Marketers have come to rely on discounts to spur purchases on, but poor coupon management eats into margins and trains customers to wait or shop around. According to eMarketer, 57% of mobile smartphone users will use a mobile coupon, and 53% of tablet users will regularly use mobile coupons to make purchases. Retailers beware! There is a fine line between discounts being used as a promotional tool and as a crutch.
Smart marketers care about brand perception and know site-wide discounts needlessly risk long-term profitability for short-term revenue gains. Personalizing the experience for every customer will help your promotions stand out, drive conversions, and boost your bottom line.
Instead of continuing to offer your consumers promotions for the sake of promotions, your focus should be on understanding the impact of your discounting strategy. Until you do a deep discount analysis of your incentives, you’ll never be able to fully determine how much money you are needlessly giving away. Retailers need to start focusing on their discounts and put together a plan to track and test incentives and redemptions.
Segment, Test, and Track
To determine how your discounts are working across your customers, begin segmenting your consumers. Create segments made up of non-purchasers, one-time purchasers, and repeat-purchasers. You can also do this with a variety of other variables and combinations, such as by customer AOV, time since last purchase, and gender to name a few.
When sending emails, send your current promotional messages to these segments. Measuring the performance of these discounts will help you get a better view of the conversion effectiveness. Even if you are not testing different incentives, knowing how your current customers are redeeming coupons can provide insight into what to test later. The same principles apply to any social ads you may run.
Knowing how your coupons are being applied across different segments gives you general baselines to measure against. Once you feel confident in how these different segments are responding, it’s time to begin testing incentives.
Create multiple incentives and test into each of these segments. You may find out that 10% off performs better than 15% off, or that 15% off performs better than 20%. Maybe you will find out a small discount with a higher minimum spend threshold performs the best. Whatever the case, you’ll get a clearer view of how your customers respond which will help protect margins.
Moving in the Right Direction
Knowing you don’t need to give away the bank to acquire sales can impact many parts of your marketing strategy, such as website email or SMS acquisition, paid search, social ads, and (of course) email marketing strategy. For emails, discounting smarter in not only your day-to-day promotional messages but your automated messages can have a meaningful impact.
For example, if you know X incentive can acquire and convert new email subscribers at a higher rate, your email acquisition strategy can be adjusted to meet this. If you discover that men are more likely to purchase with slightly deeper discounts while women are focused more on style and respond better to shipping speed, the welcome message discount can be adjusted based on the corresponding product pages where the new subscriber was acquired from.
Discounting smarter from the onset can help set expectations for your consumers. This will allow you to discount less, or not at all, in day-to-day emails and other automated messages like post purchase or cart abandonment messages. This will allow your brand to home in on what separates it from competitors, like customer service and other brand values.
Ultimately, understanding what your audience responds to allows you to apply these practices across your online marketing channels. By reducing the reliance on heavy discounts to drive sales, you’ll be able to provide consumers with what they have come to expect (discounts) while focusing on the actual value and benefits your company has to offer.
Deep discounting kills margins. It is not a sustainable business strategy. It’s time to start discounting smarter, not deeper.
Greg Zakowicz is Senior Commerce Marketing Analyst at Oracle Netsuite