Amazon Prime High-Low Delivery Charge Model For Florists

Jun 14, 2017

 

Amazon Prime use the High/Low pricing model to take the sting out of delivery charges and reduce cart abandonment. Other retailers are following along.

 

Amazon introduced Amazon Prime to solve the problem of cart abandonment. They were already doing a great job of marketing, and if for example your favorite author released a new book they were great at alerting you and getting you to put that new book into your shopping cart.

But something was happening at checkout. Confronted with delivery charges (which can seem relatively large compared to the cost of a single book) on these small orders (which were too small to qualify for free shipping) customers were abandoning their cart and not completing the purchase.

Amazon Prime addressed that problem by offering free shipping (the “Low” in High/Low) in return for a relatively large annual membership fee (the “High” in High/Low).

This removed the sting of delivery charges. Prime members were no longer confronted with delivery charges during checkout, making it more palatable to place a lot of smaller orders, increasing their overall spending. It works, and other online retailers are following along.

Membership also encourages users to buy more because of the “Sunk Cost” effect. Having already made a large investment in Prime membership they then want to average that cost down by ordering more often.

So Amazon wins by getting more customers to order more often. And in many cases they likely win with customers that never actually order enough to fully offset the cost of membership.

Gyms/health clubs benefit from this too. Most people don’t visit nearly as often as they plan, and would be much better off buying day passes… but they still prefer the unlimited visits that come with a membership.


In The Flower Business…

Some sources say that people don’t mind paying for flower delivery. Sure, some people don’t. But, in an era where delivery is free so much of the time some people certainly do resent delivery charges.

Other people say that since florists are really the only same-day delivery game in town they should charge heavily for it. That’s one of the benefits of having a monopoly, but nobody likes monopolies.

The simple truth is that some people are fine with delivery charges and other people really hate them. A High/Low model, that lets people focus on how much they’re going to save on delivery and increases their order frequency can be very effective.

 

 



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