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3 secrets of successful coupon strategy revealed

July 22, 2015 CK Wong Category : , , , , , , , , ,


First of all, both 'coupon' and 'voucher' have been used regularly in online and offline retailing, so which term should you use as a merchant?

Coupon marketing


Coupon vs Voucher


Coupon is generally applied to get discount off the purchase, while voucher is generally applied to get complete waiver off the purchase (means get it for free).

For example:
 I have a 20% dining discount coupon.
 I have a $20 departmental store voucher.

First one (coupon) you still need to pay when you use it, while second one (voucher) you can use it to redeem something without paying (or, topping up).

However, coupon and voucher can be set and mixed around like scenarios below:
 A coupon for free, or 100% discount.
 A voucher with $20 off (discount).

If there is no specific context stated, coupon and voucher should be used as explained earlier in the article, even though there is no 100% rule on the application.

For e-commerce merchant, coupon is more commonly used, as e-marketplaces or merchants issue coupon with their advertising cost, without charging the consumers on the coupon cost.

Voucher can be sold by online retailers though, as a 'pre-paid' to certain products or services. This in contrast, has to be purchased by the consumers.

Read also: 7 tips of highly effective web banner


3 success factors of coupon marketing


With online shopping becoming a habit, consumers are sometimes 'spoilt' with options. There are just too many coupons available and easy to be overlooked.

As a merchant, how to create a coupon strategy that works for your business?


#1. The value of coupon & product strength


You might be tempted to work on the discount value or ratio based on your average order volume but it is not really the printed value of the coupon that matters the most. It is how the consumers value your discount offer based on the products or services you are selling.

A good example would be a $20 departmental store coupon vs a $20 fashion store coupon, which one is more 'valuable' and sought after in general?

If you are not selling everything under the sky, it is best to promote the discount coupon together with your key products, which will be easier for consumers to understand the relative value of your discount.


#2. Hunger marketing & sense of urgency


Again, you might want to reconsider throwing a standard $20 discount coupon around, so how to work on a coupon strategy that attracts consumers?

Think of how Xiaomi disrupt the market without ground-breaking products, but rely mostly on its hunger marketing strategy, that went viral and created a sense of urgency among consumers.

Lazada demonstrates a good example of hunger marketing concept with its 'Fireworks Vouchers', available on certain days only.

Fireworks Vouchers by Lazada

More recently, 11street keeps offering a variation of 'limited coupons download' to entice consumers, who have to go to its website on a specific day / hour to download the coupon. The coupons are of course available on limited quantity only, first-come, first served!

Limited coupons download by 11street

If you refer to the screenshot above, 99% discount looks like a steal but if you read into the terms & conditions, maximum discount value is limited to a certain amount only.


#3. Target audience, distribution & media


While working on your coupon marketing strategy, it is important to first know the campaign objective - do you want to attract new customers, or boost your sales?

Wide distribution or 'hit and miss' like offering a standard $20 discount to everyone is unlikely to hit high redemption rate in long term, so it's best to work on some sort of exclusiveness mentioned earlier.

Are you offering the coupon to your existing customers? If so, are you segmenting it based on their demographic, purchase history etc.?

Are you offering the coupon to new customers? Even so, visitors coming from respective traffic source (search, social media, mobile) might have different needs and spending behavior, right?

If you are targeting new visitors or customers, do you allocate advertising budget to drive traffic from Google, Facebook etc. to your website or the coupon campaign page itself?

Last but not least, unlike top e-commerce sites or e-marketplaces which focus on driving top-line revenue, most merchants need to consider the ROI of coupon campaign. You can refer to the following formula on calculating the ROI of coupon campaign:

Incremental Revenue by Coupon = Coupon Quantity x Redemption Rate x Average Order Volume

Profit = Incremental Revenue by Coupon - Coupon Distribution Cost (including Printing, Ad Spend, if any) - Cost of Goods / Services

Of course, there are other parameters like Customer Acquisition Cost you might want to factor in so it's all about tweaking your coupon campaign to generate positive ROI for your business.

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