You Can Score With Online Couponing, But It’s No Slam Dunk

For savvy retailers, e-coupons have become an explosive business builder—but the operative word is “savvy.” If you're a CPG retailer who hasn't added online couponing to your marketing mix, you need to. According to a recent Forrester Research report, E-Coupons Engage Customers Beyond Discounts:

  • Half of coupon users who go online use e-coupons as well
  • They make more money, shop online more, and talk about new products with peers more than offline coupon users do
  • One-quarter of e-coupon users said they like to try new products and services before others, compared with 13% of offline-only users
  • Thirty-five percent say, “People ask me for information about products, places to shop, sales,” compared to just 20 percent of their offline counterparts

But before you pick up the phone and ask to talk to a Groupon sales rep, know this:

Online couponing is fraught with pitfalls. For instance, depending on expiration dates and unused amounts of the coupon face value, your friendly state tax collector may consider your e-coupons as gift certificates. Remember also that couponing, online or off, is an expense. If you're in a low-margin business, it could be a ruinous expense. Living Social and the like typically keep up to half the coupon purchase price. So if you offer 50% off a product or service, you're really selling it for only 25% of your normal asking price. And you may well wait up to 90 days to receive payment from the couponing website.

Can your cash-flow requirements stand that? My point is that while you probably can't afford not to get into the e-couponing game, you absolutely can't afford to do so without objective expert advice (i.e., not a sales rep's.) Before you offer your first coupon, you need a strategy that, at a minimum, addresses these areas:

  • What is the goal? Increased market share? Increased revenues? Increased brand awareness?
  • What is the up-sell strategy? One thing for sure, you're not going to increase your margins with coupons, so your program must be designed to either up-sell (“Would you like fries with that?”) or generate a higher total per-sale dollar amount than you're currently averaging.
  • What is the transaction-to-relationship conversion strategy? Inevitably, a high percentage of coupon redeemers will be one-time customers, but success lies in converting as many as you can into repeat business.
  • And perhaps most important of all, how will you tightly integrate your couponing campaign into your overall marketing program?

The last thing most retailers want is to devalue their brand by training customers to always expect a discount on everything. Another area you'll need to address is the backend. Your POS, credit card processing, shopping cart and accounting system absolutely must be ready to accept, process and fulfill your e-coupons. Be sure that the discount appears as a line item in the shopping cart so the customer can see that the discount has been applied. And always, always, always create a coupon-specific landing page on your website.

Okay, you've formulated your strategy and gotten your technology together. Now what about the coupons themselves? Here are three things I believe in: # Online shoppers don't read; they scan, so be as clear and brief as you can. The offer should be big and bold, and all terms and conditions should be easy to read and understand.

Make it easy to get the coupons. No required software downloads, just a simple PDF. Avoid coupon codes with letters and numbers that are easily confused. No 1's and l's, no 0's and O's. Better yet, set up your process so that customers can redeem the coupon with a single click instead of having to bother with entering a code at all. As far as the offer itself is concerned, it all depends on your business. However, at least some of these best practices will probably apply to you:

  • Use a short expiration date to create urgency.
  • If your average order is under $100, you'll do better offering a specific dollar amount off. If it's over $100, a percentage off will get more clicks.
  • Try to boost your average order by upping the minimum order above your average. For instance, if your average order is $50, make the minimum purchase $75 in order to qualify for the discount. (For this to work, you can't stint. Be prepared to offer the equivalent of at least 10% off, and 15% or more would be better.)
  • If you are unwilling to discount your product, you may still get bites with a free-shipping coupon—especially if you charge $6 or more for shipping.
  • Finally, always apply the universal rule of retailing: Offer what consumers what to buy, not what you want to sell

Forget about brand exclusions; offer the discount across the entire product category. I've barely scratched the surface of all the considerations that must go into a successful online coupon program. Done right it can pay huge dividends; done wrong it can be a painful experience. To avoid the pain and reap the benefits, consult an expert who is knowledgeable on both the frontend and backend of e-couponing—and who knows how to make it work within the context of your entire marketing campaign.