Leveraging Discounts for the Distracted Online Shopper

By Katt Srinivasan | 27 Jun 2019

Is e-commerce spearheading the next phase of the shopping revolution? Find out how brands can leverage discounts for the ever-distracted online shopper.

The recent spurt of bricks and mortar store closures in Australia, UK’s high street collapse in 2018, UBS’s prediction of 75,000 US retail closures by 2026. Whether or not you want to label this alarming trend as the retail apocalypse, one thing is definitely inevitable: e-tailers will be spearheading the next phase of the shopping revolution.

The main reason people are huddling together to shop online (besides comfort) is due to the potential it offers to compare and scout for prices. The online space has become a consumer research playground for shoppers – especially for fickle-minded and capricious deal-seekers – loaded with a battalion of options and choices at a mouse click, screen touch or one search away.

However, there is a sharp disconnect between consumers and retailers in terms of pricing and discounts. While great customer service, technology, product quality or brand image are important, according to a Forrester Consulting study, 57 per cent of customers want competitive prices and discounts, making it the topmost factor for consumers to opt for an online brand, in sharp contrast to only 25 per cent of retailers who feel so.

Let’s also face it, now that Amazon has launched in Australia, the market conditions are very competitive. A few years ago, discount retailers had very little presence online, but according to the AusPost study, marketplaces and discount department stores grew over 50 per cent. Furthermore, premium brands are succumbing to discounts too. Who would’ve thought Apple would slash iPhone by 40 per cent (through trade-in) or that half of global luxury buyers only want to buy when discounted (according to YouGov).

Get Ahead of the Curve

All of the aforementioned concerns epitomise the fact discounting is the need of the hour. More and more, it looks like discounting is inevitable – if not imminent – without which brands can risk falling into the hands of hotshot competitors. Consequently, they are coerced to cater to today’s ever-growing digitally savvy shoppers – especially the millennials and GenZers who are more frugal and price conscious than any of the other generations. As these deal seekers also have a complex shopping journey and use multiple websites and touch points – particularly on mobile – all the way through the purchase funnel, it’s about time brands realise they need to make inroads by diligently reaching out to live up to the desires of these price-sensitive shoppers wherever they are in their purchase journey.

Although the most common forms of discounting – sales, price reductions and sometimes even site-wide public coupons – are so ingrained in most retailers’ promotional strategy, they are doing them more harm than good. According to Forrester, 52 per cent of retailers’ promotions go to shoppers who would’ve happily paid full price. These are discounts that are generating little to no incremental sales (merchandise that’ll sell even if not promoted). Without careful customer segmentation, discounts can erode margins.

In other words, what today’s brands need is a multi-channel coupon strategy that can help them to maximise and make the most of the power of discounts in the form of digital coupons – also referred to as promo codes or discount codes. They are marketing discounts that online shoppers can apply during the checkout process.

Through a channelised, segmental and tailored coupon approach, online retailers are able to leverage different distribution channels and specific segments of consumers – in particular, the modern-day bargainers – plying them with compelling offers while obviating the need to publicly distribute discounts to their entire customer base.

So, Why Do Coupons Appeal to Consumers and Brands Alike?

Today’s shoppers are becoming overwhelmingly sceptical and incredulous about the cornucopia of sales and promotions viewing them as mere sales gimmick. On the contrary, coupons have a psychological benefit associated with it, rendering users adrenaline rush and instant gratification. In order to fully take advantage of the selling power of coupons, one has to really understand the psychology behind it. New research about people receiving a $10 coupon found that coupons elicit neurophysiological reactions with changes in oxytocin, stress, and mood. The increase in oxytocin is higher than what is found when people get a gift, kiss or cuddle.

And according to this Google and ComScore study, coupon users are twice more likely to purchase and become repeat and brand loyal customers. The study showed higher user engagement rates, basket sizes and incremental sales. Numerous other studies have also proved coupons can help with cart abandonment and impulse/ unplanned purchases.

Thus, by virtue of high user engagement with coupons, brands are able to draw in and consume user attention, to activate lock-in, and turn customer intent into action, in an attempt to swiftly close out transactions.

Capitalise on the Coupons Bandwagon

According to Juniper, 91 billion e-Coupons will be redeemed worldwide by 2022 making it an almost ubiquitous commodity. Since Coca-Cola’s first paper coupon launch in 1888, both paper and digital coupons have become banal and commonplace in both the US and the UK, especially post GFC, that there is even a reality TV series called Extreme Couponing. In Australia, in-store coupons are still in its infancy, while digital coupons have gained good traction over the past few years.

For a start, brands need to ensure they are present where the bargain seekers are – aggregator websites like deals, coupons, comparison and other third party intermediaries. Collaborating with these publishers and advertising on them is by and large carried out through the affiliate or partnership channel, but advertisers need to be wary and conservative in setting the right marketing fees on top of the coupon discounts they offer. With recent technological advancement in digital couponing through the use of AI – for example, automatic coupon toolbars, real-time personalised coupons, chatbots and personalised assistants – the stage is also set for wider adoption.

Besides, channels such as search, ads, retargeting, in-app, social and email can also be leveraged in running targeted and sophisticated coupon campaigns. Additionally, by employing a digital strategy and leveraging data analytics on customers, CRM, and sales, brands can further extract insights on customer segmentation including different customer touchpoints and referral or downstream sites.

The nature of coupons also makes it possible to track the marketing campaigns across channels including number of usages and attribution, through which brands can extract invaluable customer data that can not only be used to find price-sensitive customers but also help determine optimal price points for products. While winning pricing wars is getting tougher with big companies using sophisticated AI algorithms and pricing teams to set prices, coupons can also tactically help hide the final price from competitors.

In an age of bargain-laden and price-ridden shoppers thronging and swarming in large numbers and where consumer behaviour patterns are undoubtedly shifting, discounting is unavoidable. Although there is no one solution that fits all, a well-defined coupon strategy aligning with the business goals can help almost every business to stay competitive, by not only helping drive additional conversions, but also give more fine-grained control in running channel specific discounts. And by strategically traversing and intercepting deal seekers’ journey through targeted discounts, brands can indeed step ahead to gratify the needs of the distracted, drifting and wandering consumers, in a bid to close out sales quickly, which wouldn’t have been possible before.

Deal hunters are knocking at your doors, more than ever before – and set to grow even further – do you have a strategy for them?

Katt is the founder of AdAvenue Media and The Bargain Avenue, Australia’s leading discounts and coupons website.

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