Maximizing Your ROI with Coupon Marketing in 2023
In this article, I will go over the pros and cons of digital coupon promotions, or promo codes for short. I will talk about how to design your coupon marketing strategy, how to choose your campaign goals, and personalize your coupon codes with real time customer data. You will also learn how to distribute and track your coupon campaigns.
What is coupon marketing?
Coupon marketing is a clever tactic used by businesses to entice customers to make a purchase by offering discounts or special deals. It's a win-win situation – customers get to save money, while businesses get to increase sales and customer loyalty.
Coupons can come in many forms, from traditional paper coupons to digital codes and mobile apps. And the best part? They can be used for a variety of B2C and B2B products and services, from groceries and clothing to travel and entertainment in both offline and online settings.
Moreover, coupons can be personalized or have specific redemption rules that define desired redemption conditions, making them a versatile marketing tool throughout the customer journey.
There are two main types of promo codes:
- Generic (also public or standalone) code – it can be used by anyone to receive a discount or other deal. These codes are typically made available to the general public through ads, social media, or email newsletters.
- Unique code – unlike generic promo codes, unique codes are often created for a specific marketing campaign, customer segment, or product. These codes are often personalized and cannot be shared with others or used multiple times.
Why should you care about coupon marketing?
Coupon codes have already become sophisticated marketing tools, which not only drive sales, but also help in building brand image and customer loyalty. By using a modern infrastructure, coupon campaigns are also a source of tracking data for CRM, used to build and continuously improve your marketing efforts in general. Let’s have a look at some statistics that show how common the use of coupons has become:
- 90% of consumers use coupons.
- The redemption of digital coupons in the US surpassed the redemption of paper coupons for the first time in Q2 2020.
- Experts predict that the use of digital coupons will rise in 2021, reaching 145.3 million users by the year’s end.
- Digital coupon redemptions are predicted to surpass $90 billion by 2022.
Learn more: 23 coupon statistics for 2023
Coupons can help almost every business type and size, if only a coupon marketing strategy is planned according to the current budget and clear marketing goals.
Benefits of coupon marketing
Here are some benefits that come with a well-planned coupon marketing strategy:
- Accomplish your sales goals faster – coupons can be used as incentives for customers to perform specific actions that help in achieving sales and marketing objectives. For instance, coupons can help you break even with items that do not sell well and to up-sell your offering.
- Grow your customer base – coupons do not only impact the loyalty of your customers but also increase the likelihood that they will refer your brand to friends and family more often. People respond emotionally to brands that reach out to thank loyal customers with coupons which undoubtedly helps build positive associations.
- Beat the competition – if you find yourself going head to head with other brands, coupon marketing is a great way to make your offers more attractive and popular in the competitive retail or ecommerce environment.
- Track your success rate – offering coupon codes makes it easy to measure your return on investment (ROI). When people redeem a coupon code online, you don’t have to ask them how they found your business.
Learn more: How to calculate the ROI of coupon campaigns?
Downsides of coupon marketing
Coupons, just like any other business tool, carry some hidden risk that you need to be aware of before jumping head-on into discounting.
- Possible brand damage – excessive and constant discounting is likely to lead to possible brand damage with your company viewed as less desirable and cheap.
- Increase in one-time and less loyal customers – tendency to generate traffic from price-driven shoppers and customers outside your target group, leading to less repeat sales, increased acquisition costs and burning of your promotional budget. Also, if you discount regularly and your strategy is public and predictable, some customers may try to outsmart you, skip buying at regular prices and wait out until the products are on a discount.
- Higher shopping cart abandonment – customers may churn when they see the coupon box at the checkout, as they drift off to search for a deal. 72% of carts are abandoned, with half of those shoppers leaving to search for coupon codes.
- Risking your bottom line – if you are not careful and targeting your promotions right, you can be overspending your budget or risking fraud. Most of the harms of coupon marketing can be avoided by discounting cautiously, a reasonable amount, narrow targeting, and sending unique coupon codes.
Learn more: How to prevent coupon fraud?
What should the coupon code look like?
Your coupons should be easy to use, easy to remember, and make the checkout process a piece of cake for the users. Here are some universal tips on what the coupon codes should look like:
- Not too long, not too short – the perfect length of a coupon code is between 8-12 characters long.
