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Home : Blog : June 2013

Online Coupons - Getting It Right

June 17, 2013 by Brand Algorithms
Discount coupons have always been used by brand-owners for tactical sales momentum or stoking-consumer-interest activities. Traditionally delivered in the printed format, as a newspaper insert or as a direct mailer or as a gift, the discount coupon has a proven record in generating a sales bump in a flagging marketplace, and in enticing consumers to experience a brand they were aware of, but weren't sufficiently invested in.

Discount coupons are enjoying a significant uptick in use thanks to their easy circulation, courtesy the online medium, and thanks to changes in consumer behaviour following the economic downturn in Europe and the USA. Online coupons range in adaptation from the traditional product discount coupons, to coupons delivered on mobile devices, to daily-deals site coupons; with the delivery and execution models varying significantly among them.

Innovtive Practices in Online Couponing
The facility within the online universe to distribute coupons instantaneously and at negligible cost, has meant that online couponing offered the potential for more innovation in the practice of issuing discount coupons. Two such innovations have been social couponing and mobile couponing.

The history of online coupons is tumultuous all due to one company: the daily-deals (social couponing) site Groupon. Groupon rolled out an innovative business model that delivered a discount based on the number of consumers that signed up for the promo, rather than one that offered fixed-rate discount coupons to individual consumers; akin to the network marketing of coupons. The model allowed Groupon to offer retailers (that signed on) a rush of new customers, and consumers a variety of discounts that could be availed, at a time when the world economy had tanked.

Quite before Groupon's spectacular market capitalisation flameout in 2013, however, a Rice University (Houston, Texas, USA) study, back in 2011, found that 66% of the 150 businesses surveyed reported that Groupon promotions were profitable; but, more than 40% of the organizations said that they wouldn't run a Groupon offer again.

Another social couponing site, SocialTwist, follows a model that encourages users to share in order to receive a better bargain: for example, a consumer can turn a Rs. 500/- coupon into a Rs. 2,000/- coupon just by sharing it with four other consumers.

Finally, there is mobile couponing. Mobile couponing allows an additional level of customisation, not available to standard online coupons, in that the delivery of coupons can be tied to the location of the consumer (geo-fenced promos). So, rather than broadcasting the discount to a group of targeted consumers, promo information is made available only to those consumers in the targeted group who are in the geographical vicinity of the discount-provider.

The widespread deployment of mobile couponing has been held back by the difficulty users face redeeming mobile coupons. Up until now barcodes were used, which were scanned from the mobile device screen by the PoS device, to redeem the coupon, but the process is slow and prone to error. With NFC (Near-Field Communication) technology now being featured in all smartphones, the technology issue of redeeming mobile coupons looks set to be resolved.

Why It Is Important to Get It Right
Online couponing is becoming a key component in a brand-owner's customer acquisition and retention strategy. Some figures below highlight the importance of the tactic:
  • Online couponing is very popular with book and music etailers. Daily deals from book retailers such as Amazon and Barnes & Noble often result in an instant sales boost and wider exposure for the chosen author. The sites email their readers, informing them of a 24-hour price cut to as little as $1.99, as a consequence of which sales of between 10,000 and 30,000 copies of a book within the specified time period have been achieved.
  • A recent survey from RetailMeNot, a digital coupon site, found that 51% of consumers who used coupons, used them more today than five years ago, while 37% said they used them more than they did a year ago. Economic factors were the main reason for the increased usage of coupons, but a sizeable minority (23%) said that technology had made the process easier.
  • Mobile couponing is predicted to tally $43 billion (in redemption value), worldwide, by 2016, compared to a redemption value of $5.4 billion in 2011.

Online Coupons - Some Good Practices
This section is not about the best practices behind discount couponing - when to issue coupons, how frequently, working out worst-case costs for the programme, etc. - but rather about some practices that brand-owners can look at implementing when rolling out an online coupon programme.
  • Mobile and Location-based
    Given the relative ubiquity of the mobile device (whether feature-phone or smartphone or tablet), in consumer hands, brand-owners will be better served rolling out a programme that is designed for the mobile platform (both SMS and Internet-based), and which can also be adapted to non-mobile computing devices. Furthermore, the issuing of coupons can be made on the basis of physical proximity to the brand store or the redemption outlet, rather than on the basis of a generalised database.
  • Closed-Loop Marketing
    A brand-owner should track the fate of each issued coupon, from the point of origin to the point of purchase (online or offline) - passing through the purchase stages of interest, consideration, and decision. The data gathered from tracking the responses can be analysed to provide data on key metrics such as coupon-redemption consumer segment-wise, device-wise, and location-wise.
  • Consumer Data
    A brand-owner should capture consumer data - demographics, preferences, contact information (if not already available) - either at the time the coupon is issued or at the time the coupon is redeemed. This data would feed into the Closed-Loop Marketing module.
Online coupons is not seen as a high-priority sales-activation or brand-experimentation mechanism in India, by brand-owners, on account of the low Internet penetration in the country. That view needs to change, given the fact that online couponing can embrace mobile platforms too, and need not necessarily be tied to Internet access. This possibility opens up a huge market for brands: one that they would be foolish to ignore.

Tags: Online Coupons, Mobile Marketing, Digital Marketing
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