How and Why Marketers Should Use Coupon Codes

3/12/2018
Sarah Steimer
Key Takeaways

​What? Promo codes are a valuable part of most retailers’ marketing mix.

So what? They can help marketers hit sales targets, acquire new customers without losing money and move surplus inventory.

Now what? Marketers should have detailed tracking in place to measure coupon code performance. They should include a mix of private, public and restricted codes.

​Consumers have come to expect coupon codes in e-commerce. Savvy marketers can use codes to delight customers and track the ROI of their campaigns

Pop-ups featuring promo codes have become ubiquitous to the online shopping experience. Most inboxes are clogged with similar offers: Use MYDAY15 for 15% off on your birthday! Use MEMORIAL10 at checkout for $10 off your order over Memorial Day weekend!

Promo codes are so prevalent that many online shoppers expect them and will search sites such as RetailMeNot or SlickDeals if they aren’t offered one by a retailer before purchase. Chris Johnson, client services director at Vouchercloud, says the discounting trend accelerated during the recession. Now consumers know they can shop around to get the best deal.

“Promo codes are a valuable part of most retailers’ marketing mix and, if used with the right strategy, can deliver results that either exceed expectations or play a significant role in budget management,” Johnson says.

According to Vouchercloud, 65% of consumers say online voucher codes often sway their purchase decisions if they are undecided. They can also be a successful retention tactic, as 91% of coupon redeemers say they will purchase from a retailer again if they are offered a coupon.

To meet customer expections, marketers should learn how to use coupon codes, when to offer them and how to track them.

When to Use Promo Codes

There are three key reasons Springbot CMO Erika Brookes says marketers use promo codes: to hit sales targets, to acquire new customers without losing money and to move surplus inventory.

Brookes suggests sellers can use promo codes as part of their cart abandonment strategy by sending coupon codes to customers who leave items in their virtual shopping carts to entice them to complete their purchase. Promo codes may be used to reward loyal customers or encourage first-time customers to make a purchase. The latter typically involves a trade-off wherein the customer gets a code in exchange for their e-mail address.

Sheena Brady, Shopify’s merchant success manager and CEO of Tease Tea, says her tea brand has an ambassador program, which includes a call on its tea packages for customers to post a photo of themselves on social media enjoying the product. In response, the company sends the customer a promo code for future purchases.

The in-kind exchange is simple and worth the cost, Brady says. “People respond well to natural, organic social media posts like that.”

Tease Tea also has a loyalty program through which members earn points that can be redeemed with promo codes. One of Brady’s favorite strategies for offering codes is through Wheelio, a Shopify app that tracks a gamified pop-up on vendor websites. Visitors who submit their e-mail address can “spin” a wheel for a prize. “We’ve only had it for two months and it’s been ‘spun’ about 2,400 times,” Brady says. The pop-up has a 2% rejection rate and a conversion rate around 21%. “Basically, 21% of people who have answered their e-mail have converted to a sale using the promo code that’s generated [from Wheelio],” Brady says.

Tracking and Measuring

Promotional codes are a great opportunity for measurement and tracking. They allow companies to attribute a sale not just to a specific campaign, but down to the medium on which the code was offered and the unique ad copy. For example, Brady says Tease may use the codes FB15 on Facebook and IG15 on Instagram and track which one customers use to match them to a preferred social platform.

Companies like Shopify, Wordpress and Squarespace have apps and plug-ins that can help with the creation and tracking of promo codes. Even beyond tracking which platform or campaign worked best, companies can use promo codes to see which type of discount or benefit is the biggest driver: a percentage off, dollar discount or free shipping.

Promo codes have the added benefit of easy sharing. Vouchercloud’s figures find 40% of consumers share e-mail offers with friends, and 28% share deals via social media platforms. Tracking specific promo codes used by social media influencers can also evidence whether much-lauded influencer marketing actually works for brands.

To track these codes, it’s helpful to understand the difference between public, private and restricted codes, and when to use each.

“Anyone can see a public promo code, which is good for enticing new customers but could get costly if too many people redeem it,” Brookes says. “Private codes are great for treating a specific group, usually as a reward for your most loyal customers or an enticement for first-time buyers. Restricted codes are targeted to a single buyer and can only be used once. They’re often used as an apology for something like a delayed delivery or as a thank you for making their 50th purchase. We recommend stores use all three types of codes and follow a strategy for when they use them.”


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ABOUT THE AUTHOR:
Sarah Steimer
Sarah Steimer is a staff writer for the AMA's publications. She can be reached at ssteimer@ama.org.

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