- Is it 0 or O? – avoid ambiguous characters and exclude them from the character set.
- Cut the coupon into pieces – divide the codes into smaller parts to simplify the validation process.
- Remember about branding and seasonality – codes connected to your brand or a special occasion are more engaging to customers than a random string of numbers and letters.
- Your coupon codes should come in all possible forms – ext, barcode, QR, mobile, and even print. The wide variety of coupon formats you deliver to the customer translates into many validations and redemptions points they can use.
- Easy to copy – make sure that customers can easily copy and paste coupon codes. Never force them to type in the promo codes manually.
What goals can you achieve with coupon marketing?
Before deploying your coupon campaign, first, determine what you want to accomplish. Here is a list of coupon marketing goals that can help you with planning your next coupon campaign:
1. Customer acquisition – whether you want to enter new markets and offer an incentive for first purchases or give a referral discount, coupon campaigns are a fantastic way to bring in new customers.
2. Upselling & cross-selling – some products or services are seasonal. You can improve your sales in those times by using discount coupons. A good example is airlines offering coupon codes in the low seasons. With coupons, you can also grow sales of specific items by selling it in a bundle with a discount voucher. If you have slow-moving items, discontinued or close to expiry date products, you can use discount coupons to get rid of that stock faster.
3. Sorry coupons – if you face customer complaints, you can offer them sorry coupons or the value of the service or product returned as a voucher for future use. This is a very popular strategy in the hospitality industry.
4. Getting customer data or consents – you can incentivize newsletter subscriptions, loyalty program joining, profile creation, double opt-in, cookie consent, data tracking, and more with discount vouchers. A very popular coupon strategy is to offer a discount for the first purchase after a newsletter subscription. With the looming cookieless future around the corner, incentivizing users to allow data tracking can be a winning strategy.
5. Getting customer feedback – you can use coupons to encourage customers to take part in a short survey about your brand. Finding out more about potential pain points and fixing the usability of your site and the attractiveness of your offering is worth a 20% discount. By giving vouchers, you can also incentivize user-generated content or reviews.
6. Sales goals – you can activate dormant customers by sending them a limited-time offer containing discount vouchers. Discount coupons can also motivate customers to add more items to their basket to get the desired discount or free shipping. Alternatively, coupon marketing can be a tool to decrease cart abandonment. You can send emails, push notifications or other types of communication after the customer abandons their basket, offering a time-limited special offer if they complete their purchase within that time limit.
What discounts to offer in your coupon campaign?
When you have determined what you want to accomplish with your coupon campaign, you can start evaluating what to offer to achieve that goal. You can research your competitors to see what kinds of discounts they are offering. The best approach is to simply ask your potential customers (through, for example, UX research, user groups, A/B testing) what kind of discount they would appreciate most.
Here are some examples of incentives you could offer to your customers in a coupon campaign:
- Free product or service vouchers
- Free upgrade or shipping vouchers
- Amount & percentage discounts
- BOGO (buy one get one) voucher
- Mystery discounts
- Referral discounts
How much of a discount to offer in your coupon campaign?
This is a tough question and even asking your customers may not give you the correct answer. A good coupon marketing strategy relies on offering lower discounts and analyzing the response. If you are not meeting your goals, you can discount further. Try to find the minimum discount level that will increase the purchase rates enough to meet your goals. Do not go below your margins unless you need to sell out discontinued, slow-moving, or expiring products.
How to personalize coupon codes?
You have most likely already heard that personalization is paramount to a successful coupon marketing strategy. I guess you also heard or even experienced, the overwhelming privacy hiccup amongst modern consumers. In these circumstances, using personalization in your coupon marketing becomes thin ice, which needs to be trodden upon lightly.
Does it mean it is better to give up personalization? Of course not. The key to moving freely in the field is ensuring a proper balance between “loss” of privacy due to revealing personal data, and benefits the consumer gets in exchange.
43% of consumers agreed that they would exchange personal data with companies to save money through personalized promotions, discounts or deals.
