The main objective of any business is to generate revenue, and there's no better way to get people to buy than coupons. Data shows that online shoppers who use coupon codes spend 24% more than those who don't use them. Why is that? Target customers feel like they're saving money, which motivates them to spend even more.
Coupons aren't something new, though. They've been used in marketing for over 120 years, and today in the U.S. market alone, 92 percent of consumers use coupons when they go shopping. So, coupon marketing is a real treat if you have an idea of how to properly create a coupon campaign.
If you're a loyalty program owner, marketing manager, or customer experience specialist, you should consider the following set of questions before starting a coupon scheme:
- What is a coupon marketing strategy?
- How can you implement your voucher scheme and offer discounts?
- How can you market and promote coupons?
- How can you measure marketing efforts and monitor coupon campaigns?
And you're in luck because, in this interview, we had a chance to go through these questions and get expert insights that will give you a leg up.
In this installment of the “Ask a loyalty expert” series, digital loyalty expert Alex Süßel shares his insights on coupon marketing strategies and digital incentives. Alex, thank you so much for your thoughts and open-minded approach. We believe our readers' loyalty programs will get the coupon-based shift they need to thrive with this article.
What is a coupon marketing strategy?
Coupon marketing is an ever-growing market. The main focus of coupon strategies is to attract people and cause "shopping activation." A successful coupon campaign targets existing and most loyal customers, as well as new customers that you want to win over with your offerings.
The fact is that the pioneers of couponing were American businesses that have come a long way. They became the inspiration for other European companies that began using coupons as a form of currency after World War II. Right now, coupons are becoming more and more appealing to businesses worldwide. Primarily because shoppers need "tools" to make definitive and rational decisions, and vouchers fit that task perfectly. People think that if they opt for a specific product, they can purchase it at a lower price thanks to coupons. As a result, vouchers can encourage shoppers to make a final purchase decision.
With loyalty program software, you can segment your customer base, create a voucher-based marketing strategy, and offer favorable price reductions to specific groups. This way, you can hit the mark with your coupon offer. You can do many creative actions within your coupon scheme, such as cross- and upselling, offering eye-catching and limited coupons, and pressuring people to make quick sales. To be honest, you're only limited by your imagination.
What should a good coupon marketing campaign look like?
An ideal and advanced coupon campaign should include several elements to be effective:
- A set of conditions. The coupons must be complex, but not complicated. Only a well-thought-out coupon campaign can bring you substantial sales and new customers.
- Multiple coupon formats. Include those types of coupons that have been tested and proven in your business case.
- Dynamic or fixed value. Think about the real value the coupon will bring to your end-users.
- Perfect targeting. Analyze your customer base and segment it to create a dedicated coupon campaign for each.
- Time-pressure element. Play with different psychological mechanisms and persuasion tactics to encourage customers.
- Budgeting structure. Remember, it's all about the money. Ensure coupon codes are an integral part of your digital marketing and don't cause your business to lose money.
What are the most popular types of coupons to increase customer loyalty?
If you launch a new product, you can create sample coupons so that the customers can get a taste of your fresh product offering. Make sure to present your samples in a compelling way.
Value and percentage discount vouchers
Consider what attracts your loyal customers and brings the most profit in your coupon scheme. Explore the use of percentages or monetary values, as these work differently for every business. So, another type is discount coupons, which can be divided into:
- Value Discount Coupons (fixed and dynamic)
- Percentage Discount Coupons (fixed and dynamic)
Value coupons reimburse a specific value expressed in a monetary amount, while percentage coupons reimburse costs expressed as a percentage. Brand loyalty managers typically use these in their couponing strategies as they do wonders.
Items or reward programs
From my observations, it's becoming quite popular for customers to receive a reward or physical item when redeeming coupons. This definitely adds value to the purchase transaction, and trust me — your target audience will love it.
The gamification trend also works to your advantage. People are more likely to buy things by actively participating in games or contests. This is strongly related to a lottery-like coupon campaign or raffle. A customer buys product X and, in the next step, receives a voucher entitling them to participate in a low-end or high-end raffle. Not surprisingly, this solution attracts many people because it comes with the "reward experience."
Time-limit and number-limit vouchers
Putting pressure on your customers is always a smart move. You can boost engagement by using another great type of coupon — time-limit coupons or number-limit coupons. It's always beneficial to attribute dynamic time pressure and dynamic attribution to coupons. If you offer coupons that are only valid for a week or two, or coupons that are available in limited quantities, you can affect the frequency and quality of visits to your business. People have it in their nature that once they receive a coupon, they don't want to waste it and look for opportunities to use it here and now.
