45% of Online Retailers Increasing Free Shipping Budget for Holidays

Ad Age reports on a Shop.org study that shows 45% of online retailers are significantly increasing their budget for free shipping this holiday season.  It appears that, this holiday season, everyone is a defector in the prisoner’s dilemma that is free shipping.  

We’ve always advocated holding firm on shipping charges but the tide is simply too strong to resist this holiday season.  Instead, consider a way to minimize the damage.

It is likely that you have some set of customers that are simply unmoved by your generous shipping offer. It may be that they value your site’s ease of use, merchandise selection, or brand name over shipping costs. Perhaps they simply don’t focus on the S&H line item on the checkout page. Maybe they just don’t care about price at all!

Granted, these customers are few and far between but they are the ones with the highest long term potential value to your bottom line.  Whatever happens, don’t start training them to wait for freebies!

Here’s a quick acid test to find this coveted group: identify the customers whose historical response rate to promotional offers (including free shipping) is two standard deviations below your mean promotional response rate.  This is the 5% of your customer base who loves for you, not your prices.  

These customers are gold.  Shower them with love, affection, and tokens of appreciation, but not free shipping.

Tags: Discounts and Offers, Free Shipping, holidays

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This entry was posted on Wednesday, November 12th, 2008 at 10:47 am and is filed under Discounts and Offers. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.