To offer relevant deals, which let your clients save money, you need to first know your audience. This can be done by incentivizing their consents to track their behavior, access their data, asking them to fill out their profiles, preferences, or surveys. The beginning of the personalization process starts with getting a proper customer data platform and the data to feed it, defining which data you want to collect, and ensuring data quality. Once that data and customer segmentation are ready, you can start with promotion personalization.
Some ideas for the customer data to be collected:
- Family & occupation status.
- Age & gender.
- Contact details and consent to contacting them via specific channels.
- Purchase history & product preferences.
- Birthdays & anniversaries
Once you have the CRM or CDP in place, full of quality data, you can connect your voucher management software with that data to use it for coupon personalization. You can use the customer data to run advanced promotions, for example, a 20% off coupon voucher for children clothing only for those customers who are based in Germany, between 25 and 40 years old, who have purchased at least once from your company and who have children or have purchased any clothes from children category before. This level of personalization would not be possible without a proper database and coupon automation software.
What limits to use in your coupon marketing strategy?
Besides defining your campaign goal, the incentive, targeted segment, and personalizing your campaign, you should also think about the campaign limits. You should keep in mind your target market and the goal of the campaign to define which limits to use. You should definitely introduce some limits, at least to protect yourself from fraud. Here are some ideas of the limitations you could implement in your campaigns:
- Number of redemptions per customer in a predefined timeframe.
- Total discount per customer.
- Campaign timeframe.
- Eligible customer segments.
- Discounted & excluded products and other product-related limits.
- Order value & size.
- Redemption touchpoints & allowed payment methods.
- General budget limits.
- Campaign combinability restrictions.
How to distribute promo codes?
Where you place your coupons is a big part of your coupon marketing strategy. There are many channels you can use to promote coupon codes. You should investigate where your customers spend the most time and then try those channels. You can then see the open rates and redemption rates and adjust your coupon distribution strategy accordingly. Of course, the preferences will depend on the customer segment (mainly on the customer age and location) so you should use different channels for different customer segments. We have listed some channel ideas for you below.
1. Coupon aggregation platforms & partner websites
Thanks to websites like this, your coupons can reach customers who haven’t heard about your brand yet but look for specific products. It is a chance to compete with the greatest giants and win new acquisitions. Examples: Groupon, RetailMeNot.mPlace coupons in the right category, as a mistake like this, can burn your budget in a blink of an eye. Also, share only those coupons you want to go public and viral.
If you have any business partners you could offer special coupons for their customers. They could then promote your coupons on their websites, social media, and other organic channels. You can do the same with their discounts. That way, you can get some new customers from their network and vice versa.
2. Email marketing & newsletters
Email coupon marketing has one significant advantage – it can be highly personalized. It means extra points to their marketing power and a chance to build 1:1 interactions with potential buyers. You can also send discount codes exclusively to the newsletter subscribers or loyalty program members to promote more brand interactions among your audience
3. Social media & influencers
Social media can be a great tool for coupon distribution. You can reach your current followers by posting organically on your feed or in your stories or using social media for acquisition campaigns and placing the coupons in paid ads. You can also give coupon codes to influencers so that they share them with their audience. This can be a great way to access new customer segments. You could pay your influencers per content piece or a provision from sales associated with their discount code.
4. SMS & push notifications
SMS open rate is one of the highest of all the messaging channels. Phones are considered personal devices and customers usually check all messages they get (as opposed to email, where they are used to receiving and ignoring massive amounts of spam). To make the most of SMS, you should combine it with geo-targeting. SMS gives you a chance to catch customers right in front of the store, and a coupon makes the message a real incentive.
Push notifications are a great way to distribute discount coupons, especially if they auto-apply the coupon, let customers copy the code or take them to the promotion’s landing page. Otherwise, they have the same drawback as pop-ups as they are not permanent placements and, once read, will disappear (together with the discount code).
5. Live chat
The popularity of live chats is continually growing. Besides serving support requests, you can leverage your live chat to build an outstanding customer experience and boost sales. How? By launching flash sales, personalized campaigns, and other coupon campaigns through a live chat.
6. Your website
Your website is another highly recommended coupon placement spot. Here are some site components that you can use for effective coupon distribution:
- Sales landing pages – you can create a landing page for all the promotions and sales you are publicly running at the moment. You can combine them with a sales category that displays all the discounted products.
