The revenue generated by digital coupon redemption is expected to be $91 billion by 2022 according to research by Juniper. That’s almost double the amount of revenue coupon strategies generated just five years earlier ($47 billion).
Consumer appetite is clearly hungry for deals and this appetite is increasing as retail web and mobile platforms improve.
Yet, should you be using coupon or voucher code discount fields within your web form or eCommerce checkout? At Zuko, we know that isn’t always the wisest move for your website.
The mere presence of a discount code or voucher can increase shopping cart abandonment rates (more on that later). Mention the word “discount” and you risk driving your customer (the one you fought so hard to win via numerous marketing tactics) back down the ‘digital high street’ to see what other discounts might be available.
However, as coupons can be a reliable means of generating revenue, it is a matter of finding the best way to use these discount strategies, without costing sales.
From the run-up to Black Friday, throughout the Christmas shopping season and beyond into spring and summer sales season, many eCommerce and online retailers run several types of promotions at tactical points throughout the year. This strategy can increase conversions and improve customer loyalty.
The most common strategic benefits are:
The most obvious one. A recent study indicated that 83% of shoppers said that coupons changed their purchasing behaviour so we know discount coupons can increase revenue.
Discounts aren’t just attractive to customers. They can also be a successful means of growing your social media followers + your email subscriber lists and they help encourage users to embrace your mobile platforms.
Offering a personalised or timely discount at the right time can cause a domino effect. Anyone who receives it can now share it easily with their friends with the touch of a digital button.
It’s a low cost way to get your brand in front of millions and grow your awareness with minimal effort on your part.
Oxytocin spikes when a consumer knows a discount is coming.
"Getting a coupon, as hard as it is to believe, is physically shown to be more enjoyable than getting a gift," said Paul J. Zak, Director of the Centre for Neuroeconomics Studies at Claremont University USA.
A further study also showed that American shoppers felt 3.1x savvier when they used a coupon discount versus one advertised on a store website. Interestingly, the equivalent figure for the UK was only 1.6x. What’s the deal there Brits?
This injection of positivity into the customer experience is always good for loyalty.
By assigning each advert or platform with a unique discount code you’ll be able to ascertain which ads and platforms generate the most traffic and conversions. Over time, you’ll be able to fine-tune your marketing activity, using only the best performers. For best practice use Unique Single Codes to establish where your ROI performs best.
When discounts are given logically, it’s a great way to build trust with your customer base.
If you’re clever, over a customer’s lifetime you should be able to gain an understanding of their likes and dislikes, if they trust you. So the more personalised the discounts you offer, the better.
For example, if I’ve just purchased a new sofa from Ikea, a code that entitles me to a discounted warranty covering stain removal & upholstery repairs is likely to make an additional sale and one happier customer.
I may be so delighted, I’m happy to join the Ikea Members club and opt-in to emails.
Next summer, it might be a good time to let me know you’ve got a new soft furnishings range to match the sofa (and possibly even have a discount code for them).
Some of these points will be obvious but it’s always good to weigh the benefits against the possible costs before you make a decision.
As we spoke about earlier, the mere presence of a “discount code” field can be enough to trigger severe FOMO, causing your potential customer to jump right out of your sales funnel and run off in search of a coupon. A study by Paypal & Comscore showed that 27% of people would abandon their shopping cart to search for a voucher code. The shopping buzz always feels even buzzier with a discount code, and you’ve just reminded them of that. Ouch. They may even grab a code from one of your affiliates, giving a double blow to your margins.
Further still, if they can’t find a code, the risk is they’ll go off the idea of making a full price purchase altogether and leave their basket at the digital till.
The problem is exacerbated in a world of discount code sites and apps specifically built for this: Vouchercodes, Pouch, Honey, Go Groopie, Piggy, to name just a few. It’s a common occurrence that the code you find no longer works. Shopper.com found that half of the time spent searching for codes was wasted as the customer failed to find one that was valid.
At this stage, many customers will rage quit, destroying your conversion rate and negatively affecting brand perceptions.
If you use promotional codes and discounts too frequently, you can’t blame customers if they never want to pay full-price again.