The next type of coupon is value-dropping coupons. To describe them, I'll use an example from restaurant loyalty programs. There's the Repeat app, where after you eat dinner, you can get a coupon for your next meal. But the catch is that the value of that coupon decreases over time. If you go to dinner another day, you get 20% off, but if you come back three days later, you get 10% off, and so on. Use this mechanism to keep consumers coming back fairly quickly to get a higher voucher value.
Birthday and welcome vouchers
Now, let's move on to the all-time favorite birthday coupon. Use it to recognize your customers and show them that you care about celebrating this special day with them. There are also welcome coupon campaigns where your target audience can get vouchers with unique codes straight to their inboxes as a part of the onboarding process.
If you want to grow your customer base, you should definitely use referral coupons, which allow customers to refer your offline or online business to their friends in exchange for a coupon.
The last fantastic type of coupon is, what I call, train coupons, which are multiple vouchers combined into one campaign. The way they work is that the customer receives the first coupon, redeems it, and then immediately gets the second coupon of even higher value. If the customer redeems the second coupon, they receive a third coupon with an enticing discount, which encourages further deals. I truly recommend this particular coupon strategy to connect with customers and build their loyalty in the long run.
Another element that increases sales through couponing is clear and straightforward terms and conditions. For example, your customer will receive a 10% coupon discount if they make purchases over €50. See? No small print. Of course, you're in control and can always set a new coupon threshold to encourage buyers.
One last thing about combining brand loyalty with coupons: If your loyalty program has loyalty levels, couponing can be one way to get loyalty benefits. Essentially, if your customer is a gold member, they'll get different vouchers than people in the platinum tier. Use a voucher marketing strategy to qualify shoppers and turn customers who buy once a year into those who visit you regularly.
How to implement a coupon marketing campaign?
When it comes to implementing a coupon marketing strategy, I cannot describe it in general terms. Mainly because some specific characteristics are unique to different industries.
However, I recommend starting by defining the goals of your coupon strategy and then moving on to the campaign design phase. Next, you need to segment and build customer cohorts and then, based on that, choose a suitable coupon type for you. Ensure that your voucher descriptions are in-depth and detailed, and set your terms and conditions accordingly.
Then, think about distribution. How will you promote the coupons and distribute them to customers? Will they be distributed digitally via email, sent via traditional mail, posted on social media, or given out as print vouchers in a brick-and-mortar store? The right distribution channels ensure that end-users find your vouchers and use them.
Integrate your coupon campaign with other systems. For example, if you're a food retailer, you should integrate your coupon scheme with your partners' point-of-sale (POS) systems. You need unique integration and separate policies, vouchers, and documentation for each business partner to keep things organized. Next, think about who will handle coupon clearing because, at the end of the day, it's all about profits, right?
Budgeting for coupon marketing campaigns
Speaking of money, a significant part of campaigns is their budget. Your investment in coupon campaigns can vary depending on the size of your business and revenue. You can allocate a fixed marketing budget, such as 10% or 20% of it, to the coupon strategy itself.
If you launch your company's first discount coupon campaign, begin with small sums and increase your investment over time. You can start with a four- or five-figure marketing budget and then expand to six- or seven-figures, depending on the currency in which you operate. Do some A/B testing and see if your campaign works like a charm for both you and your customers. If it brings in multiple sales and profits, you can surely allocate more money to your coupon marketing campaign.
How do you know when a coupon campaign is losing money?
The first thing that goes hand in hand with wasting money is poor targeting. Mis-targeting often happens in off-the-shelf vouchers that aren't unique coupon codes and don't appeal to any particular customer group. Simply put, anyone can get them and use them on the go. If you give a voucher to a customer who's already a loyal buyer of your product, and they would have bought it anyway without the price reduction, you just lose money. My solution is to identify buyers' behaviors and stages of the customer journey. Select smaller but proven customer segments that are profitable for your business.
How to measure a coupon marketing campaign?
I purposely discussed setting goals or Key Performance Indicators (KPIs) for your voucher campaign. KPIs can really help you grow your entire voucher system and make it easier for you to calculate Return on Investment (ROI) or track your results. If you're going to launch your own successful coupon campaign, you should follow these metrics:
- Distribution rate, or number of coupons distributed
- Redemption rate, or the number of coupons that customers redeemed
- Redemption place, or the offline or online store or other location where the coupons were redeemed
- Opening rate, or the ratio of the total voucher recipients to the redemption rate
- Email open rate, or the number of emails opened as part of an email marketing effort
- Usage rate, or the number of people who received a voucher out of the total pool (but didn't necessarily use it, as this is a redemption rate)
Measuring is all about checking the quality of the campaign. For example, suppose you gave away 1 million vouchers worth €10 million. You can then examine KPIs related to the redemption rate and see if the campaign increased revenue in the specific customer segment. Also, you can easily verify if your shopping basket value is growing and which product was the top choice.
