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Ecommerce Forum

Are Coupon Codes a Profitable Method of Promotion?
-- or do they train your customers to be cheapskates?

 4:21 am on Aug 14, 2009 (gmt 0)

Lately I've been pondering the effectiveness of promoting with coupons.

There are a couple of merchants that I have purchased from who send out coupon discount codes with clocklike regularity. I see the effect it has on me as a shopper, and I wonder if those coupons are really as productive as the merchants think?

The first time I bought something from Merchant X, I paid the price posted on the site and was happy to do so. But once I was on their mailing list, they started sending so many discount codes that I have effectively been trained to never, ever pay the posted price again.

I go to their site, add the items I want to my shopping cart, then I go away to wait, because I know that I'd be stupid to buy the items today. I know that if I wait a few days, another discount code will come along in my email that knocks 10%, 15%, sometimes 20% off the price I'd otherwise have been willing to pay.

From the merchant's end it would look like the coupon was an effective promotion, but was it really?

I'm just an occasional shopper, but there's a thriving subculture of "couponers" out there who practically make it their life's work to trade coupon codes and chase discounts.

What are the pros and cons of catering to the discount mindset? What makes the difference between offering an occasional special, versus training your customers to expect permanent discounts?



 8:33 am on Aug 14, 2009 (gmt 0)

Sounds like the b&m store down the road from my office. They alternate between discounting individual items and discounting multibuys. Nobody in their right mind ever pays list price.

The effect on me when looking at similar b&m stores in the area is to think "I'll come back when they discount that".


 2:06 pm on Aug 14, 2009 (gmt 0)

And the traffic boost you can get from coupon sites like FatWallet can be substantial. I have had site traffic go up by 10x on one occasion from someone putting my coupon on the site. These dedicated coupon people will then post the coupon all over the net so that you get a lot of traffic and backlinks, If your total offer is good you will get a lot of sales too.

There are some other threads here about consumer behaviour with coupons
and this was interesting (from otc_cmnn)...
"So now the question is... when you make coupons such a blatantly obvious and integral part of your site, what % of users actually USE a coupon? Naturally it will be different for everyone, but for our common consumer goods $60 average order site - it is less than 35% of checkouts. " from this thread [webmasterworld.com...]


 2:30 pm on Aug 14, 2009 (gmt 0)

How do you add a coupon to fatwallet? I wonder if there is an API that can be used so when you add it to your cart it gets pushed to their site.


 9:58 am on Aug 15, 2009 (gmt 0)

Coupons have especially become the "to do" thing when shopping online.

Several merchants themselves inform the customer of possible coupon deals by displaying "applying coupon" on check out pages. This leads the customer to search for coupons on Google etc and then come back to the merchant site to finish the purchase.

I think, merchants should only display coupon "boxes" when the visitor has actually landed from a coupon website or an affiliate.

On the other hand, offline coupons are a valuable tool for "offline "merchants as it actually increase the footfall and conversions in the stores.


 10:36 am on Aug 15, 2009 (gmt 0)

This is something I have been pondering for some time - I have considered sending coupons to subscribed customers on email to entice them to come and buy again as well as using the coupon sites to try and drive incremental net new business.

There is obviously a cost in terms of lost margin but is it generally offset by the increase in sales?


 11:52 am on Aug 15, 2009 (gmt 0)

Having coupons on your site could be the difference of ranking in Google or being considered more affiliate spam.

You didn't hear this from me.

What did I just say?


 1:25 pm on Aug 15, 2009 (gmt 0)

This leads the customer to search for coupons on Google etc and then come back to the merchant site to finish the purchase.

Yes. I've done that myself more than once.

I wonder how many affiliate cookies get overwritten when the customer goes off in search of a coupon code, and ends up clicking someone else's link at the last minute?


 2:34 pm on Aug 15, 2009 (gmt 0)

@buckworks, There should be a fool proof way of not getting your affiliate cookies re-written by other merchant sites?


 4:22 pm on Aug 15, 2009 (gmt 0)

If you see a site has a spot to enter coupon codes it is customary to go check the web to see if you can find any relevant coupon codes beforefore you finalize the order.


 8:39 pm on Aug 15, 2009 (gmt 0)

I've been on both sides of this equation.

For a merchant, coupons are a double edged sword. You got new customers but they eat into your margins, big time. Coupons are not ideal for retailers but they may work if you measure repeat business.

