What matters most to consumers: free shipping, low prices, or coupons?

eBay Strategy readers - I'm excited to introduce a guest post from ChannelAdvisor's COO, David Spitz.  A lot of readers think I'm pretty analytical - well you haven't met David!  David penned this piece on a general ecommerce trend and I've had lots of discussions with eBay folks around the 'free shipping/low prices/coupon' topic and thought you would be interested in his insights. Now without further ado heeeeeerrreeeeeee's Dave....-Scot

We spend a lot of time at ChannelAdvisor thinking about e-commerce trends so we can make sure we’re helping our customers stay ahead of the curve.  Today, our friends over at Google announced an embeddable Google Trends gadget, which reminded me of an interesting query I ran the other day.  We hear a lot about the pros and cons of free shipping, and obviously Amazon Prime has been a great growth driver for Amazon over the past couple of years.  But we also know that, especially in this economic environment, more and more people are turning to e-commerce as a way to get the best possible price and save money.  So I wondered: what do people spend more time looking for when shopping online – free shipping, or the lowest price?

Turns out, as you can see below, people search for “free shipping” about five times as often as they search for “lowest price.”  Even more interesting, that trend has accelerated significantly in the past couple of years, and is particularly pronounced during the holiday shopping season.  I’m betting that Amazon has really raised the bar here and set the expectation in a lot of peoples’ minds that shipping can and should be free.

 

Then, thinking about my own shopping habits, I wondered how many other people look for coupon codes before completing a purchase.  At our Catalyst conference last week, one of the participants on our consumer panel talked about how she would always stop half-way through the checkout process when making a purchase to open up another browser and search for an applicable coupon code, all to try and get a last-second discount during checkout.

She and I have a lot of company: as you can see from the trend chart below, the search frequency for “coupon code” has accelerated faster than “free shipping”, and eyeballing the graph is now a good 40-50% higher.

 

So, what should you do?  Well, as always, keep your prices low and competitive, but if you don’t have free shipping and promotion programs, you should implement them now (especially by Q4) and aggressively promote them on your site and on all your marketing channels.

Comments

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[Henrietta -Red Ink Diary]

@Ron with the free shipping and the 12 different sizes . . .

With all due respect I submit that the 'free shipping' has little to do with anything except eBay's bizarre search algorithm which will enable your items to be found because you are embracing the current eBay buzz trend.

As a buyer I assure you I am capable of doing the quality vs price math and price is what it costs me to get it to my front door. Prime turn offs are sellers who geographically discriminate against Alaska and Hawaii buyers by zapping up the shipping by large amounts and then ship parcel post (4 - 6 weeks to Hawaii no matter what the PO tells you) which ironically often ends up costing them more than first class or flat rate Priority which is a non zoned rate. It also costs them my custom.

[Mike Nediano]

QUTOE:
Turns out, as you can see below, people search for “free shipping” about five times as often as they search for “lowest price.”
END QUOTE

This is misleading and not the best true indicator. When doing trend analysis you have to expand keyword possibilities. While "free shipping" has few variations such as "ships free" or "ships for free" it's logical to conclude the most searched term is "free shipping" and when comparing only the term "free shipping" against "lowest price" you'll see "free shipping" has more searches.

Now, let's aggregate the other variable search terms into the mix. First off, the term "cheap" and "cheapest" are used more than "lowest" in search....by a HUGE margin (per google trends)

cheap-----cheapest-----lowest
1.00--------0.08--------0.03

Take it a step further and it's 2.75 prices to 0.68 shipping

best price-----cheap price-----cheapest price-----lowest price-----free shipping
---1.00-----------0.22---------------0.12--------------0.26-------------0.68

Now dive deeper, people who want to find a low price, cheap price, best price etc will most likely attach the term differently...in other words the term "lowest price" will outrank "cheapest price" and "cheap price" because it can't logically appear in a different way. You want "lowest price widget" not "lowest widget" where the term "cheap" and "cheapest" are more often coupled with the item in question such as "cheap widget" and "cheapest widget".

As you can see on a FEW items that you can extrapolate the implications of PRICE vs FREE SHIPPING, the following are 3 items only...imagine the variations and specifics searches possible on price all vs the term "free shipping" (no matter what "free shipping" is put with it still is counted as "free shipping")
cheap tv-----cheap phone-----cheap computer-----free shipping
--1.00-----------1.70-------------0.90-----------------4.5

As indicated above with the terms it's OBVIOUS that pricing is FAR MORE IMPORTANT than FREE SHIPPING but this is in relation to SEARCH TRENDS.

