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Assume you want to buy a product online

  • The first shop offer 50€ and there is 10€ of shipping cost.
  • The second shop offer 60€ but with free shipping cost.

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As a customer I love the free delivery system but as an eshop owner, I am afraid that the higher price discourage users. Especially the ones who make an order with many products.

What is your opinion on this ?

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35  
If ever there was a question screaming out for some AB testing, it is this. –  JonW Jul 21 at 9:36
9  
@CodeMaverick How else can "free" shipping be paid for? –  Neil Kirk Jul 21 at 14:31
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@CodeMaverick Amazon must be the shadiest company in existence then. –  Conor Jul 21 at 15:04
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There is a third option, which is shady but in practice the most commonly found way to deal with this: Don't show any shipping cost next to prices - bury them deep in your help or terms page so the user won't even be reminded that he has to pay for shipping until he's about to confirm the order. –  kapep Jul 21 at 15:32
6  
There is a difference in the final price once I buy multiple items and shipping can be combined. –  Simon Richter Jul 21 at 17:04

12 Answers 12

up vote 24 down vote accepted

There are factors outside of how users behave on your site that might determine whether you use one or the other.

  1. For comparison sites or shopping searches it's important to get a high listing and a low headline price often helps - the first challenge is getting people to visit your site. High traffic with higher dropout is normally more profitable than average traffic with average dropout.
  2. Commercially, $50 with $10 shipping is different than $60 with free shipping. In many places it may be that the customer has a right to return the item and get a refund if they don't like it but may not have the right to have shipping refunded. Having a $10 shipping charge means that the business is insulated from some of the cost of returns.

Outside of these constraints testing is the obvious solution to find out how your market behaves. But if I was to bet on one or the other I'd start with a low headline price to get people excited and then use our amazing UX skills to communicate how reliable and efficient our delivery is to mitigate some of the sticker-shock of postage.

This wikipedia article on Loss Aversion is probably a good starting point for a more academic/psychological perspective: http://en.wikipedia.org/wiki/Loss_aversion

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It'd be awesome if you could add pointers to evidence for 1! Not that I don't believe you but it'd be nice to see some data on the topic. –  Sidnioulz Jul 21 at 15:25
    
Evidence for which part? That cheaper listings in comparison sites drive more traffic? Sorry, I've got no studies for that - I'm basing that from experience designing for various major ecommerce sites. The shipping/return laws? For UK (and EU) bit.ly/1kg6J5c Or did you mean anything else? –  edeverett Jul 21 at 15:45
    
I meant the first part: "high traffic with higher dropout is normally more profitable than average traffic with average dropout" –  Sidnioulz Jul 21 at 16:04
7  
In my experience, most price comparison sites also list shipping costs, and in most cases the default sort order is "price including shipping". –  ntoskrnl Jul 21 at 19:01
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A good comparison site always sorts by total cost (base + shipping) and either excludes items for which the shipping cost is not listed or obfuscated, or assumes some high shipping cost like $20+ in such cases to penalize them. –  R.. Jul 22 at 4:37

Most e-Commerce sites have different shipping options. For example it may be "Free Delivery" for standard delivery, $5 for "Next Day Delivery" or $10 for "Saturday Delivery".

If this was a T-Shirt company for example, and the cost of the "t-shirt" was $50, and the cost for the shipping (by an external company such as DHL) was $10 then it would be better to display the first version. This way the customer knows the breakdown of what they are paying for and the service they should expect. The more you pay for shipping the better standard you would expect, if I have "free delivery" I would assume that I would get the parcel within 5 working days.

If the T-shirt sale and the delivery was done by the same company then the second option.

Another thing to think about is if I am buying 2 items, I would rather pay $50 x 2 for the items + $10 for shipping = $110. Rather than buying 2 items for $60 x 2 = $120. I will get more value for ordering 2 items and therefore I may be more inclined to buy more at one stage as I'm saving on the shipping.

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Dan Ariely has some great research in his book Predictably Irrational about the "Power of Free".

The most interesting example of the power of “free” in Predictably Irrational comes from Amazon.com. When they launched a “free shipping” promotion with the purchase of a second book every country except France showed a big jump in sales from the offer. The Amazon marketers investigated, thinking perhaps the French were rational enough not to be swayed into buying a second book. In fact, they found that in France the program had been slightly altered. Instead of zero shipping, the offer in France charged a mere one franc – about twenty cents. From a pure economic standpoint, the two offers are almost indistinguishable. In actual performance, though, the one franc offer caused no sales increase. (When the French offer was changed to FREE!, sales did indeed jump.)

Ariely's conclusion from his research was that the psychological impact of free offers can be significant and can even result in irrational behavior from customers. With all of that said, I'd really be tempted to at least run an experiment to test free shipping offers.

It's also common to see free shipping offers for orders over $25 (or some other arbitrary amount). This may actually encourage customers to buy more in a single order.

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Think of the user experience and perception:

  • If you have a luxury product or service and want to give a feeling of white glove service then free shipping can be important part of that user experience.

  • If you have impulse buy then the user may be more put off by add-on's than the sticker price

  • If you say you are fighting for the lowest price - then show that every penny matters. Charge exact pricing for shipping.

