22nd January 2014 by dan hamilton
Discount vouchers (or coupons if your on the other side of the pond) have been around for almost a century but are often viewed by some online retailers with dismay. Here we explore the benefits and limitations of using vouchers, and will explain how using the right strategies, vouchers can be used to effectively test and drive customer behaviour to directly increase revenue, profitability and loyalty without devaluing your retail brand.
Every Thursday in our office, we would order Pizza from Papa Johns for our weekly evening Poker game. After sometime we switched location and to a local pizza place for our much valued slices. A couple of weeks after I started receiving text messages every Thursday afternoon, offering a deal from Papa Johns to be used by the Sunday. The first week the deal offered was ok, but we were enjoying our new local supplier; the second week the deal was similar to what we had been ordering previously, though at a better price, we gave it serious consideration but stayed put. The third week we were expecting our voucher and there was fierce debate that finished with agreement that we would return to Papa Johns; however no text came. We had missed out. In the end we called the store and asked for the deal. We were lured back by the Papas vouchers.
This strategy worked for Papa Johns for a number of reasons. The customer was tempted by a great deal that is relevant to what they have previously bought and wanted to take advantage of it. The time sensitive nature of the coupon means they have to act fast which we learnt to our detriment.
As the example above shows to incorporate vouchers effectively into your own marketing you must first understand the psychology behind the spending. Vouchers and coupons are effective because:
- They can be time sensitive which gives the shopper a sense of urgency, act now or lose out.
- The worry of others using the same coupons also instils a sense of urgency as a shopper may worry that a store will run out of stock if they don’t act soon.
- If a shopper receives a product for half price, psychologically, they’ll see the saving as money they can spend, regardless of if they intended to buy the product initially. This means shoppers will often buy items alongside the product. They are buying the good feeling a discount brings, as much as the items themselves.
- Vouchers offer personalisation with specific vouchers targeted to certain customers. This makes the shopper feel valued, and the more accurate and appropriate the personalisation, the more likely a buyer is to act.
- Vouchers are more tangible than normal generic instore offers. Customers must seek them out and actively redeem them. This engages the buyer and as they have invested their time in the voucher, are more likely to act on it.
- Regardless of how good a deal the coupon or voucher is, a shopper will always look for ways to extract the best savings. This often means they will buy multiple items online to save on delivery. In the case of Tesco this is particularly true, it’s the “while I’m here” psychology of a shopper.
There are many advantages to using discounts and vouchers whether online or offline. Not only do they entice people with a special deal they can also become an incredible marketing tool that can increase exposure significantly. However there is also the risk that you end up giving away discounts that are unnecessary and potentially devaluing your brand.
The answer is simple and boils down to 2 things:
- Plan what you want to achieve with your campaign in terms of business outcomes.
- Understand which voucher types drive certain which behaviours in customers.
Once you understand how different types of voucher affect customer’s buying behaviour, it becomes as simple as identifying your goals for your campaign, and matching them to the correct vouchers. Well not quite that simple as you need to get your offer out to the world and buyers clicking but you get the idea.
Let’s start by understanding how we can target certain behaviours with particular vouchers:
Catalogues such as Look Again and Next are adept at attracting first time customers by offering first purchase discounts. Unsurprisingly their homepages entice new customers in by offering a percentage off the first order. The percentage method works as the more the shopper spends the bigger the savings they’ll make. As the shopper is aware they won’t get 10, 20 or 25% off subsequent orders they’re more likely to buy more on their first spend.
Be careful how good a deal new customers are given as if your existing customers feel they are missing out, they may try to leave or sign up again with a new account to qualify for the voucher.
To increase the amount a shopper spends you can add a voucher to your site that gives the customer a benefit when they reach a certain spend threshold. The secret here is to make sure that threshold is higher than what what they would already spend, so you are raising the average order value. You should include the cost of the benefit you’re giving away in the additional amount added so to keep the deal profitable.
For Example: If the average order value for your site is £30, then you could look to offer £5 off if the customer spends £40, thus moving the average order value up-to £35 (£40 – £5).
In practice there are a few ways you can do this. You can calculate the average order value across all values, or for more granular results, could calculate it for customer segments to see how they respond.
A voucher can be an ideal way to test out a new product. You can offer a customer a free sample of your new product providing they spend a certain amount. This can also build up positive reviews for the new product. If the free product is not yet otherwise available, this exclusive opportunity can be a strong motivator in its own right for the purchaser to buy more to reach the spend limit.
The key thing to measure here is how many customers who receive the free product go on to purchase it again. This type of voucher works best for consumable goods that require fairly frequent repeat buys such as foods, household products etc.
