Promotional codes are alphanumeric strings that online stores offer to encourage purchases on their website and are typically associated with an overarching promotional marketing strategy. The discount associated with a promo code can apply to individual products or an entire order.
The discount can either be a percentage or a specific dollar amount. Promo codes also provide customers with free shipping or gift-wrapping. This marketing strategy essentially gives customers yet another reason to buy your products.
According to Microsoft, a promotional code, sometimes known as coupon code or discount code, is made up of a combination of numbers and letters. It's used for specific purposes, such as a holiday marketing campaign.
When a store issues promotional codes, they're providing customers with an incentive to buy, which benefits both the customer and the business. Customers get the products they want for a lower price, and the ecommerce store generates revenue. One of the most useful things about promotional codes is that they work well with both new and returning customers. These incentives even have a direct impact on the overall shopping experience, according to research conducted by the Center for Neuroeconomics Studies at Claremont Graduate University.
"Getting a coupon, as hard as it is to believe, is physically shown to be more enjoyable than getting a gift," said Paul J. Zak, director of the Center for Neuroeconomics Studies at Claremont Graduate University.
The study showed that people who received promotional codes had heightened levels of oxytocin, which is a hormone that creates feelings of happiness. With that very physical reaction in the minds of your prospective customers, it's a smart idea to experiment with incorporating promotional codes into your blog business plan regardless of how you're monetizing your website.
Promotional codes are an effective way to track your marketing efforts to see which platforms are generating the most traffic or leading to conversions, according to Inc. magazine. Store owners can track their efforts by attaching a certain promo code to a specific marketing campaign or advertisement. Different codes can trigger the same discount, so you don't have to create a different discount for every advertisement. You just need a new promo code. For example, you could create slightly different codes (SaleFB, SaleTW, SalePT) so that any ads or marketing efforts on Facebook, Twitter and Pinterest have unique, platform-specific promotional codes, according to Inc.
Assigning specific numbers and letters to a certain ad is particularly helpful if a customer sees the promotion advertised in an email or on social media but doesn't click through immediately to follow through on the promotion. You'll still be able to capture and analyze the ROI of advertising on that platform because by entering the tailored promotion code, the customer is also telling you where he or she saw the sale advertised.
When a customer enters a promotion code during the checkout process, the store confirms that all conditions of the promotion are satisfied before validation. If the promotion code offers 20 percent off shopping carts of $200 or more, for instance, the code will not work if the minimum threshold hasn't been met. You can also tailor the requirements to exclude certain brands or products.
Depending on your site, you may be able to allow customers to enter multiple promotion codes or limit customers to using only one code. While deciding how many codes a customer is allowed to use is up to you, it's important to ensure the transaction is still profitable for you no matter what combination of codes are used.
There are three different types of promotional codes store owners can choose from.
Public codes Anyone can see or use a public promo code. These are useful for enticing new customers and encouraging previous shoppers to come back for more.
Private codes Stores use private codes to target a specific group of people. Commonly provided to loyal customers for special shopping opportunities, such as first-time shoppers, private codes are a good way to bring in new customers.
Restricted codes A code that is restricted is targeted to a single user and can only be used once. For instance, you might send a customer a restricted code as an apology for a delayed shipment or as a thank-you for making their 50th purchase with your site.
In most cases, it's best to utilize all three types of promotional codes on your site. This will ensure that you're connecting and providing a wide variety of customers with a reason to make purchases.
Are coupon codes worth your time? 80% of consumers are more likely to shop from a new brand if it provides a discount coupon, and that number jumps to 89% for millennials.So, yes, in short, coupon codes are an effective marketing tactic...But there’s a caveat.While coupon codes are desirable from a consumer’s perspective, there are numerous downfalls to this marketing tactic that can have an ill effect on your brand.I put together this article to help you weigh up the pros and cons of coupon codes and make an informed decision about whether they are right for you.
Let’s start with the positive side of things - the pros.As I mentioned in the introduction, coupon codes are extremely popular with consumers, especially in the eCommerce industry. They’re also an excellent way for brands to engage new audiences, re-engage stagnant customer groups, and create a spike in sales.Here are the pros of using coupon codes:
Consumers are naturally pessimistic and distrust brands before purchasing from them. Building enough trust with a prospect to convert them into a customer can be time-consuming and costly.Discount coupon codes can accelerate the conversion process by reducing the perceived financial risk of transacting with your business. They also tap into buyer psychology by creating a feeling that the customer is getting a good deal.For example, here is a coupon email from Ugmonk that offers new prospects a 15% discount on their first order if they make it within 48 hours. The code is unique and expires automatically, which is a smart use of urgency to inspire action.
