Couponing In The Digital World

Professional marketers in electronic commerce are embracing and improving promotional techniques originally developed for the offline world.

As the Internet matures and becomes more and more competitive, merchants are finding unique new ways to leverage incentive marketing to differentiate their offerings from competitors. Additionally, they are adding powerful new motivators to stimulate the impulse-to-buy at the moment of purchase.

There are three major promotional models comprise the online coupon activity today:

  1. In-Store Redemption: Users print coupons from a site and redeem the coupons at a retail location.

  2. Online Redemption: “E-commerce coupons” are placed on coupon sites. Users click on coupon offers and are sent to merchants’ offers right on the site. Discounts are applied at purchase.
  3. Continuity/Affinity Program: The site provides offers worth a pre-designated amount with purchase. Visitors print these coupons and give them to the offline retailer at checkout.

    For instance, coupons are scanned into a coupon reader, then turned into “Web Bucks,” good towards a purchase of anything at the next visit.

    This model is similar to affinity programs. Companies allow surfers to earn points towards future purchases of products and services, which allows flexibility for consumers and builds the lifetime value of a customer overall.

    Companies Using Online Coupons

    Similar to offline marketing, industries using online coupons to market products and services are varied. Below is a list of categories and companies, follow by the benefits of online couponing.

    Category

    Company

    Apparel & Accessories:

    JC Penney, Kmart

    Babies and Kids:

    EToys, Kids R Us

    Computers & Electronics:

    CDW Computer Centers, Hewlett-Packard, egghead.com

    Entertainment:

    Reel.com, Disney, BigStarDVD, Music Boulevard (CD NOW)

    Gifts & Flowers:

    EJeweler, Flowers USA, Ross-Simons

    Hardware & Garden:

    Garden.com

    Health & Beauty:

    SelfCare, Paul Mitchell, Tylenol, Clairol, Colgate, Sea Breeze, J&J Acuvue, Orajel, Garden Botanika

    Home, Bed, Bath:

    Furniture.com, art.com

    Package Goods, Grocery:

    NetGrocer, Ragu, Jollytime Popcorn, I Can’t Believe It’s Not Butter, Duraflame, Glade Plug-Ins, Boboli

    Photography:

    Kodak

    Sports & Fitness:

    IGO Golf, Sports Superstore

    Telecommunications:

    AT&T, Qwest Communications

    Travel:

    Alamo, Preview Travel

    Benefits To Consumers

    With better deals through diligent searching across a range of sites, consumers can research the best deal and get it immediately.

    Online coupons are available for consumers when they want. And, unlike freestanding inserts (FSIs), online sites are organized by interest. Visitors download offers they would like, providing immediate gratification. Several coupon companies even offer email alerts to “members” who provide their personal list of promotion interests. Offers come directly to their email inbox.

    Benefits To Merchants

    • Better Targeting. The Internet is an excellent research and information medium for consumers, thus coupons can be placed where people actively look for offerings, enabling manufacturers to promote at the “point-of-research” to focus offers on user profiles.

    • Better Response. Average click-through rates for online banner ads with coupons is 20 percent, compared to .065 percent for standard banner ads (Sept. 1998 Forrester, Apr. 1999 Nielsen/NetRatings). ICONOCAST and NCH Promotional Services say several net promotions, including one for H&R Block, achieved a 10 percent response rate, significantly higher than the average FSI response of 1.8 percent.
    • Better Tracking. Most coupons include bar codes to prevent fraud. This makes it easier to track where coupons originate, allowing merchants to better determine ROI for promotions. As online coupons become more actionable,manufacturers can tell who really redeemed and then create promotions accordingly.
    • More Efficient/Easy To Induce Brand Switching. Marketers are using precise promotional offers based on previous purchases and net behavior. The Internet lets marketers experiment and measure which offer works best and modify programs on the fly.
    • Reduced Paper/Labor Costs. Online coupons have little production costs. Users download the ones they want to their printer, when they want them.
    • Alleviates Migration Of Offline Consumers To Competing Online Sales. Capturing consumers online and providing them an offer that drives them to a site or to bricks-and-mortar retail complements marketing efforts.
    • Affordable Presence For Local Merchants. Even the smallest retailer can compete by having a place and promotional program on the web.

    Opportunities Going Forward

    With only 49 percent of Internet users aware of online coupons, there is an opportunity for growth in coupons. As lines between couponing, general promotion and direct marketing blur, creating effective promotional marketing programs on user profiles and purchase histories will become more common.

    Several major online marketers are establishing portal deals that give coupon companies the benefits of increased awareness, better targeting and broader distribution. In return, the portals receive a new source of revenue.

    Several opportunities exist for leaders to take advantage of now:

    • Be More than Just Coupons. Just as there is an array of sweepstakes, price discounts and other promotions offline, brand marketers, and coupon/incentive companies should broaden their offerings online as well. Merchants can provide consumers more convenience and additional methods to save, create brand preference and build loyalty over time.

    • Integrate Online And Offline Offerings. Marketers must ensure their promotion calendars, offers, and creative executions sync online and offline, conveying a consistent message to consumers. Offers may vary slightly, but the marketing message should be consistent.
    • Test Offers. Unlike traditional media, which typically involves longer-term planning and significant production costs, the Internet enables marketers to test a range of offers quickly and cost effectively. Results can be seen on-the-fly, and programs modified immediately. Marketers can also actively test a range of offers and messages on different sites to see which sites and offers are pulling best, as well as test demographic appeals.
    • Provide Offers Based On Personal Profiles And Purchasing Habits. Visitors to sites, or surfers who click on promotional ads, can provide valuable profile data in exchange for an offer. This in turn enables marketers to offer relevant, right-time offers based on specific needs.
    • Take Advantage Of Local Targeting. When services are localized or regional, a promotional tie-in with local sites like Microsoft’s Sidewalk or Citysearch is yet another highly targeted way to capture people at the “point-of-research.”
    • Build Loyalty. Marketers must be innovative to make consumers want to return to their site again and again. Smart marketers are building loyalty programs that accomplish this task. They give discounts based on the amount of purchase a customer has spent on site, provide airline miles, give free gifts or access to exclusive offerings (“just for you”).

    Online couponing represents a mid-life kicker for incentives in marketing. Where offline response rates and effectiveness have dwindled over the years as consumers begin to take incentives for granted, their online use is allowing marketers to change some of the rules and invigorate this powerful tool for achieving positive behavioral change.

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