Zalando Marketing Strategy Case Study – Coupon-based Promotions
The role of coupon software in building international success or Zalando's case study.
Zalando Marketing Strategy Case Study – Coupon-based Promotions
Have you ever wondered how Zalando run their coupon campaigns? Have you ever wondered what it takes to roll-out and manage promotions across dozens of channels on this scale? Well, instead of wondering, read on.
Since the first paper coupons appeared in 1887, their value has been increased immensely. Nowadays, over 90% of American people claim that every week they do their shopping with discount coupons. One of the biggest European e-commerce companies which has mastered coupons is Zalando. We’ve investigated over 100 of their coupon campaigns from the last couple of months to better understand their coupon offers and what makes them tick.
Understand your target shoppers
To create a successful campaign, a coupon must match customer needs. How do you make sure your marketing team comes up with coupon deals that have good customer fit? There’s no silver bullet answer, you have to continuously adjust them to their expectations. And you can only do that by efficient customer tracking and profound analysis of their behavior.
One of Zalando’s ways of doing this is A/B testing of coupon variants. How does that work you ask? They launch multiple campaigns with various attributes at the same time and just compare the results. This includes testing different coupon features like the discount value, minimum amount to spend, expiry date etc., etc., as well as different segments like locations, marketing channels, gender, or age.
The way it works is that they first roll out to a small customer segment to figure out what converts best. Then, they expand the campaign country- or channel-wide.
Thanks to this approach, they know which products are the most desired and which types of discounts would bring the greatest yield. Next, Zalando applies their insights to future campaigns to become ever closer and closer to customer needs.
Running such kinds of coupon experiments is a cautious way to increase their chances of appealing to customer tastes. Moreover, it also helps Zalando find a balance between campaign profit and costs.
Fixed or unique codes?
Another issue which needs to be faced at the very beginning of creating any coupon strategy is the campaign type. Why is it so significant? Because it influences how the above-mentioned customer tracking works. Zalando uses unique and fixed code campaigns and, obviously, this is no coincidence.
Fixed code campaigns can be promoted easily and they’re perfect for increasing brand awareness or attracting the attention of many potential customers. Meanwhile, unique codes are good for customer tracking and controlling of the promotion effectiveness. On top of that, a unique code allows you to reduce coupon code misuse and deliver more details about the customer. They are a veritable mine of priceless marketing knowledge.
Finally, thanks to their coupon software, Zalando can monitor all campaigns across all channels which lets them focus on those yielding the best number of redemptions.
The power of the local
Zalando knows that expansion into new markets requires wide-ranging distribution. With the support of local channels, they are able to spread their coupons and reach tons of potential customers. To implement this strategy, Zalando taps into well-positioned marketing companies. For example, Zalando collaborates with affiliates like online coupon platforms such as picordi or alerabat.pl. The cooperation is straightforward; the affiliates are rewarded proportionally to their performance.
Of course, there’s more to it. Other local marketing tactics include:
- Attaching fixed-code coupons to ads in mainstream websites and printed media
- Joint deals with other brands, e.g. buy a washing machine to get a gift card code
- Social channels - Zalando uses their country-specific social channels to promote different coupons for different audiences
As you can imagine, the number of local marketing channels is huge. Tapping into this, Zalando can attract more viewers and eventually turn them into buyers. The key thing is to be able to track coupon popularity and conversion rate per location. Having such tracking machinery in place, they can:
- use a mixture of short- and long-running A/B tests,
- figure out what’s best for the local segments,
- attribute ROI to a particular channel.
Adding all this up, they can ultimately outperform the competition.
Tweaking your incentives
The Zalando team knows that drawing attention with a coupon is only halfway to the redemption and final purchase. They need to convince the indecisive and persuade the hesitant. How? One of the most common tricks to push customers to redeem is to set an expiry date on the coupon code. Creating this sense of urgency makes customers more determined and allows you to reduce the number of abandoned coupons.
Another way of making the code more engaging is to introduce cart-based limits. For example, let’s imagine you could create a coupon valid only if the total amount is greater than some other value e.g. estimated average order value. You might think this sounds like a nice incentive for upselling. And you’re right, Zalando uses it all the time.
But again, they don’t forget about experimenting and marketing personalization, they come up with different price tags for different campaigns, locations, or segments. Testing, testing, testing.
Zalando also found yet another way to increase the order amount through coupons: product-based upselling. One way to achieve this is to remind the customer about other items that he or she may be interested in while they browse the shop. But Zalando does more. They issue coupon campaigns which work only if the cart has specific categories or event specific products in it, e.g. 10% for women’s shoes or $20 for Nike Air Max.
Imagine the possibilities if they could mix these 2 upselling tactics in a single coupon campaign. They can:
Zalando’s coupon strategy is full of life throughout the year. By rolling out dozens of short-term, diversified and personalized campaigns often, they have gained a large group of followers who visit the online platforms to find a coupon for the shoes they’ve been dreaming of.
By being able to schedule future coupon campaigns ahead of time, Zalando can plan a promotional calendar full of personalized incentives. The calendar isn’t limited to Black Friday and the Christmas period but also for national holidays, sports events, or local festivals like Oktoberfest - you name it.
Moreover, in the unlikely event of running out of ideas, they can partner up with any local or global brands to come up with countless other mutually beneficial deals throughout the year. E.g. they can run a coupon campaign dedicated only to their partner’s employees.
How can Zalando share coupons through so many channels and still make sure they’re not misused? Again, their coupon software takes care of this. How? With these 3 things:
- Redemption limit - e.g. fixed codes like Christmas2016 can be used 20,000 times and then they automatically become invalid.
- The code can be redeemed once per customer.
- Different coupon codes cannot be mixed in a single order (As you’ll learn in the next post, they can be combined with gift cards, though).
It’s a powerful tactic which lets Zalando precisely estimate the total number of redemptions. Plus, they don’t have to worry that widely advertised public coupons will lead to coupon fraud and eventually generate substantial loss to the business.
Likewise, Zalando keeps unique coupon campaigns under control too. Despite the fact that unique codes cannot be misused as easily, there’s still a need to keep an eye on their performance. The key thing is to limit the number of codes which belong to a single campaign. One of the reasons to do so is to control affiliates. This is important because of the commission Zalando pays them every month.
That's not all
As you can see, Zalando has taken promotional campaigns to the next level. This is only possible because they invested in creating maintainable and trackable coupon software.
To recap, their tactics include:
- Coupon campaign A/B testing and monitoring
- Using fixed code and unique codes campaigns
- Experimenting with coupon parameters: discount value, expiry date, number of redemptions, amount, and percentage type
- Coupon upselling with minimal order amount and discounts only valid for particular products
- Scheduling coupon campaigns with a given time-window for the whole year
- Affiliate partnership with online coupon platforms and other local vendors
- Launching campaigns only for particular customer segments (employees of company, students etc.)
And by looking at their scale, we’re sure they have it fully automated, otherwise, they would lose big time due to the coupon fraud.
But they’re not done here yet. We’ve only described the tip of the promotional iceberg in this post.
When you visit any Zalando website, you can spot this:
What we haven’t written about is a whole new set of coupon tactics that can run once they capture your email. These tactics allow for more personalized, more trackable, and ultimately more profitable coupon marketing.
Finally, Zalando mastered gift cards too. But we will discuss that next time.
Do you to streamline your coupon campaign like Zalando?