Free p&p strategy

Sterling Marketing – making sense of multichannel retailing

Question: “I’m thinking of offering free p&p as a promotion to help shift end-of-season stock, but I’ve heard some people say that once you do, customers are unwilling to pay for p&p in the future. Should I stick with offering product discounts instead? And if I do promote free p&p, does this mean that I have to cover the postal costs of any returns?”

Answer: A number of issues are raised by this question:

• Clearing end-of-season stock. In this instance by far the greatest incentive to purchase will be product discounts. The extent of the discount will depend on how much stock remains and the margin on the specific products. In this instance i.e. seasonal sale offering free p&p as well is unlikely to benefit response and might confuse the prime offer of the discount on the product with the result of giving away further margin than is necessary. Better to increase the discount than offer free p&p to improve response.

• When would offering free p&p be effective? When customers are asked about barriers to ordering the charge for P&P is often cited as a key hurdle to purchase. In our experience this does not always reflect reality. Free p&p can be a useful tool to incentivise purchase i.e. to drive customers to order online, to increase response to housefile follow mailings or to reactivate older cells. Sadly in today’s economic climate it is often not a sufficient incentive for reactivation, follow up mailings where money off (£5 off when you spend over £30 or the equivalent dependent on you average order value) or a straight discount is much more effective.
• If you do offer free p&p will customers be prepared to pay for it in the future. This depends on the frequency of its use. If it is used tactically the answer is yes. If it is a prominent feature on your website they will then expect to receive it on any online sales.
• If free P&P is offered will a customer expect free returns? No, the two are not necessarily linked. If you are a fashion business – free p&p and free returns can be an effective promotion to acquire new customers. Again sadly today a discount as well will probably be required to clinch the purchase.

Whatever promotion is being used it should always be used tactically and not become the norm. The product offering should be enough to drive sales from your better customers (end of season sales excluded), leaving promotions for new customer acquisition, reactivation, follow-up mailings and emails at later stages in the season - that way your customer is not trained to wait for the expected promotion prior to making a purchase.