If you’re trying to decide between offering your customers free shipping or lower pricing, know that making the wrong decision can not only have a negative impact on your bottom line, but on your quality of service too.
Offering free shipping increases conversion rates. The obvious reason is that it makes customers more likely to respond to and follow through on a purchase. But the downside is deciding how to “finance” the free shipping.
- There’s less last-minute cart abandonment
- It allows you to stand out from the crowd
- You can drive more traffic to your store (via “free shipping” advertising)
- Customers pay a higher product price (for you to recoup costs), or
- You take a loss (from having to eat the shipping costs), or
- Customer support and other services are reduced (to save money)
The goal of a lower pricing strategy is to trigger an increase in demand by offering customers the best deal possible. However, there’s also the chance of potential buyers getting the wrong impression about your store, your product, or both.
- It allows you to position yourself in the market
- There’s faster turnaround time of your inventory
- You can reach wider audiences (via more word of mouth referrals)
- It’s hard to offer sales or discounts without losing money
- A low price can affect the customer’s perception of a product’s quality
- You risk credibility if your “everyday low prices” are not comparable to low pricing found elsewhere on the Internet
So, which is better, free shipping or lower pricing? After all, both offer the potential for increased sales as well as the ability to position a brand in a crowded market. And they share similar risks.
Yet, what works for one seller may not for another.
So it may take some trial and error to figure out what works best for your store. Ultimately, though, the real secret to choosing between offering free shipping or lower pricing is knowing that the best choice should be dependent on your type of business and nature of the product.
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