Free Shipping 3.0: Leveraging Scarcity and Popularity Information

We conduct a randomized field experiment to investigate the impact of free shipping promotion on an online retailer's conversion rates and to examine how the use of persuasion principles, such as scarcity information and popularity information, affects consumers' purchase likelihood. We find unconditional free shipping leads to higher conversion rates, by at least 2.2%, compared to threshold-based free shipping. In addition, the presence of scarcity and popularity information increases consumers' purchase likelihood. However, scarcity information is significantly more helpful than popularity information, and even more helpful than a combination of both information cues. Our findings show economic significance that the introduction of unconditional free shipping could gain more revenue by 18%, amounting to €191,419 a year. During the promotion, customers exposed to information cues produce more revenues by 8.3% (€19,499 a year) than those without any information. This suggests that online retailers should leverage the persuasive power of information cues.