You have to be aggressive on your pricing as comparison sites make it easy to sort by price...then the next logical objection people will have is shipping cost. Some sites are transparent with shipping and some have to be calculated. On transparent sites, the overall price is compared and people want the lowest overall price with shipping and price regardless of the semantics.

Free shipping is a tie breaker for online sales. It you have a higher price but free shipping makes the overall situation more enticing then you get the sale.

Remember to look at things as though you are a customer and not only the owner. You have to remember your own shopping habits and the logical extension of those habits.

-Nedz

[Ron M]

Well, this weekend I tried the "Free Shipping" on an item that I have 12 different sizes of. I had been running them on Ebay with FP30 and the last two months sales for this item was poor. So I raised the purchase price and put in "Free Shipping" to the US. Since them I have been averaging a sale @day on this item which is far better than it was before. I say give the customer what he wants.

[Jonah]

We find that that those paying the least give us the most problems. They want an item at the lowest price, then they want free shipping and some even have the audacity to tell us exactly how to package and ship it. Many of these types receive their brand new item(s) and still complain. They either then ask for a partial refund (the new after-the-sale coupon) or they want to return the item and then want us to pay return shipping.

We find just the opposite with our customers who pay for higher priced items and also pay for reasonable shipping. They pay higher prices and 99% are happy and are low maintenance.

The low-paying "bottom feeders" are high maintenance. It is just not worth it for us to court them. The DSR system on eBay and the lack of the ability for a seller to leave honest feedback has only enabled their bad behavior.

I actually think that customers who pay more perceive the value and the quality of their purchase to be higher and as a result they are happier overall.

[Mei Ling]

David,

Excellent! The meteoric rise of www.retailmenot.com last year is a testament to the interests of shoppers. They optimized for searches on "coupon code".

Coupon codes give the shopper a burst of adrenaline at the time of purchase. Free shipping does not.

Mei Ling
WatchedItem.com

[Nick Rindahl]

I agree with the last comment. Keeping your prices low while simultaneously offering free shipping is often a hard thing to do. Ultimately I believe you must strike a balance, which is often why many online retailers offer free shipping on certain purchase amounts (i.e. Free shipping on all purchases $99 or more).

When it comes down to it however I believe most consumers now see shipping as simply part of the overall cost. So long as your purchase price combined with your shipping is lower than or on par with your competitors, I don't think retailers will have a hard time saying competitive.

It's also worth noting how big a role branding and consumer confidence play when it comes to buyers not always purchasing from retailers at the lowest possible price.

[Jake]

What is this garbage about FREE shipping, this stupidness started by eBay’s double talk is ridicules; as EVERYONE knows the post office don't give their service for free, so lets call it what is actually is "Shipping INCLUDED"

[John]

All due respect but I think using google trends is a poor way to measure this. When people want the lowest price they simply search for the name of the item and compare the prices of the results. When they specifically want free shipping they would likely do a search for such. Coupon codes would need specific searches as well.

An opinion poll would be a much superior way to gauge interest, and even that wouldn't be as accurate as actually watching buyer behavior.

[Robb Lewis]

Thanks Scot for sharing David's views. We can relate as Retrevo also loves looking at data and trying to understand (and predict) consumer behavior. The trends for coupons aren't surprising given the economic times and I've always been puzzled why people weren't doing this more before. However, I don't think it's an apples to apples comparison between free shipping and lowest price on Google trends. I believe most people are still as interested in finding the lowest price / best deals but they just don't type in that search term. Rather they see the price engines like pricegrabber and shopping.com which have those terms in their ads and go there. It would be interesting if Google shared data on how many ads / organic search results users clicked that contained the word lowest price. @retrevo_robb

[Phil Thompson]

Free shipping? Never. You can make charts say whatever you want. I sell collectibles, and if people want them, they have no problem paying reasonable S&H.

Maybe free shipping works better if you sell Ipods, TV's, computer accesories, or common items you can buy at Wal Mart, Target or Best Buy.

Ebay is a collectibles/auction site that other items happen to be sold on. Once the smoke clears, EBay will be a true collectibles site again!

[Jim]

"keep your prices low and competitive, but if you don’t have free shipping and promotion programs, you should implement them now"

Hard to keep prices low and at the same time to offer free shipping. Give away the store and you'll be out of business soon.