shopping cart to qualify for free shipping, and 44% stated they’ve chosen the slowest delivery option because it was free. That’s how important free shipping is to customers!
Just remember you’re not actually offering shipping for free, you’re tweaking your prices to make your customers more interested in making a purchase.
At its core, free shipping is designed to override the customers’ logic with emotion and play with their natural impulse to reconsider buying the extra items they previously talked themselves out of getting.
However, the offer is not going to work merely by having the words FREE SHIPPING posted somewhere on your site. It might get customers to stick around, but it won’t necessarily get you sales.
You have to make sure that your store as a whole and, most importantly, your checkout setup give customers a feeling of safety and trust. They need to know the benefits of why they should buy from you, so make sure you’ve made them clear.
Free shipping strategies
Before you set up free shipping on your store, you’re going to have to put in some brainpower and do a little math to figure out how to offer free shipping and still make money.
Make sure you keep track of your conversion rate while you experiment with free shipping. If the results are less than inspiring, it might be worth exploring other strategies to boost sales on your store.
Firstly, it’s up to you to decide whether to install free shipping as a permanent perk or use it for promos. Free shipping in the long-term is great for customer retention and building brand loyalty, especially for stores that drive sales with repeat purchases, and short-term campaigns are great for customer acquisition.
Then, you have to decide either to go site-wide or limit the offer to a certain product or product category. Going with free shipping for certain items can be a good way to start out. Here, it’s better to give your customers more of what they already love – go with a best-seller with relatively low shipping costs.
Next, you can either set up free shipping on any order, or free shipping with minimum purchase value. The setup behind each is a bit different. Below is a breakdown of the two.
Free shipping on any order
If you’re going to implement free shipping for all orders, you’re going to have to increase your prices to compensate for the shipping costs that were previously shown as an additional cost.
In this scenario, you have to increase the prices gradually, so as not to scare off your existing customers – an overnight growth spurt of $10 may come as a shock.
We’ve actually tested what it means to set up free shipping for all orders, and it worked pretty well.
Back in 2016, we ran a year-long free shipping campaign on one of our own online stores. The campaign was live from June 2016 up until July 2017 for shoppers in the US. Before the launch, we increased our prices by $5.
During this time, the number of incoming orders grew by 10 orders/month and the average order value went up by 5%, increasing our monthly revenue by $250. This proves that good results don’t necessarily require radical change.
Free shipping with a minimum purchase
If you’d rather go for free shipping with an order minimum, again, the key is to set the threshold in proportion to your customers’ average order value. It has to be low enough so people still want to add more items to the cart and high enough so that it results in profit.
This is a good time to try some of these upselling or cross-selling tactics that convince buyers to either upgrade their order or add more products.
Think about the possible product combinations your customers might put together to hit that free shipping threshold. Make sure you have a few low-risk products at lower prices that allow customers to go just over the threshold.
For example, if you’re a store specializing in premium all-over tees at $50 a pop, technically, you could offer free shipping starting from $100, enticing your customers to by two at a time. Or, you could set the threshold at $75 and expand your catalog with a $25 dollar tote or $15 dollar mug.
So, how to know that you’ve hit the nail on the head with your free shipping threshold? It’ll take a bit of monitoring on your part – you’ll simply start getting more higher-value orders.
If you’re unsure on how to set up free shipping for your ecommerce platform, check out their FAQs or Google it. All major platforms have some form of tutorial on the topic. Here are the ones for Shopify, Etsy, and WooCommerce.
Marketing free shipping
Spreading the word about free shipping on your store is going to happen in two ways, through the structure and copy on your storefront, and your marketing campaigns.
Whether it’s a long-term or short-term campaign, promote it as much as possible.
On your store
Make sure the promo is noticeable as soon as your customer enters the page. You could go for a pop-up or custom visual, but one of the best ways to do it is a simple free shipping banner on top of the page. It’s practically ecommerce canon, you’ve probably noticed it while shopping yourself.
But don’t stop there. Take it a step further and show the customer what they’re missing, remind them about the offer during the checkout process. In the example below, Lee couldn’t have done it any clearer—they let the customer know just how far away they are from qualifying for free shipping.
And after they’ve made their purchase, give your customers something to show how happy you are that they’re a part of your brand. It could be anything from a thoughtful success/thank you message to a confirmation email boosted with a discount code—a small reward to keep them visiting your site again and again.
Last but not least, don’t forget to mention your free shipping offer on your Shipping & Returns/ FAQ page. Your customers will end up on that page eventually, and seeing that information there will give them an added feeling of security that your offer is legit.
Via marketing campaigns
If free shipping is going to be a long-term incentive, make sure to single it out in your promo campaigns. Going for the long haul, free shipping is going to be one those perks that’ll keep customers coming back, so remind them about it, whether it’s in your emails, ads, or social media posts.
For online book retailer Book Depository, free shipping is a core component of what makes them attractive to book lovers, in other words, their unique value proposition. That’s why they still make sure to remind customers of their special offer—check out the email promo below.
You can also include this info in your Instagram bio or Facebook About page, complement relevant posts with the #freeshipping hashtag, or create separate posts focusing on your offer. If you need some marketing inspiration, check out some of our previous blog posts on the subject.
Remember that one of the main elements that drives a good short-term marketing campaign is a sense of urgency, so play around with flash sales and countdowns.
Over to you
Although free shipping is a marketing strategy that works particularly well for marketing events like Black Friday and Cyber Monday, you can run experiments all year long. In the end, you might even resolve on making free shipping an integral part of your brand identity.
Have you already used free shipping on your ecommerce store? Where do you stand in the battle royale of free shipping vs. discount? Feel free to share your experience in the comment section below!
Good luck guys, and happy sales!