- Banners & ribbons – you can place coupon codes on website banners, for example on the main page or a category page or even on the product page. To have them placed throughout the website and always visible, you can add them on the website top ribbon. They will be always at hand, even in the basket or checkout view, which will make the deal redeemed more often and will decrease the customer churn caused by people who leave the basket to search for discounts.
- Footer – you can place your discount coupons in the website footer, it works well for newsletter subscription incentives. You can also add a link to the promotion terms and conditions there.
- Cart view – this one is a bit controversial as it has both benefits and drawbacks. If you place your discount vouchers straight in the basket view (for example, as a dropdown list), you can burn your marketing budget as customers who would have bought anyway, may use the coupon and pay less. On the other hand, you can close more purchases because unconvinced customers can be convinced to place their order if they see a discount offered (especially a time-limited discount) and you can decrease the basket abandonment rate as customers won’t drift off to look for better deals.
- Digital wallets – you can offer customer cockpits for logged-in customers that display all their rewards and incentives, for example, loyalty points, gift card balance, offers, discount vouchers, together with their conditions and validity dates. This offers clarity and helps customers to have an overview of what they can use for their next purchase, especially if you offer many incentives.
- Pop-ups – website and mobile pop-ups are a very visible placement to use for your coupon distribution. However, they can be considered intrusive, as they cover the content the user wants to access. Moreover, the coupons cannot be easily found again once the pop-up disappears. Therefore, we do not recommend a pop-up for discount coupon placement, unless it is an additional placement and the discount coupon is always visible on the main page, website ribbon, in the basket, or other permanent placement.
7. Physical placements
If you are going to offer printed coupon codes, here are some ideas for placements you can use:
- Printed codes – you can distribute printed coupons either by sending them by post, placing them in your store (for example, at the checkout counter), having them distributed by stewardesses or other employees in your physical store. You can also attach them as hand-made messages to your deliveries.
- Newspapers – you can syndicate your promotional content to newspapers or pay for paid advertisements in the newspapers. There are plenty of formats, from small banners to full-pagers or even leaflets attached to the newspaper. If there are national sales events (Black Friday in the US, Glamour Napok in Hungary, etc.), often newspapers or magazines have a special section with coupons. Even people who never buy newspapers or magazines shop for them on that occasion so placing your (even online!) coupons there may be a good idea.
- Physical banners – if you want to gain some offline visibility, there are plenty of options. From billboards, road-side banners, banners on airports, prints on tramways or buses to posters hanging in venues, there is a lot to choose from. Choose whatever can reach your audience best, not what can reach the most people (that can be expensive and inefficient).
- Leaflets – you can include your coupons in your leaflets or newspapers if you issue any. For example, if you send a monthly newspaper with discounted products, new products, etc., or a magazine, you can include the coupons there.
- Labels & price tags – you can add the coupons to the labels or price tags, either in-store or online. Online, you could place the coupon next to the price tag, so that customers know there is an available promotion. Make sure the promotion conditions are visible, too.
8. Mass media
Television, radio, cinema and Netflix, HBO, Hulu, etc. Lots of people still watch cable television and even more watch streaming channels or listen to the radio (or Spotify). Those are great ways to advertise your promotion. Remember to make your discount code very short and easy to remember if you want to place it in such an advertisement as your viewers will probably not be able to note it down. It is best if, in addition to this ad, you will place your discount on your main page just in case someone remembers only your company name and looks up the discount online. The same goes for brick and mortar establishments – hang the poster on your front display if you advertise it in mass media, to make it easy for people to find if they did not memorize the code.
Each of these channels can be a good choice, but only when combined together can they really work great. Whatever channels you decide to use, keep in mind that people strive for a genuinely omnichannel experience these days. It means they want a seamless journey when changing from online to offline mode. The way you sync your online coupon marketing with the in-store/offline experience decides its final efficiency and results.
How to design your coupon code ads (placements)?
Coupon ads design is an important part of your coupon marketing strategy. There are four steps to designing coupon ads that convert:
- The coupon ad design should catch attention.