You'll have a lot of expectations and predictions before the campaign kicks off, and once it goes live, you'll see actual results in the reports. Use the reports and track the campaign results weekly. If things go according to plan, you can hold meetings every two weeks or even every month so that you don't lose track. Build different reports for your various needs or even team goals.
Also, always compare your active and completed coupon campaigns to see which one did well. Learn from your business efforts, gather knowledge, and apply it proactively.
What are some examples of good coupon marketing campaigns?
REWE centralized benefits card
Going back to the food industry, the first example is REWE, one of Germany's largest food retailers. They introduced a benefits card — a physical card that also comes in a digital edition.
Customers who visit the company's website can clip coupons on this card and show it at checkout. Then, all the coupons they've previously pinned are automatically redeemed that way. This allows REWE to run many different campaigns at once easily, and their customers only need one card to collect and redeem all coupons. Having such a centralized card makes it convenient and accessible for existing customers!
Additionally, the company released REWE App Couponing which makes the usage of the coupons even simpler. REWE’s mobile loyalty application is constantly expanded and is set to become the central point of the whole shopping experience.
McDonald's packed mobile app
Another example is McDonald's and its mobile coupons, in some countries called McDonald’s Deals. As you wander through your favorite brands' websites or social media channels, you may notice the coupon ads available in mobile loyalty apps. Such apps are often full of discount codes and promotions, which sounds enticing, right?
Potential customers can quickly get promo codes by installing the app, selecting a set of coupon codes, and then redeeming them all at once at checkout. They can then review the purchase history and see their top picks. What's more, even if there's a limit on coupons per person and a time-limited discount, it doesn't change people's interest — they still participate in the initiative, and so boost sales.
Beck's tops Budweiser with a simple trick
The last campaign that comes to mind is a campaign built around a checkout coupon code. This voucher type is heavily targeted and can change your customers' shopping habits.
When the shopper is at the checkout, you can quickly scan their shopping list and see what they intend to buy. Let's say that the customer plans to buy Budweiser beer. If you have a competitive product, such as Beck's beer, you can easily grab their attention by offering discounts on future purchases or free samples. Use coupons to steer transactions and attract new customers. The shopper's need, in this case, is obvious — they want fine beer — but what they ultimately choose can be changed with your incentives.
What's the future of coupon marketing?
Last year, 23 billion vouchers were distributed in food retail in Germany alone, representing a 10%increase over the previous year. Digital coupons are currently experiencing the most remarkable growth, with a triple-digit growth rate. At the moment, I predict that this market will grow even more rapidly. One reason is that we're experiencing inflation, and that problem is going to escalate. Well, people need to be even more responsible with their money. They need to take care of their overall household budget and make rational purchasing decisions, and coupons allow them to save money.
Also, as clearly seen in the market, all paper coupons are becoming digital coupons. People are getting more and more digitized in all walks of life. However, there's one major hurdle. In my opinion, it'll take some time to teach people to use and trust a coupon code online. Customers were used to relying on paper coupons, and now, their attitude has completely changed in the last 20-30 years. The system of using digital coupons instead of paper coupons is still crawling, but people are increasingly open to using smartphones to make online purchases, store and redeem vouchers, express customer feedback, and so on.
A coupon marketing strategy is a great way to build brand loyalty and drive customer acquisition. You can easily tap into customer preferences and offer them coupon codes as part of their customer journey.
To learn more about the trends developing in the loyalty industry, make sure to check out our report on the subject.
About Alexander Süßel
Alexander is a highly experienced digital loyalty consultant with a wide range of experience. Starting his career in the field of marketing and sales, Alex worked with Nestlé Deutschland AG, where he designed and implemented the first concepts for things such as online grocery shopping.
Since 2007, Alex has been working as a digital consultant for a number of companies, such as Wirecard, Eintracht Frankfurt, Frankfurt Airport and others. As a certified ITIL V3, Salesforce Administrator, Mobile Marketing Manager and Design Thinking Expert, Alex has guided his clients through the process of introducing and expanding corporate projects in the field of digital marketing and loyalty services.
Over the past 10 years, Alex has devoted a lot of his work to the topic of loyalty management, having seen the potential of loyalty programs in fostering lasting customer relationships. As such, the focus of his career in the loyalty space has been loyalty software and other IT systems such as BI analytics; campaigning, and CRM.
For more articles like this one, make sure to follow our LinkedIn channel and stay up to date on all our latest content.