Many people have felt this way about GAP over recent years. They’ve offered a whopping 40% discount, sometimes higher, so often now that many customers just can’t bring themselves to pay full-price for their products.
Rightly or wrongly, customers now perceive their value is 40% less than the full-price items they advertise, impacting their ability to maintain their premium prices.
If you use discounts regularly every new season, you’re inadvertently training your customer base to wait for your next round of deals.
You know the end game isn’t to eat away the profit on every item you sell. It’s best to save certain discount levels for certain times of the year (perhaps when your sales need a boost or you need to reduce stock). Or only reduce the price on items that don’t sell well or so quickly. Never discount items that fly off the shelf anyway.
Always remember the act of providing a discount does impact your margins so be conscious of why you are doing it and what you expect to get from it.
We’ve established that voucher codes can positively impact your business but there are potential pitfalls that can reduce conversion and profitability.
Are there any ways to alleviate the downsides whilst maintaining the benefits?
We believe there are. Our best practice tips for using digital discount coupons include:
Using public codes means the discount is available for everyone to see.
Public codes work brilliantly for those traditional January and end of summer sales periods. In those instances, taking large discounts off last season’s stock will be more profitable than not selling it at all.
Then there are private codes. They’re a great way to target specific groups of people without every member of the public knowing about it.
You might want to use private codes to encourage your ‘high spending’ customers to keep spending. Offer a £50 off voucher when they spend £500 or more? Or offer free delivery and simple returns for life.
They’re also a great way to target new customers, with a “one-time only 50% off trial us” style incentive.
Then finally, there’s restricted codes. Retailers usually reserve these for customers who may have had an issue or complaint with your service. They’re targeted to a single user and used only once.
Discount fields no longer need to be visible to all on your website forms. Pre-discounted checkout designs are increasing in popularity and achieve a positive user experience whilst simultaneously decreasing abandonment rates. A win-win for UX and conversion rate optimisation.
These involve designing your forms so discount codes are only visible to visitors that have been referred from your key affiliate sites, meaning that other users who come through the front door remain oblivious and aren’t inadvertently prompted to go on the big voucher code treasure hunt.
Companies now exist to help design your web forms to match the aesthetics of your brand personality, improve user experience and make intuitive actions that improve the conversion process. Many form builders (such as Typeform) can design your checkout so that a discount field is only visible to a user who has come from one or any of your trusted affiliate sites.
Another option is to use Chatbot technology: offer an automatic discount or private code to customers with a specific reason that justifies a reward or discount.
Have a look at the example below. All of the sneakers Jenny, the customer, had liked were unavailable in her size up until the point she saw these Nike trainers.
This Chatbot recognised a discount was essential to secure a sale from Jenny.
If your default position is that you don’t do coupon codes except for set circumstances, why show the discount box at all? Simply hide it and only reveal it when a user comes in on one of your discount links (as above).
Depending on your wider strategy, you could have a permanent URL within your site for ongoing deals and special offers, like Mimosa have done below. This means that customers can always access the relevant discounts and don’t have to leave your site to go hunting.
Or you could create a temporary page, that makes the user feel they are being invited to see a special VIP access event. A benefit of the latter is that you can encourage the customer to share this ‘exclusive’ one-time offer or event via their own social media. Hopefully providing you with a viral, peer to peer marketing element to boost your campaign performance.
A big, prominent discount code box on your checkout is an open invitation for the customer to go a-searching. Hiding the coupon entry field behind a button, such as this example from Staples, is less likely to incite a fear of missing out from the customer.
We’ve already discussed that using language like “discount coupon” creates an expectation in the minds of the consumer that there must be a valid voucher out there that they need to find to avoid missing out. Why not change this paradigm? Amazon are masters of this; putting the focus on “Gift” before “Promotional” to avoid raising expectations too high whilst still maintaining functionality for a well timed promo code when required.
Digital discounts on forms and checkouts are here to stay. The demand for them is stronger than ever. But always make sure you are aware of their potential to negatively impact your conversion rate and put in place some of the mitigation techniques we’ve outlined above.
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