Coupons have been around since the dawn of retail, but in the e-commerce space – particularly in Australia – they remain a largely untapped channel. Chris Garner outlines why online retailers need to understand the e-coupon pehnomenon.
A new e-commerce phenomenon is taking the world by storm, saving customers millions of dollars while at the same time increasing the margins for advertisers on their average order value. What is it? You really need to be across this.
Online coupons are this year’s game changing ecommerce route to market and we have the evidence to prove it. In the offline world, coupons appeared in the late 1800s, when they began to drive brand allegiance, increase loyalty and conversion.
Among the first to use coupons was little known company Coca Cola, founded in 1886, which went on to become the biggest brand in the world. In the first 25 years of its coupon promotion, more than 8.5 million free sodas had been sampled.
Online, over the past 18 months there has been a significant rise in the use of coupons. This has arguably been driven by two things: the global financial crisis and the additional value and loyalty offered to savvy internet customers.
According to Google Insights, the number of people searching for the term ‘Coupons’ increased by 150% in 2009 in Australia alone, and by more than 300% in the USA, UK and Canada.
New research with regards to online coupons is being released every day from the mature markets, including how users are engaging with advertisers who deliver a coupon strategy on social networks and beyond.
Almost a third (31%) of online coupon users started using them in the last 12 months (Source: InternetRetailing, October 2009).
Estimates put the consumer savings at GBP2 million in the UK every day, redeeming more than 1,500 in vouchers in the UK alone.
One in five US consumers use digital coupons, which equates to 45 million US consumers in 2009 alone, a 20% increase from 2008 (Source: Coupons inc. Feb 2010).
Back in Australia, the evidence is showing that, on the whole, the growing legion of coupon customers are not the discount bargain hunters but rather wealthy, well-educated and loyal customers. Exactly the type of customer that advertisers spend hard marketing dollars trying to attract.
Research by dgm shows that a good coupon strategy can deliver increased Average Transaction Value and Conversion significantly. Careful placement of coupons can help brands to “trade up” their customers through the product range to the high ticket items, thus growing both revenue and more importantly, margin without any brand degradation (a common fear of inexperienced coupon marketers).
Other positive effects of clever coupon strategy can be an increased perceived value of the products purchased and the overall customer experience with the brand. The research we carried out indicates favourably that the coupon customers do not see the coupon as a discount but rather an incentive hook to upgrade their purchases to premium products within the range.
Using one of Australia’s largest online electronic retailers and measuring against a data set that ran into the several millions of dollars of revenue generated we found the following:
- 13% growth against PPC sales
- A comprehensive 21% growth against shopping comparison sites
- In addition coupon sites converted users 3.5 times more than PPC search
This data proves that the correct coupon offer in market can generate more cost effective return on investment than endlessly lining the pockets of the major search engines whilst generating irrelevant and costly clicks.
In addition to the awesome increases in average transaction value, there are many more positives which include the overall on site conversion from click to sale from coupon sites which are approaching the double digit mark. This shows a significantly high propensity for coupon customers to transact.
It is not just electronic retailers catching on to this new online channel but tFMCG advertisers hot on their heels. Domino’s pizza, for example, has seen massive increase in sales from its coupon strategy and keyword searches for “dominos coupons” are listed in the rising searches again from Google insights at +650%
Procter & Gamble, the world’s largest FMCG advertiser, delivers 57 million coupons per year in the US alone. P&G’s “eStore” opening will harness a formidable FMCG coupon sampling strategy – P&G’s Chief Executive Bob McDonald said last August that the company wanted to increase its online sales “substantially” over the next few years. Online sales accounted for about $500 million, or 0.6%, of P&G’s fiscal year 2009 of $79 billion. P&G plans a full scale launch after a pilot test with 5,000 consumers which started in the last couple of months.
Attracting customers through coupons creates an affinity with a brand or website, making the propensity for return increase considerably.
Almost three in five consumers are more likely to visit an online grocery store or FMCG website if a coupon is available (Source: InternetRetailing, October 2009).
In subsequent articles on this topic we will cover off:
- Review of coupon sites in Australia
- Building a comprehensive online coupon strategy for the Australian market place
- Coupon2.0: the future of coupon redemption strategies