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Why Shipping Offers Are More Complicated—and Important—Than You Realize

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shippingAs the holiday shopping season draws near, retailers are rolling out strategies and service improvements to attract and convert more customers. Toys R’ Us, for example, has taken a bold move to lower its free shipping threshold from $40 to $19. The decision, the toy retailer explained, was informed by a growing body of insights the company has gained into customer behavior and a shifting competitive landscape.

Read More: Fuel your testing ideas with this mobile shopping data for the 2015 holiday season

Indeed, research has identified shipping as a major point of consideration for online shoppers. Tweet_this According to Internet Retailer, 93 percent of shoppers say shipping options will be important to them this holiday season, an increase of 23 percent over last year. This concern can drive worrying trends, like increases in cart abandonment, but manipulating the nature and presentation of shipping offers and options can influence consumer behavior as well. Three in five respondents, for example, said they have increased total order size to qualify for free shipping and 68 percent report using a coupon or discount code to get free shipping.

Simply adjusting the free shipping threshold, however, may not be enough to effectively improve conversion this holiday season. While doing so may increase the overall order rate, for example, order size will likely decrease. Depending on how dramatic of a swing is created, the change may result in a net decrease in revenue. Understanding this behavior and the relationship between order size, rate, and shipping threshold is critical. Testing the threshold, clearly, is the best way to determine which level is optimal.

At the same time, a free shipping threshold and a persistent free shipping promotion or discount code could present dramatically different impacts on shopper behavior. While the former encourages shoppers to build baskets of a specific size, the latter leaves basket size undefined. If balancing the gain of increased orders with a loss in average order value is posing a challenge, testing a discount code promotion against a threshold could produce valuable insight.

Offering free shipping, clearly, is a complex tactic that must be tested extensively to implement effectively. At the same time, it presents only one approach to address the consumer need. Many shoppers, research shows, prefer ship-to-store options as well. While the primary motivation for taking advantage of such an option is to save on shipping costs, 17 percent want to get their order immediately. A full 21 percent select ship-to-store during the holiday season because “they don’t want others in their household to see a delivery.”

Balance these unique needs and desires with research that suggests collecting information, like an email, today and supplying a reward, like a free shipping discount code, later actually increases the perceived value of the offer and additional research that shows reducing or eliminating unanticipated costs can reduce the “pain of paying” and the design and presentation of free shipping offers becomes incredibly complex. At the same time, it’s clear that shipping will prove one of the most valuable levers for moving shopper behavior this holiday season. Tweet_this By testing early and extensively, retailers can develop a better understanding of how this important tool influences consumers—and create an optimized experience during the most critical period of the year.

Brooks Bell helps top brands profit from A/B testing, through end-to-end testing, personalization, and optimization services. We work with clients to effectively leverage data, creating a better understanding of customer segments and leading to more relevant digital customer experiences while maximizing ROI for optimization programs. Find out more about our services.