- You should provide an expiration date for the promotion. Short time frames convert better than longer ones as they create a sense of urgency and FOMO.
- Write clear and concise messages. If your promotion sounds complicated, fewer people will use it.
- Design a tempting call to action, for example, “Claim your deal” or “Save money now”.
Learn more: How to design the best UX for coupon codes?
Here are some real examples of eye-catching online coupons:
How to manage coupon campaigns?
The technology stack is the base of your coupon marketing strategy. You can start with a simple coupon software that allows you to create a coupon campaign with limited options. You can even start by generating a list of randomized codes and setting them up in your pricing software as coupon codes that will generate a simple discount, let’s say $20 off. When it starts to become more complicated is if you want to, for example:
- Scale your campaign.
- Trigger the coupon distribution and assignment based on certain events.
- Limit your campaign further and create complex scenarios.
- Connect the coupon software to other software applications.
- Personalize your promotions.
- Track and A/B test your campaigns.
- Manage other types of campaigns (loyalty programs, referral programs, gift card campaigns, giveaways, or cart promotions) and combine or stack campaigns.
In that case, you will need a more advanced voucher management system.
Having a specialized coupon management system will save your developers a lot of time and resources as well as cut your time-to-market, as compared to using a limited coupon software or developing a custom solution. If you are considering whether to build or buy a coupon management system you can read our blog post that compares these two options.
What a good coupon management system should have?
1. Support for many campaign types
You should be able to launch various campaigns from one promotion management software, to be able to manage them in one place, and to combine and stack various types of promotions. You should have the option to launch discount coupons, cart promotions, gift cards, referral, and loyalty programs from one software.
2. Advanced campaign customization
You should be able to create customer segmentation, the campaign rules and limits based on any data. This will allow for personalization once you connect all of your data sources.
3. Redemption validation mechanism
Your coupon management software should check if a customer profile and current context are eligible for a discount. It should also save the details about successful or failed redemptions and potentially notify you if fraudulent behavior is detected. You should be able to connect the redemption process with every customer touchpoint easily, to make the promotions truly omnichannel.
4. Redemption rollback mechanism
You should have an option to cancel a redemption if it was granted to a non-eligible customer.
5. Customer data import or CRM integration
To personalize the promotions you will need to have the customer data reachable from your voucher management software. You can either import the relevant information or connect the two systems: coupon management software and your CRM system. The connection with CRM is crucial for running the campaigns and reporting on their outcomes.
6. Customer segmentation
To personalize or better target your promotions, you should be able to create customer segments, both static and dynamic.
7. Campaign limits
You need to be able to set up who is eligible for which promotion and in what context. To get truly creative, you would need the flexibility to create validation rules based on the:
- Order structure & volume
- Budget constraints
- Customer location & device
- Purchase history & in-store activity
- Redemption history
- Marketing permissions
- Custom attributes (metadata)
You should be able to mix different validation rules to create more targeted campaigns and protect yourself from unnecessary spending or fraud.
Your coupon management software should let you control the promotion budget by setting up safety limits that automatically deactivate your promotion. It should be possible to set budget constraints based on:
- Total discounted amount
- Total orders value
- Total number of redemptions
- Total redeemed gift amount
- Redemptions per customer
- Redemptions per customer in a campaign
- Redemptions per customer per day
- Campaign timeframe
8. Customer cockpits
You should be able to pull the data from your coupon management system to create customer cockpits where your customers would see all their rewards and incentives from all campaigns you are running. This will take the heat off customer support agents by helping the customers to self-serve.
9. Landing pages creator
A landing pages creator that creates responsive website pages is nice to have. Landing pages creator speeds up greatly time-to-market and let marketers create the campaigns by themselves. It should contain a couple of page templates, reusable widgets, and e-mail collection forms. It should have branding possibilities.
10. Branding options
You should be able to add your branding to the landing pages, messages, and customer cockpits. If you want to fully customize your front-end, you should look for a promotion engine that provides purely back-end functionality and can easily connect to any front-end. This is the case with API-first promotion engines. If you want to use built-in front-end capabilities, for example, email designer, landing pages designer, make sure these are customizable.
