When devising prices, businesses need to be aware of how their shipping costs influence consumer behaviour. Some businesses may choose to inflate the prices of their products and offer free shipping, while others may charge for shipping but offer products at a lower price. Both of these approaches have advantages and disadvantages; in this article, we examine the impact of shipping costs on consumer behaviour.
Abandoning online purchases
One example of the negative impact high shipping costs have on consumer behaviour is the basket abandonment rate. Many businesses try to appeal to customers with seemingly low prices; this encourages them to add items to the basket, which can look good initially for the business. However, very few customers will then purchase the product if the shipping cost is unreasonably high. When customers find out later down the funnel that the cost of shipping is higher than expected, they’re likely to abandon the journey and look elsewhere for other products. If you have a very high abandonment rate of 85%+, you may want to look at your shipping costs and the impact of reducing these.
Value perception
When consumers feel like they’re getting good value, they’re more likely to complete the purchase quickly and feel happy and confident about their purchase. Free shipping is one method businesses use to increase the product's perceived value and overall experience. Customers don’t like to pay for shipping when other businesses offer it for free; therefore, they may shop around for what they perceive as the best value, which is often items being delivered for free. Consider a free shipping strategy if you want to add more perceived value to your products.
Increases average basket value
Many businesses employ a minimum spend for customers to qualify for free delivery; this is often a good tactic to increase your average basket value. Customers are more likely to add other products to their basket to qualify for free delivery. Choose an affordable spend amount for your business; you ideally want this to be slightly higher than your current average basket value. However, this also needs to take into account your products and the prices. If all of your products cost £99 and your minimum spend for free delivery is £100, customers may become frustrated and look elsewhere. Choose something that’s reasonable based on your competitors, product prices and how much it costs your business for delivery.
Premium delivery experience
When customers pay a high cost for delivery, they expect a premium delivery experience. For example, they may want to choose their own delivery slot and have the ability to track the delivery driver. Companies that offer free delivery will find that customers are more forgiving and don't expect such a premium delivery service; they will be happy with their items being delivered on time in any format, from postal bags to cardboard boxes. Customers who pay for delivery and don’t experience a premium delivery service are more likely to be dissatisfied and complain. These complaints often happen online, where other potential customers can view them; this could dissuade potential customers from buying from your business.
Customer loyalty
Delivery experience and cost can influence customer loyalty. Customers are more likely to repeat purchases from a business where they’ve had a positive delivery experience and the delivery cost has been low or free. Their perceived risk of buying again from the same business is low compared to buying from a competitor. Therefore when deciding what prices to set for delivery, companies need to consider whether it will impact customer loyalty. Learn more about customer loyalty.
In conclusion, shipping costs, such as shipping boxes, significantly impact consumer behaviour and must be carefully considered by businesses when devising their pricing strategies. High shipping costs can lead to cart abandonment and negatively affect the perceived value of a product, while free or low-cost shipping can increase customer loyalty and drive sales. Offering a minimum spend for free delivery and providing a premium delivery experience with sturdy shipping boxes can also increase customer satisfaction and loyalty. By understanding how shipping costs influence consumer behaviour, businesses can make informed decisions about their pricing strategies and create a positive customer experience that drives sales and builds long-term loyalty.