Free shipping is enticing, says Ravi Dhar, the director of Yale’s Center for Customer Insights, because shoppers irrationally hate to pay for certain services—even those that they value immensely, such as speedy and reliable delivery. This demonstrates the economic principle known as “pain of paying,” a psychological discomfort that keeps people from completing purchases. Certain factors seem to sharpen the pain. Using cash rather than credit cards typically hurts more, because paper money must be physically relinquished. Higher charges for convenience, such as the jacked-up price for a soda in a hotel minibar or closer parking at a sporting event, usually rankle too. Printer ink and hotel Wi-Fi torment because they’re a means to an end that consumers feel they’ve already paid to reach. You bought the printer—of course you need to print things. You booked the hotel—of course you need to check your email during your stay. (Hotels, with their inherently captive audiences, are veritable houses of pain.) Paying for shipping is a two-for-one pain deal: Not only are you confronted with the actual cost of your convenience, but you’re being asked to pay “extra” for a store to fork over items you’re already laying out for.
“The reaction to free shipping goes beyond the normal way of looking at cost and benefit,” Dhar explains. “A 20 percent discount, which would add up to the same $5 or $8 that shipping costs—that’s not as effective as giving free shipping.” In general, Dhar says, shoppers are even willing to pay more overall for the same goods if there isn’t a separate shipping charge. What bothers them most is the nickeled-and-dimed feeling, not the total amount of the tab.