11. Omnichannel & automated distribution
To engage customers in the right context and at the right time, you should be able to distribute your coupons omnichannel to all possible existing and future channels. If you can manage your coupon campaigns and distribute them from one place, it will help you to distribute them faster and to maintain messaging and data coherence across platforms.
You should be able to automate the incentive delivery, for example, based on some triggers, like a customer entering a specific segment or performing a specific action on your website.
12. Bulk updates
To make your work more efficient, you might want to have a possibility of creating bulk updates – changing or deactivating multiple vouchers or promotion tiers, uploading customers or products in bulk.
13. Self-service marketer-friendly dashboard
Having a campaign editor that can be used by marketers without the need to program each campaign is a must.
Marketers, sales and Customer Service Agents should be able to, for example:
- Find and deactivate a single coupon.
- Check the single user view to see the customer’s history.
- Quickly change the promotion mechanism in response to any legal requirements or competitor landscape.
- Double-check the validation mechanism in case of a customer complaint.
- Return the money to a gift card in case of reimbursement.
- Launch a flash sale in a couple of clicks to meet the daily turnaround goal.
14. Role-based access control
Your coupon management software should let you establish roles and access flow for your team members to prevent any unauthorized changes. Team members from customer service shouldn’t be able to launch new campaigns, but they should assign an “apologize” coupon for a customer. Junior marketers shouldn’t be able to give 50% off discounts for the whole inventory, but they should be able to compile a performance report from A/B tested campaigns. You should be able to create specific read/write, read-only, no-access permissions for every team member or partner.
15. Tracking and reporting
You should be able to get some insights into the performance of existing campaigns so that you can plan the next ones better. The most efficient solution is to let your marketers track any promotional campaign without wasting developers’ time. Therefore, your coupon management software should have built-in tracking that does not require a set-up done for each campaign.
16. Training and documentation
Make sure that your coupon management software has an up-to-date, understandable manual so that your employees/colleagues can use it as self-service.
17. Compliance with legal requirements
One of the important things you should keep in mind is involving the legal department in making sure the data storage, processing, and all consents they collect are compliant with the local laws. Keep in mind that they might not be the laws that apply to your company based on your location but the laws of the countries where your customers are located. This might be very complex if you have an international business online, with many customers coming from different countries.
A couple of topics to be on top of:
- Unfair and deceptive trade practices.
- Having an expiration date on gift cards might be prohibited in some countries/states.
- Privacy and data security – many countries have different rules on data storage and processing.
- Tax implications.
18. Reduce the maintenance and running costs to the minimum
Developers’ time is not cheap. There are a lot of more important projects in your backlog than simple changes to the promotions, which could b potentially done by your Marketing or Sales departments. You should ensure that the solution you implement will reduce maintenance and running costs to the minimum.
The best way to do that is to go for an API-first solution. API-based coupon management software will make implementing all the previously mentioned features faster and cheaper as well as allow for plenty of customization.
How to optimize your coupon marketing strategy?
There are a couple of ways to optimize your coupon marketing strategy. Most of them are based on trial and error and require you to measure the results, so implementing tracking is the basis for it. There are two main approaches to optimizing coupon campaigns:
1. Launch smaller campaign experiments
Doing a test run with smaller segments can help you determine which strategies are the most effective. This can also help to keep you from offering a discount that is too big and cuts into your profits.In the beginning, you could run small campaigns with diversified parameters, such as discount value, type, and duration. You must be patient and aware that it will take some time and numerous experiments to figure out what works best for your business.
2. Run A/B tests
This one is more complicated as it requires dedicated software that would show different campaigns to different people in a randomized manner. On the other hand, the results are more straightforward and obtained in a more reliable way than if you were just launching small experiments. If you have or can pay for software that allows you to A/B test your campaigns, we believe this is the best way to optimize your campaigns.
A great coupon marketing strategy requires a comprehensive coupon management system that can be connected with various data sources and distribution channels. It should also enable launching personalized and easily manageable promotions at scale.
Coupon management software is the basis for launching effective coupon campaigns. You should start with planning your requirements, finding the right software, and then launching and optimizing your campaigns. We hope this guide helps you go through all the phases from planning to implementation of your next successful coupon campaign.
Create personalized coupon campaigns in no time