Online Marketing Basics #10: The Pros and Cons of Online Coupon Campaigns
Digital coupons are the online cousins of the tried and tested discount stamps. Both work the same way. But instead of scissors to cut them out you just use the copy-paste function. In this part of our online marketing series, we will show you how entrepreneurs can successfully use this tool.
What is Digital Couponing?
Online coupon campaigns take a more than 100 years old marketing tool and transfer it to the virtual world: the tried and tested discount stamps. You don’t have to collect them anymore, though. Nowadays it’s all about coupon codes. When buying something online, you will come across a field at checkout where to type in a promotional code. This way, you will save the fixed amount in dollars or percent that is promised with the coupon code. The discount is the buying incentive and therefore it’s what this marketing tool is all about.
So this makes it rather obvious where online coupons are used most frequently: coupon codes are most suitable for online stores selling stuff, especially in the B2C retail industry.
When doing such a campaign, it’s important to come up with an efficient way to distribute the code, to get the message out. This can be done by the retailer via emails and SMS or offline by printing the codes on receipts or standalone flyers. Alternatively, a coupon publisher can be used. According to the online marketing mag „Adzine“ there were more than 150 such publishers online in the German-language region alone.
Basically, there are two kinds of digital coupons: discount coupons saving you a specific amount, and campaigns that let you buy vouchers for a product at a discounted price. In both cases, the discount works as the purchase incentive.
With the rise of mobile Internet access, digital coupons are no longer for online stores only. Now they can be distributed virtually via mobile devices, but be redeemed in brick-and-mortar malls. The buyers just have to present the virtual voucher on their smartphone or tablet in a store to get the promised discount.
Digital Couponing: Goals, Benefits, Options
Nearly every fourth online buyer (23%) in Germany in 2012 had been tempted by a digital coupon to purchase something, according to a study by the German digital industry association Bitkom. In the United States, around 3 billion digital coupons were distributed in 2013. A report by the coupon company NCH Marketing calculates that’s less than 1% of all coupons published there – but they delivered more than 10% of the redemption value! A pretty great conversion rate, right? Considering the high penetration rate of internet usage in general, the potential of a coupon campaign can be huge.
There are a number of goals a coupon campaign could achieve:
- Increasing sales
- Generating an additional purchase incentive
- Increasing the value of goods in the shopping cart
- Using a purchasing incentive to compensate for seasonal sales losses
- Target specific customer segments
- Launching new products successfully
- Customer retention
- Increasing the store’s brand awareness
- Getting new customers/recover inactive, existing customers
- Differentiating the shop from the competition
Digital Couponing: Risks and Concerns
When doing coupon campaigns, advertisers don’t see just the opportunities, but also some risks involved. For instance, they worry about their margins going down unnecessarily because even non-price-sensitive buyers would be tempted to search for coupon codes first.
Additionally, with so many affiliate publishers out there who make a business out of copying coupon codes, some companies have become wary of this marketing tool. These publishers used digital coupons that were not targeted at them at all for their own SEO-optimized websites. So, if someone searched for „store name coupon code“, went to one of these top-ranked pages and clicked one of the affiliate links there, the buyer got the discount, yes – but the publisher also pocketed a commission. Thereby, the retailer’s margin got squeezed without the affiliate actually helping with the purchase at all.
Using so-called Unique Codes or Cookie Switches, a retailer can thwart this kind of strategy, though. One could even think of a beneficial scenario: if a prospective customer actually searches on a publisher website for a competitor’s coupon code, but discovers the coupon of our retailer and uses it – this would be an affiliate commission well-earned.
Another risk regarding online couponing: it can damage the brand of a company and its general price structure. Customers won by huge discounts could get used to these prices and expect rebates all the time.
And there’s more that could damage the reputation of a company. If the coupon codes don’t work (because they are only for new or existing customers, they already expired, there’s a minimum order value etc.), the prospective client would be unsatisfied with the shopping experience. Most of the time, the blame will be not on the publisher, but on the online store – even if the affiliate made a mistake like not indicating a minimum order.
To avoid this kind of hassle, advertisers should choose their coupon affiliates carefully.
Online Couponing: Most Important Things to Consider
As described, there are big opportunities as well as big risks when doing online coupon campaigns. The risks could easily jeopardize a company’s bottom line: by affecting its margin and its reputation this could make or break a business.
To minimize any risks, here are some bullet points to check if you plan to do an online coupon campaign:
- Design the coupon according to the goals you want to accomplish: This being more about the content than the actual layout, it’s essential to get the validity period right (like only off-season to compensate for sales losses), to mention a minimum order if applicable (for instance, to increase the average value of a shopping cart), to tell prospective clients if the coupon is valid for a specific customer segment only (like, for any new clients), or for a specific product or product group (if, for instance, the retailer wants to clear a specific inventory). It doesn’t hurt either to tweak the coupons to optimize conversions: applying a little pressure like limited time offers, limited products offers, etc.
- Apply security measures to hedge your earnings: Use tools like Unique Codes, Cookie Switches etc. in order to prevent coupon fraud or click-hijacking by pusblishers.
- Take care of the success metrics: As with any marketing campaign, you need to measure the outcome of your coupon effort. Hint: Earnings should always be higher than costs.
- Get coupons to the target group: It doesn’t matter how many people you reach with your coupon campaign. You need to reach your target group. To make sure you don’t waste your time and money, get the distribution right first.
- Work with reliable publishers and maintain your contacts: Publishers with a good name to them can ensure you to get the coupon terms right and your offer out to the appropriate target group, thereby maintaining your own brand reputation. If you spot high-earners among them, get in contact and expand the business with them, like with exclusive campaigns.
- Guidelines for SEA and content: You need to set guidelines with your publishers in order to prevent search engine advertising fraud (e.g. using „name of store + coupon code“ as a keyword for Google AdWords ads) or prevent damage to your brand by wording errors (e.g. minimal order)
Online Couponing: Pros and Cons
Digital coupons are ubiquitous and used by many. You find them at coupon websites, as well as in the shopping mall around the corner. Specific coupon codes are part of the marketers’ toolbox and are used almost daily – also by the customers. The German industry association for the digital industry (BVDW) provides a Couponing Manual (see link at the end of this post) which explains different examples by way of interviews with marketers. As a shortcut, here are some essentials:
- Notebooksbilliger.de uses online coupons for more than five years. There’s an example of a campaign which achieved 400% higher sales.
- Myphotobook was not so lucky: Using a coupon publisher, they noticed that sales were triggered not by the publisher’s website but by an ad earlier in the customer journey. Consequentially, they stopped paying commissions to the publisher, and actually stopped using coupons at all.
- Department store chain Galeria Kaufhof reported satisfying results of their coupon campaigns. They distribute the vouchers via selected publishers and claim to have increased revenues sevenfold compared to the same time period without the exclusive coupons.
- Toddler outfitter Baby-Walz didn’t give details about the success of their campaigns. According to the mentioned Couponing Manual they nevertheless use online coupons for more than three years.
What’s Next in our Online Marketing Series?
Online couponing was the second to last part of our online marketing series (too bad, right?). The last one, part 11, will deal with content marketing. Since content is kind of everywhere in the internet we will recapitulate what we discussed earlier, and zoom in on the important features of any successful online marketing campaign: address a specific need of the users and provide them a solution.