Ugmonk Coupon Code ExampleDepending on where you distribute your coupon codes, they can also generate traffic from untapped sources you may have never thought of. For example, there are numerous coupon listing sites, and people often share coupons with friends and family on social media. This new traffic further contributes to the conversion of prospects into new customers.You may also find that new customers purchase other non-discounted products or services from your business, creating an ancillary revenue stream from the coupons at a higher margin. In fact, 38% of couponers buy something they don’t need.All-in-all, coupon codes are a great way of attracting new customers and increasing revenue in the business. However, that comes with complications… more on this in the cons section of the article.
Coupon codes also provide your brand with a competitive advantage. If you compete on price with other businesses in your industry, a coupon code could be the difference between a sale and someone shopping elsewhere.You can use a coupon code strategy to gain market share in a highly competitive industry quickly. You’re undercutting your margins to draw shoppers away from your competitors and hold onto them in the long-term.The lifetime value of the customer subsidizes the short-term loss of profit. If, of course, you provide a high-quality product and a great experience.
It’s much easier to convince a happy customer to buy from you again than it is to build trust with a complete stranger. However, it’s also very common for a customer-to-brand relationship to be a standalone transaction that results in no further interactions.Finding ways to re-engage with your customers is critical because all of the hard work has already been done. They are your most profitable forms of conversion.One way to do so is by sending current customers an exclusive coupon code. You may choose to send this to cold contacts who haven’t purchased in a while or use it as a tool to reward loyal customers. Either way, it is a smart way of re-engaging and creating new buying opportunities for customers.This email from Marley Spoon illustrates how coupons can be used as a way of re-engaging cold customers:
Marley Spoon Coupon Code Example
Data is all the rage at the moment, and from a marketing perspective, it’s not surprising. 80% of online shoppers are more likely to buy from a company that offers a personalized customer experience - data enables you to provide that personalization.If generated as unique codes, coupons enable you to track their redemption and each user's behavior. This information will help you personalize the marketing experience for each individual in the future by using data about which topics and products interest them.
Coupon codes are often used as a means of tracking brand ambassador or influencer campaigns. Not only can you personalize the experience for each influencer or affiliate, but you can also trace all code redemptions back to the source and determine an ROI from the campaign. You’ll also find that influencers like to offer their audience something that is at least perceived to be exclusive.This is a tactic regularly used in TV or outdoor advertising, too, where a campaign-specific coupon is generated to help brands track conversions.
At face value, coupon codes sound like a no-brainer - especially if you're trying to grow market share or generate a spike in revenue. But there are also several vital downsides you need to be aware of.Here are the cons of using coupon codes:
The most obvious con to using coupon codes is that they cut into your profit margins. Depending on what you sell and how tight your margins are, this can result in minimal profit or, in some cases, a loss.When you take into account advertising and promotion costs, as well as operational costs such as shipping and handling, from a purely financial standpoint, coupon codes don't make a lot of sense. That is unless your site and follow-up marketing are well-optimized for up-sells, cross-sells, and ancillary revenue so that the lifetime value of a coupon customer makes the investment worthwhile.
On top of the financial hit you may take in the short-term, coupon codes can also have an unwanted effect on your product or service's value perception. Simply put, if someone pays less for a product once, they're unlikely to want to pay more for that same product in the future.The perceived value of your offering is now less than what it retails for, meaning that you could fall into the trap of always discounting products to get sales. This cannibalizes revenue in the future and creates an expectation from your customers that discounting is normal. The trick to overcoming this challenge is to run coupon campaigns and provide discounts infrequently so that customers don't get used to it.
Coupons are synonymous with fraud. If you choose a generic coupon for a campaign, anyone and everyone could guess it without meeting the redemption criteria, such as giving you their contact details. You may also find that the same person uses the code over and over again under different aliases.
Single-use vs generic coupon codeNow, while you want a coupon campaign to be shared with friends and family, you don't want a situation where thousands of people are getting discounts without providing data you can use in the future. It's also concerning when coupons are listed on coupon sites and other online forums without your knowledge because once it's out on the world wide web, you lose control of your brand reputation.Single-use coupon codes that are automatically personalized for each person can overcome this challenge.
So, are coupon codes good or bad?Considering the pros and cons mentioned in this article, the appropriate use of coupon codes is not a simple argument.For some brands, they simply won’t make sense. But for others, they can be the lifeblood of a successful marketing campaign.If you're planning a coupon campaign, I'd strongly advise using unique codes rather than generic codes that anyone can use or distribute. A unique code is designed for single-use, which means that every user has their own code, and it can't be re-used or duplicated.Of course, creating so many codes for a campaign requires technology! ShortStack’s Prize Manager makes the setup simple and intuitive.
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