Coupon codes can boost sales in your online store

Published on September 22, 2014 Coupon codes can boost sales in your online store

Coupon codes can be a very effective strategy for increasing sales in your online store. Coupons tap into the psychology of bargain hunting and can help encourage a potential purchaser to make a purchase, even if they had previously abandoned their cart.

Here are some of the ways that they can be used effectively in your online store.

Rewarding loyal customers

If you build a loyal following of repeat purchasers this will lower your costs of marketing to new customers, improve customer satisfaction and increase revenue. An unadvertised proactively sent coupon to loyal repeat customers can help build loyalty because it makes those customers feel special relative to the general customer base who buy from you (they are getting something that is not advertised). Personalised coupon codes can enhance this feeling of exclusivity even further.

The coupon needs to be of an appropriate size to ensure that the customer feels they are getting more than just a token discount, but does not need to be excessive. The coupon code might also be a discount off their delivery/postage costs rather than a discount off the products. It could even be a coupon that has no dollar value, but when entered gives the buyer a free upgrade to Express Postage.

You will need to work out what makes sense for the products that you sell and the costs that you have to send items out to your customers, and at what threshold it applies. You might offer better discounts to more loyal customers based on total spend over previous orders for example.

When using discounts coupons make sure that your coupons have an Expiry date – to encourage action by a particular time, and prevent long-forgotten coupons from being used with other promotions and you losing money on an offer or sale.

Rewarding your Facebook or social media community

Publishing your coupon codes on your Facebook site or on your Twitter feed can encourage a loyal following on social media – in a similar way to how you can make your loyal return customers feel special, offering coupons only on your Facebook page rewards your followers on Facebook and is more likely to increase sales and conversions.

To restrict the coupon to your Facebook fans, you can use a Facebook app to make a page on your Facebook page and then block access to it with a “Like Gate” (which is a piece of software to protect a page from visitors unless they have Liked your account on Facebook).

Encouraging up-selling

Coupons can be used to encourage the purchase of a greater bundle of goods, by applying a minimum qualifying spend (for example “spend over $50 and get 20% off your entire purchase using the code XYZ20”). Alternatively, a coupon can be applied only for a particular product so that the customer must put a more expensive or higher margin item into the cart to qualify for the coupon (for example “get 20% off our Deluxe package).

Encouraging first time buyers

One way to use coupons to encourage first time buyers is to create coupons and advertise them on coupon-code websites. When making a purchase, bargain-hunters will frequently search for a coupon code on one of these sites before ordering. The likelihood of this happening increases as the size of the potential order increases.

Managing Abandoned carts

Coupon codes can be used to encourage customers to complete a purchase when they had previously put items into their cart, signed up an account but did not finish their order. A coupon that arrives in the email box of a potential buyer reminding them of the items they had purchased and providing them with a coupon to give them a discount can help encourage them to reconsider their purchase.

The danger in using coupons for abandoned cart management is that you encourage potential new buyers, and particularly repeat buyers, to deliberately abandon their carts in order to obtain discounts. This encourages a discount mentality in the minds of your buyers which can be hard to break as your business grows, as customers come to expect or wait for discounts to make purchases. Coupon codes should therefore be used sparingly as a strategy to deal with abandoned carts rather than being sent out automatically by your shopping cart software.

When coupons can go wrong

Coupon codes can work against your online business instead of for it in some situations. These include:

• If potential customers perceive that your products are over-priced and that the coupon code is just bringing your prices into line with everyone else.
• If you over-use discount codes your customers might come to expect a discount or discount coupon as their right. This can lead to the effect where they will not purchase from your store unless they have a discount.
• If you are selling a unique or premium product in an environment that has little competition. In those situations, offering discounts could lower your revenue from sales without stimulating additional sales – because customers would have purchased your item anyway. If you are selling high value goods then a small discount may not be as effective as other things bundled with the products – like giveaways or bonuses (e.g. a free extended warranty for an extra year(s)).

Coupons can be very effective

Discount coupons can be a very effective marketing tool if they are carefully planned. They are most effective when you understand what you are using them for, you have considered whether your discounts will be of a sufficient size to generate additional sales or loyalty, you have considered the costs of running your discount, and you understand the buying behaviour of your customers.