Increasing repeat purchases is one of the most powerful levers an ECommerce store has as your marketing has already been previously successful and the customer acquisition costs have already been sunk. Time between purchases is a key measure for any Ecommerce store and there are 2 voucher strategies that can be used to engender more purchases: personalisation and urgency.
Personalisation: By using your previous data on the customer, you should be able to target offers to the users tastes, just as Papa Johns did with our Poker group. The more relevant the offer, the more likely the user will do a
Urgency: Making these vouchers time sensitive imbues the fear of missing out within the customer and acts as a strong motivator to move them from desire to action stage in the purchase process.
If you offer an existing customer a gesture, they will feel as though you appreciate their business. Tesco have this down to a fine art. Regardless of how regularly people shop they still send out vouchers monthly and many savvy shoppers look out for these when they want to make a special more expensive purchase and are loyal to Tesco as a result.
You will have seen sites that utilise the “refer a friend” discount code. Done effectively, this can be the ultimate business generation tool. This brings in a new audience while giving your current customers an excuse to shout about your store.
- it is incredibly cost efficient way to acquire new customers
- your existing customer becomes a brand champion and is rewarded
- your new customer is more receptive to your business as they have been introduced by a trusted friend
The key thing here is to ensure you can track which users are making referrals, so the voucher codes need to be unique to each referrer.
There are some best practices to follow in order to make the most of marketing through vouchers, and also some key things to avoid. Take heed of the following and you will be well on your way to a successful campaign.
The first step is to identify the results you want the vouchers to create. Would you like to drive more sales? Do you need more likes and followers on social media? Would you like a bigger audience? Would you like to sell unwanted stock? Or would you like to increase the purchase value at checkout?
Once you’ve identified what you would like the vouchers to do you can pick the right one that will drive the buyer behaviour you need..
Vouchers and coupons can give you incredible valuable insights into your target market. You should always monitor the success so you can adapt subsequent strategies and optimise the results. But how do you distinguish between customers who have acted after seeing your voucher, and those who would of spent their money anyway?
The answer is to make the user type in a voucher code to receive the discount, as opposed to auto-applying any discounts. This way you can be sure it was the offer, and it prevents you giving away unnecessary discounts.
It can also pay dividends to compare the performance of a voucher against different customer segments and other factors: such as does the voucher/offer perform better in the morning or late at night?
With the right CRM or analytics you can separate your customers into certain demographics. This allows you to target particular interests, locations, age, sex or annual income. This gives the shopper a sense that you’ve tailor made the offer especially for them, increasing loyalty while ensuring you entice with an offer they’ll like.
If a customer buys milk from you every week there’s little point giving them a voucher or a discount, unless you notice they’ve chosen another store for their milk. While Tesco do offer vouchers for essential items that the shopper buys (more as a little goodwill gesture and as a big company they can stomach the cost) try using vouchers to entice the customer to buy something they may have previously avoided due to price.
The initial success of vouchers usually pleases many eCommerce owners, as the profits, increased conversions and wider audience are plain to see. It’s natural that any business person would want to replicate this success however if it’s done too often it can position your brand as “discount” and perhaps damage your reputation.
For example, if you always have coupons and vouchers the customer will expect them. This also means they’ll be very reluctant to buy anything at full price.
Recurring offers and discounts can also position you as a discount site in the market, as you are seen as a place to get offers and money off rather than a store to buy quality goods. Unless this is your brand strategy, its wise to consider a quality over quantity approach when it comes to running voucher offers.
Of course discounts are bound to have an effect on your profits and mark ups. Keep a keen eye out as every voucher or coupon issued should give a return on your investment that pays for itself, whether through increased audience, conversions or upselling.
In order for the vouchers to have the potential to create long term loyal customers your website must be user friendly. Be wary of using the checkout process to throw more information at the shopper or to make them sign up for newsletters and email alerts. This will simply put them off regardless of the savings promised. A swift clean checkout with as little data input as possible is the key to success. You can use the email address to remarket after the sale is complete.
There is such a thing as over marketing, this is when your customers think you’re trying too hard, your marketing starts to reek of desperation and the customer loses interest. You will begin to incite feelings of annoyance, disrespect and general apathy as a shopper feels you can’t have good products if you have to try so hard to sell them.
At Emagineers we know just how to ensure your marketing strategy involving vouchers and coupons gives you the best return on your investment while bringing other benefits such as:
· A better reputation for your brand
· Increased conversions
· Viral marketing
· More customers
· Enhanced brand awareness
· Actionable analysis
Contact us now to see how we can give your business a big boost with coupons and vouchers today.