Now for SEO/SEM, coupons are a niche just like geo-targeting is a niche. Coupons are a convenient anchor to go after, as is geo-targetting. And the success you get will be based on your implementation of the practice. Simply deciding to do it is a small fraction of the effort required to be successful at it.

(and yes, there's a seedy side of coupon marketing involving cookie stuffing that is so rampant anyone mentioning coupons may be put in that bucket.)


 10:10 pm on Aug 15, 2009 (gmt 0)

SEO aside; not a fan of coupons, discounts, sales..... We want a reputation for honest prices and quality products. Once a company starts any of these things my immediate inclination is not to trust them. I say, "Hey, just charge me the honest price to start with."

One of many discounting scams (used by some big name retailers) is to discount merchandise 'extremely similar' to the standard stock. They have actually bought in a cheaper, inferior substitute and are making as good a margin as with the 'real' merchandise. They close it out, then go back to the higher price with the better merchandise. This scam works online too if not buying specific brand names; though the big boxes have access and buying power to get 'custom downgraded' brand name merchandise that has been cheapened specifically for these kinds of pricing scams.

Coupons - They make me think of my 'grocery card', where I get the honest prices if I let them track every item that I ever buy. No card, no 'deals'. We use the card because it is too much money to burn over the course of a year, but I resent it every time. Companies that use a hook to give the honest price don't sit well with me - though I do business with many because a lot of these things are the only game in town.


 5:19 am on Aug 16, 2009 (gmt 0)

Coupons have become the "necessary" evil. Retailers cannot live without it nor work without it.

But, the situation is different in developing countries like China, India and Brazil. The concept of couponing is not there. Customers wait for the annual sales for the discount.

Will coupon concept only play in the west or will it be prevalent in China, India etc also?


 8:05 am on Aug 16, 2009 (gmt 0)

Coupon codes + twitter can set your business up for a nice surge in sales. Personalized coupon codes given to sites that have a following work well. I don't think I've ever purchased a domain name without a 25% off coupon code come to think of it... yes, they work.


 2:43 pm on Aug 16, 2009 (gmt 0)

What are the pros and cons of catering to the discount mindset? What makes the difference between offering an occasional special, versus training your customers to expect permanent discounts?

I don't have an ecommerce site, but I do have hundreds of visitors who look for deals when clicking on merchant ads.

Pros: Avid online shoppers probably know the coupon game very well, but I'm not sure the average web user does--which could help generate a steady stream of income when coupons are available to them. Obviously, this depends on your niche and visitor base.
People are almost always interested in deals. If I can pay $19.95 for an item instead of paying $26.95, I feel like I'm getting a deal. Plus, affiliate links may be distributed via email, so touching more potential buyers is possible.

Cons: As incrediBill didn't point out :), a site filled with coupon offers may trigger an affiliate spam notification--especially if those pages are stuffed with keywords (ie. free, coupon, sale, etc). Additionally, I think the flashiness and "in your face" approach by some merchants, may create doubt in the minds of site users. If your site is lined from corner to corner with coupons, some users may not be comfortable with it.


 1:53 am on Aug 17, 2009 (gmt 0)

Having a coupon box could put some customer's off. I always feel a little ripped off if I see a coupon box but have no coupon. Also it could interrupt the customer. They could go off in search of a coupon code and not come back especially if it's an impulse item. If you don't have a coupon box you could spin it as a plus for the customer with a message like "No coupon box here, we believe every single customer should pay the best possible price"


 6:08 am on Aug 17, 2009 (gmt 0)

I know I have a lot more stuff that I really don't need thanks to coupons. :) The structure of the coupon offer is very important. We worked with a bunch of retail clothing sites and EVERYTHING was always BOGO, 20%, 50% off, etc...Free ship with $X order. This was before the economy really fell in the toilet. That along with alot of other things put a once well positioned retailer in very bad financial shape. The MBA at the top has to make his quarterly sales numbers so they'd give the stuff away to hit the sales numbers. Till they got their act together, wasn't it buy.com that proved long ago that if you lose money on every sale you can't make it up in volume?

Now if you are going to do coupons there needs to be some strategy to it. Maybe you need to get inventory off the books and your margin is 50% on a $100 order and the incremental cost is $5.00 to add and ship another item (not including the cost of the item). You want to get the inventory off the books so you don't have the holding cost and you can free up capital tied up in inventory.