While I would test, just how you craft the designs to be tested can depend on that UX you are trying to deliver.

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One thing you might consider is taxes. In some areas shipping charges are not taxable if listed separately. Which means that your $60 item with free shipping might actually end up costing you more than if it was $50 with $10/shipping.

Beyond that serious AB testing needs to occur. My limited experience says that there is almost no real difference between the two as the shoppers I deal with are smart enough to look at the final delivered price.

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I don't think it's about shoppers being "smart enough to look at the final delivered price". There is some far more subtle psychology going on into how people perceive prices. –  JonW Jul 23 at 8:02
    
But most prices include taxes (at least in the UK). –  Ian Jul 23 at 8:36

Its all about customer experience and fulfilling the delivery promise. For me Delivery is as important as the product. I will abandon a shopping cart if the delivery options are not satisfactory enough and purchase elsewhere.

Our customers tell us they have gained double digit growth by removing the static delivery page within their website.

Instead they have dynamic delivery options provided by us to enable them to communicate in real-time the delivery options available to the consumer.

This is based on order attributes, delivery service availability, time of order, cut off, delivery location etc etc.

This brings together the warehouse with the web front end. Meaning accurate delivery options are provided in real-time fulfilling the customer promise and never mis-calculating delivery for the retailer.

In answer to your question - it is important to provide choice. If a consumer has a choice to have it tomorrow at a premium, but see they can save by having it in 2 days... this may be a better experience for them...

Remember next day/Same day delivery is not always the best.... The best is to give the choice in real-time of what you can actually delivery and promise.

By doing this it opens a world of possibilities, not just for the consumer but also for the retailer.

If you have any questions about this, please get in touch with me. gareth.ashworth@metapack.com

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For me personally, it will put me off if the shipping is not including in the visible price. For two reasons, one, I don't want to the math to add the two together to see my final price, and two, I usually am more enticed to purchase something when it says free anything at the bottom. People like free stuff. If you stop to think for a moment, you'd realize it's not free but most people won't do that since they only spend a few seconds looking at something in a list of items.

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This is a bit of a subjective answer rather than objectively stating how users in general perceive things. –  JonW Jul 23 at 8:02
    
@JonW when it comes to the user experience, aren't most things subjective? –  Milo Jul 23 at 8:03
    
Only if you're not doing things properly. User research, AB testing, reviewing analytics, conducting experimentation, reviewing research... all of this is objective rather than just stating "I like X". Some implementations do work better than others, and you'll find that out through objective research. –  JonW Jul 23 at 8:08

If you ever have different shipping prices the 'included' versions is much less clear. Several types of delivery, different amounts for different target locations, extra options. You'd either include the most expensive form which makes your prices inflated, of the least expensive form, which makes you some sort of sneaky deflater. They are separate products, name the price seperately.

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My opinion is the first one as long as I can clearly see next to the product that I will be paying $10 for shipping. The second one makes me wonder how much is the shipping costing the seller and therefore the quality of the carrier/postal service. As commented already this really would benefit from A/B testing

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Most shops price shipping and handling separately from the price of an item because it's cheaper for them to ship a given amount of product in a few large orders than in many small orders.

This happens for a number of reasons including:

  1. The amount of time/effort to retrieve 2+ of an item from the warehouse is normally only marginally more than the cost of retrieving the first one.

  2. A box with 2x the volume generally costs less than 2x as much and weighs less than 2x as much.

  3. Related to #2 when shipping multiple items (especially if small) adding an extra item often doesn't increase the size of the package used.

As a result, adding the cost of shipping in has to not just be a better UX, but enough of an improvement that it increases total sales enough to make up for the reduced margin from pricing small orders below the total shipping and handling cost (if you add the amount of shipping that a large order costs per item and are taking a loss when shipping small orders), the loss of some large orders due to price comparing shoppers finding lower prices elsewhere (because you added the shipping cost for small orders to the price and are overcharging on large ones), or some combination of the two.

Amazon, which is one of the best known retailers pushing free shipping hard as a price advantage is also willing to sell goods at just over cost and make a tiny profit per item in order to drive total volume up to grow market share.

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If the objective is to make sales, then the answer clearly is to remove any impediments or negative implications off the face of your offering. But this is more of a marketing directive than user experience. It's important you see the difference.

In other words, leave the bad news for later. On the other hand leave the Free shipping icon as it is encouraging the user to act on the purchase.

You need to capitalize on the impulse buying behavior, and certainly surfacing that negative shipping price tag is not going to help anybody.

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I don't understand what you are suggesting here, do you think the shipping should be "free", or not? –  Vality Jul 22 at 16:43

It gets harder when the cost of shipping does not go up if the customer buys more items.

Often I buy plants on line, the shipping charge will be fixed or for upto 8 plants, as the vendor has to pay per box, and does not give a discount from the shipper for a smaller box.

This make it very hard to compare prices on say eBay, without read the details of each item.

Therefore a lot of ebay vendor lists the items BOTH with shipping includes and with shipping excluded. Some ebay vendors even run two accounts, so they can get the best of both worlds.

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