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How Promotional Coupon Discounts Work

  
04-17-2012  |  By: Adrecom


While coupon usage make up a fundamental part-and-parcel of traditional commerce, it is also true that e-tailers have much to gain from making use of promotions and coupons. This post contains a summary of wise and unwise discount practices and how coupons and promotions are used (and should be) in the world of e-commerce.


Wise Practices

Broad Application

One of the best practices to adopt with regards to e-tailer promotional coupons and discounts is to set up coupons so that they are applicable to a relatively large number of items or item categories. By casting a wider net you create more opportunities for customers to save on your products, which raises the probability that they will spend money on them. If you exclude a large number of products from the discounts available with a coupon or set of coupons, you might also exclude customers.


The Choice: Dollar Amount or Percent Savings?

A good practice when establishing discounts is to fluctuate between fixed dollar amount and percentage savings based on the price of the sale. For example, it is better to use dollar amount discounts for relatively low purchases, such as those less than $100, and to use percentage savings for purchases higher than that. For example, a fixed coupon, such as one offering $25 off any purchase lower than $100, creates a substantial saving and is generally preferred by most customers. However, the same discount applied to more expensive purchases generate less clicks and it is better to go with a discount that increases along with total purchase price.


Free Shipping

It would be a slight misnomer to suggest that free shipping is a perk when in fact (according to Forrester Research, a global research and advisory firm) free product shipping will either make or break the deal. According to a 2008 finding by the Conference Board, as high as %90 of consumers say that free shipping would persuade them to make larger online purchases.


Shifting between Automatic and Manual

It’s smart to make it as easy as possible for a customer to utilize a coupon. While one way of doing this is to issue relatively short coupon codes, no longer than 10 digits, but preferably shorter, another way is to automate coupon code entry by installing a coupon button that automatically enters and applies the coupon. Customers will sense that the company is trying to make their shopping experience easier and more streamlined, and they would be right. Customers also appreciate seeing their discount applied and displayed on the screen once having clicked the coupon button.


Unwise Practices

Coupon Complexity

One of the worst practices to adopt with regards to e-tailer promotional coupons and discounts is to set up coupons with unnecessarily long coupon codes. Left to human error, which is common enough given that many customers manually jot down coupon codes, a coupon is rendered unusable. Best practices suggest to avoid using codes with strings of 15 or more digits, but rather to limit yourself to no more than 10, and preferably less.


Greed

If you’ve found a goose that lays a golden egg, keep it alive. In other words, avoid the temptation to raise the minimum sale amount necessary in order to receive a discount, which just might kill the sale in the first place. For example, if you find that most customers tend to purchase two products for a $50 total, it might not be the wisest practice to raise the $10 discount minimum purchase to $75. The additional $25 might not be worth the $10 savings. This is largely a case-by-case principle and should be handled individually.


Ignoring New Customers

While it’s important to keep your fan base happy, it’s also important to reach out to newcomers, who generally speaking have larger orders than regular customers. New customers as well appreciate larger discounts as a way of showing them that their business is appreciated. Offering higher discounts for new customers is a good way of turning them into repeat customers.


Navigation Confusion

One way to shortchange conversion rates is to design a confusing navigational structure. For example, customers appreciate it when clicking on a coupon link directs them to the landing page of the discounted item, not to a more general category page. Even better than directing the customer to the product page, create a coupon landing page for all the coupons on the site.