At a glance, coupon marketing is a win/win strategy – you reach a huge deal of new customers while shoppers enjoy substantial savings. But is it really?
Like print coupons, the primary use of online coupons is to promote one’s business. The standard of measure of a successful coupon marketing is the same for any other type of promotion: you attract new customers and make them come back to your e-commerce site to buy your goods for their full price.
When used incorrectly, however, they can create the opposite effect. There are risks to take, such as customers not coming back. Taking the steps to fully understand the ins and outs of coupon marketing can help in your decision making with regards to offering coupons in your eCommerce store. You have to remember that coupons, like any marketing strategy, have its own pros and cons. And as with any marketing strategy, successful promotion starts with proper planning.
Advantages of Using Coupons for Your E-business
There are a variety of ways to offer coupons to customers. You can offer them onsite, or you can take advantage of group buying sites like Groupon. You can also structure it in a way that best serve your business goal – to reward regular customers (loyalty program), to increase order volume, etc.
Coupons offer a great way of attracting online customers and making quick sales. It can increase awareness about your product, and entice new customers to try your offer. They function like product samples, allowing people to try your product so they can decide if they will buy it at full price. If you offer a good deal, you can even be rewarded with repeat sales and customer loyalty. You can even stimulate customers to switch brands. Recent study by Rice University reveals that 66% of online business found coupon marketing profitable. The respondents reported 60% redemption rate, and 31% said they garnered repeat sales.
If you have stocks that have been sitting in the shelf for months, offering coupons can help unload them quickly. It can produce a sales surge, particularly if you have seasonal products and you wish to make huge sales during low seasons (e.g. tours). People may be enticed to buy things they wouldn’t otherwise buy, hence increasing your sales.
Disadvantages and Risks Associated with Coupon Marketing
Unfortunately, it’s not all roses with coupon marketing. There are several things that you have to consider before embracing this marketing strategy. One, your sales volume may increase, but you will earn less profit from those sales. Two, customers may wait out coupons and deals instead of making instant purchases. Hence, there’s the danger of non-sustainability. Three, depending on how you present the offer, customers may start perceiving the regular prices to be unfair and unreasonable, and this can hurt your business a great deal. Some customers also have the misconception that items promoted with coupons are lower quality products. As such, coupons may lessen the perceived quality of the products or services you offer. If you’re selling luxury brands, discounting items could make your business look cheap and reduce the spirit of luxury.
Making Coupon Marketing Work
In order to leverage coupon marketing and drive your online sales, ecommerce site owners must take the time to understand the paradigm within which online coupon marketing operates as well as their target market. Success depends on what you know as well as on your business savviness and foresight.
Some questions you need to ask when deciding if online coupons are good for your business include:
- What is my profit margin on an item? Can I offer the item at a discounted price without suffering any loss?
- Will my customers find the item valuable such that they will go back to my store after their initial purchase to buy the same item for the full price?
- Will discounting items affect customers’ perception of your business?
For coupon marketing to succeed, you have to build and distribute it within the online marketing paradigm, which is quite different from brick-and-mortar marketing. The value of print coupons for brick-and-mortar storeowners is they clearly delineate two types of consumers. The first type are those who loves bargains. They don’t mind spending the time to hunt for deals in newspapers and magazines. The second type are those who don’t mind paying the full price.
Online, it’s much harder to identify customers, but there are some things you can do to make coupons work for you. One is to offer tiered discounts. For instance, if your customer’s purchase total is $100, they get 10% discount. If the purchase total is $200, they get 25%.
For bargain-seeking customers who don’t buy immediately, you can send them targeted special offers through emails. The offer can be in the form of one-time coupon.