7 Steps for pricing delivery fees

Is this sort of stuff – big companies giving free delivery – causing you angst? I know lots of kitchen table businesses are despairing about the whole delivery fee issue.

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So here are 7 practical steps to help you manage it:

1. Set your price first

 

Did you know there are two parts to pricing? The first is to decide what to charge, the second is to decide how to charge it.

 

When you’re deciding what to charge don’t let the issue of charging delivery fees get in the way. Trust me, you can ignore it at this stage.

 

2. But do include delivery costs when you are calculating your ‘cost price’

 

When you are deciding what to charge you will look at it from 3 points of view: your costs, your competitors pricing and your customers ‘value’.

 

When you look at your pricing from the ‘cost’ point of view you must include the costs of delivery.

 

The cost of delivering stuff to the customer is your cost. It’s a cost of doing business.

 

It sometimes helps to think of delivery as like the paper cup that comes with your take-away coffee. You can’t get your coffee without the cup much as your customer can’t get the product without the delivery.

 

3. Then decide how you want to charge your price

 

Once you’ve worked out your price you can then work out how you are going to charge it. This is about wrapping your price up in a way that makes it feel more appealing and more affordable to the customer.

 

A good example of a way to make your price more pleasing was covered in last week’s blog when I showed you how you could write the same price 13 different ways to encourage different types of customers to buy.

 

Another way to make price more appealing is to charge, or not charge, delivery fees.

 

4. How delivery fees help customers find your price more palatable

 

Once you’ve set your price you then look at how you can ‘charge’ it in a way that appeals to customers.

 

One way is to do that by including some of the price as a delivery fee. So if you decide your price is $100 you could say it’s:

 

1. $100 with free delivery or
2. $90 with $10 standard delivery (if you use ‘standard’), or
3. $80 with $20 delivery (if you use ‘express’)

 

The choice is up to you. But you will want to do it in the way that is most appealing to your customer.

 

5. Stand in your customers shoes

 

To make the decision about whether or not to charge delivery fees you need to think hard about your customer. Here are some tips to help:

 

1. Frugal’s like to get something free so they’re likely to prefer the $100 price plus free delivery option
2. Skinflints like to understand what they are paying for, so they’re more likely to go for option (b) with the $90 price plus $10 standard delivery
3. Fashion buyers are motivated by urgency. They want it now! So they’d probably go for option (c ) and pay for the benefit of fast delivery.

 

6. Acknowledge what competitors do

 

Big businesses do their pricing this way. They work out what they want to charge and then look at ways of making it more palatable to customers. If all your competitors (and I mean here businesses that are selling similar stuff to you to the same customer) are offering free delivery then it’s a good indication that that’s what customers want.

 

7. Don’t lie

 

There are a few businesses who do naughty stuff with delivery fees  – like charging way more for delivery than it costs, or charging for ‘express’ then sending it via the slow boat to China. Don’t do this – you might win one sale but you’ll lose them as an ongoing customer.

What should you do if your product is directly comparable to someone else’s, and they sell the product more cheaply than you can and offer free delivery? Like, um, books and Amazon.  
Sadly I can’t give you an answer that you’ll like.  Big businesses are designed in a way which means they can get stuff to their customers more cheaply than you can. It’s a fact. So if you’re in an Amazon situation you simply won’t be able to compete on price.
Your choice is to find something other way to be better than them……or, if you can’t, well then I think it’s time to try a new business.

 

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