Small businesses that sell products online are constantly looking for new ways to bring in more clients, sell more products, and keep customers happy. As an ecommerce company, do coupons help small businesses or do they hurt them?

The new norm of buying online with coupons

People who shop online, whether they’re looking for a commodity item or a specialty product, are always looking for a deal. While offering coupons or discount codes used to be used sparingly, shoppers are now inundated with codes and coupons from sites looking to keep a shopper from abandoning their cart, increase their purchase amount, or bring them to the site in the first place. Savvy shoppers know this is the new norm of buying online and have come to expect a discount code or other offer when buying online. To illustrate the point, consider this: 65% of buyers say online voucher codes frequently influence their buying choices in the event that they are undecided.

Deciding how and when to use discount codes for your marketing efforts

how and when to use discount codesUnderstanding the prevalence of discount expectations, small business marketers may simply give in to the new norm and offer codes. This may or may not be the best strategy. There are a few items to consider if your business is going to use vouchers or discount codes:

  • What are you trying to accomplish?
  • Who will this discount be for?
  • What is your margin to allow for discounts?
  • How will you track discounts?

Seems simple enough, right? Let’s look at each one individually.

What are you trying to accomplish by offering a discount?

At the beginning of this article, we briefly listed a few reasons why online retailers offer discounts to shoppers. Here’s a more expanded list:

  • Attract people to buy in the first place (gain new customers)
  • Reward repeat buyers (customer loyalty)
  • Increase purchases (amount per transaction)
  • Cross-sell products (product awareness)
  • Entice shoppers to complete the purchase (avoid cart abandonment)

If you’re going to offer coupon codes, determine the reason for each code so that you can create an offer specially designed for that intent. New customers may need a fairly significant discount or perk to bring them to your site in the first place. Rewarding loyal customers is great only if the reward suits the customer’s interest in the first place. Looking to increase the purchase amount per transaction? Maybe a buy 2, get one free is a good offer or the infamous free shipping over a certain sale amount. Want to introduce customers to a new product?  You could offer that second, different product at a discounted price when bundled with another product. And of course, the most dreaded online retainer situation:  cart abandonment. If someone has gone through the trouble of filling up their cart only to abandon it, what will it take to make them stay and complete the purchase? You need to think of all of these items as you create an offer.

Who will this discount be for?

You should create different discounts for different people that you’re targeting. Brand new customers should get a completely different enticement than your loyal purchasers. Nothing turns off loyal customers more than knowing they are getting a lesser deal than brand new customers. Repeat customers remain a business’s best and steadiest source of revenue. It’s a fine balance, and one small business owners need to consider when creating codes. And don’t forget about referrals! Referrals have a higher close rate for sales than a cold lead, so if a happy customer refers someone to you, reward the referrer and maybe the referred client too. The power of referrals for small business owners can’t be emphasized enough: referrals are one of the best ways small business owners can grow their business. This is especially true for online retailers.

What is your margin to allow for discounts?

Before you offer any discount for any product to anyone, you need to understand your margins. While some retailers will purposely offer “loss leaders” to bring people to their site, many small businesses may not have that luxury. Have a very good understanding of what your costs are and how much you can discount and still see a profit. Don’t make the discount so large that you lose money.

How will you track discounts?

Marketers understand that they can’t lean on any one marketing tactic. You need a good mix of tactics in your overall marketing strategy and then you need to measure to see which works, and which is a dud. To do that, you need to track your discount codes. The easiest way to do that is to create different codes for different tactics. Offering a new customer a 20% discount on Instagram? Use the code NEWINSTA20 or something similar. Giving a $10 off code to someone for a referral?  REFER10.  Platforms such as WordPress, Shopify, SquareSpace and WooCommerce all have plugins that help create and track codes. Be sure to use them!

More things to consider before offering a discount code or coupon

Here are a few final thoughts to consider before launching a discount code or coupon campaign as part of your marketing efforts:

  • Test your codes first – seems obvious, but once you create a code before you publish it or share it, test it and make sure it works.
  • Be strategic in when your codes are offered – holidays and paydays are popular times for shoppers; coordinate your codes with them.
  • Test and measure often – are you seeing a lift in sales when you offer 10% off?  Or are you seeing more from a free shipping offer? Rotate your offers, track what works, and toss out the codes that aren’t getting results.
  • Don’t forget a call to action – put a time limit on your code, state supplies are limited, or put some other strong call to action for best results.

Vouchers, discounts, and coupons help small businesses online when used correctly. Not sure how to implement a coupon strategy?  Find a small business marketing consultant that specialized in e-commerce to help create a program that will work for you.

Patty Hughes
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