So you do an incremental discount that goes up with the order size. 10% off $100, 20% off $200, $30% off $300 because you will make about the same amount of profit PER order when doing this and you free up your cash. (Didn't do any real calculations to support those numbers)

The other thing is to give a gift cert for a future order. Buy $150 or more today and get a $25.00 gift card good for a future order. It is couponing but in exchange you are probably guaranteeing yourself another order. There will be "breakage" or whatever they call it so not all those $25 certificates will be redeemed and you won't actually have to give all those future discounts.

Straight up coupons where you give 30% off (or whatever amount) unless you need to free up that capital tied up in inventory don't seem to make a whole lot of long term business sense but as a consumer I'll take whatever you want to give.

It is amazing how many businesses seem to equate sales revenue with success, not profit but sales. What do they teach in those MBA programs?


 6:24 am on Aug 17, 2009 (gmt 0)

Random discount coupons may make the customer feel ripped off a bit.

Discount coupons should be conditional. Say after every 4th - 5th (may vary) purchase you offer a discount of 10% to 20%.

Also there should not be any discount box on your site. First time visitors may get undecided and leave your site. Offer coupons to your regular customers only via a private login option. If you think that not having a coupon box on the site can put off the discount seeker, then worry not! You can always highlight a message on your site that says 'Attractive Discount Coupons for Regular Customers'

My 2 cents. Some statistics in this regard would be interesting.


 4:59 pm on Aug 17, 2009 (gmt 0)

we have the problem that our #1 competitor is RABID about coupon sales and it means are forced to come up with something or loose competitively.

a friend advises that 3 for the price of 2 actually makes sense mathematically but in this case, we don't quite have that option.


 5:13 pm on Aug 17, 2009 (gmt 0)

It is amazing how many businesses seem to equate sales revenue with success, not profit but sales. What do they teach in those MBA programs?

Reminds me of an old line. "We lose a little on each one we sell, but make up for it in volume."

That #1 competitor that is rabid about coupon sales is sticking to them somewhere else; most often hiding profits in the shipping. One company that I did a lot of work for was rabid about lowball pricing. He had to be the cheapest. Get through the checkout without paying attention and you are paying a premium to do business with a shell game pro however. Can you develop your site to deflect his coupon assault - to rise above it?

Same deal with websites/business with 'sales' that never end. If it is 'on sale' for a year - it's probably actually the price and just looks stupid. It might suck in the new visitor, but repeat business probably suffers over time when they recognize some of the hooks being used.


 5:30 pm on Aug 17, 2009 (gmt 0)

sad part is that this is a one time type customer with zero follow on type products or services, and the race to "free" by everyone and their user genrated content is pinching us all. Fortunately I have other clients.

Expect a rash of "twitterbait" type consumer product type coupons in the near future from zillions of people who should know better but who just have to prove the value of the brand building they are doing.

I prefer value added marketing approaches rather than discount gambits.


 1:18 am on Aug 18, 2009 (gmt 0)

Absolutely, we use coupons and they deliver, like clockwork :)


 7:53 am on Aug 20, 2009 (gmt 0)

"But once I was on their mailing list, they started sending so many discount codes that I have effectively been trained "


I'm no longer concerned with being one of the biggest...been there, done that.

I'm now working harder toward larger order sizes and more profitable products, and concentrating on those two things are paying big dividends.

Essentially, I'm concentrating on more profit per order, not more orders.

Getting more orders is easy, but it's not always worthwhile.

At last for me, the ones who expect discounts and those that place small orders end up being a LARGE portion of problems, customer service issues, etc...too much handholding required.

I'll take the profitable ones - the competition can deal with the rest.

Gross sales mean nothing to me anymore.


 7:16 pm on Sep 1, 2009 (gmt 0)

I immediately started to think of some of the limited edition or limited stock items out there - collectibles, clothing, shoes, etc. These can sell out way before a coupon is available - and people know this - which can help push an immediate sale harder than the proposition of simple savings.

On the other hand, I too always search for a coupon before completing any online purchase.


 12:34 am on Sep 2, 2009 (gmt 0)

What are some good coupon sites on which to advertise my coupons? I have put my coupons on sites such as tjoos in the past but never had any traffic from them.

Currently we occasionally offer coupon codes in our newsletters. It's not clear if they make a different to sales though as few customers seem to remember to use them.


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