Coupons are believed to have been first used by the Coca Cola Company in the late 1880s, where over 8 million coupons were exchanged for a free glass of Coke soda. The concept of offering discounts came some 30 years later when the C.W. Post Company offered a one cent discount to help sell breakfast cereal.
While we’ve come a long way from cutting out coupons from newspapers and magazines, discounts are still very widely used and over 85% of shoppers in developed countries still frequently use coupons. In 2020, more online stores than ever before are using coupons and discounts to drive sales and upsell to their existing customers.
As shoppers become more and more careful with their spending habits, discounts can be an effective incentive to get them to make purchases and increase revenue for your WooCommerce online store. With the right implementation, coupons and discounts can provide great results for any online store.
In this post, we look at the different types of coupons and discounts at your disposal, review some of the pros and cons of offering special offers for your online store and explore the best ways you can use discounts to boost customer loyalty and conversions.
What are coupons and discounts used for?
Everyone loves coupons and special discounts. For shoppers, they mean price reductions that help them save money while for online store owners, they can help to build a strong and loyal customer base that results in significantly improved conversion rates and steady revenue growth.
As a rule, when it comes to the implementation of coupons and discounts, your goals should be clearly defined before the implementation, and the short-term results analyzed and optimized to provide the best results.
You must also clearly state the conditions of an offer, such as time limits, minimum order value, category, restriction etc. This will help to avoid frustrations when redeeming the offer. You don’t want your customers feeling like they have been deceived.
The main purposes of coupons and discounts include:
- Increasing sales
- Building customer loyalty
- New customer acquisition
- Increasing customer engagement
Types of discounts, coupons and special offers
There are several types of discounts and offers you can use. The main types include:
Fixed value discount: This is the most common type of discount in use today. Here online stores offer a dollar amount off the price, usually for the first or next purchase.
Example: ‘Get $5 off on your next purchase’
Percentage discount: This is similar to the fixed value discount but offers a percentage off of the product price instead. Both are particularly effective for creating awareness for a new WooCommerce store.
Example: ‘Get 5% off on your first purchase’.
*Tip: A simple trick to keep in mind when deciding between a percentage or fixed value discount for a product is the rule of 100. If your item is less than $100.00, use a percentage discount; If more, use a fixed value discount.
Credit rewards: Here the discount is turned into credit or points that shoppers can use on a second item to lower its price or exchange for an item. The more they shop, the bigger the credit they accumulate encouraging them to keep buying.
Example: Online retail giants such as Toms, North Face and Sephora incentivize customer loyalty by offering points on every purchase. These points can be redeemed for price reductions, exclusive gifts, membership to VIP customer programs or donations to charity organizations.
*Tip: You can pair this with a minimum purchase limit to increase its impact.
Quantity Discounts: You can offer your customers a quantity discount for higher volume purchases. When an online store is able to sell more product, shipping and marketing cost per unit are reduced, which translates to bigger profits.
*Example: An online wine store might offer a price reduction if you buy a case, as opposed to a few bottles.
Seasonal Discounts: As demand for a product fluctuates, online stores can offer seasonal discounts to either encourage sales during periods of low demands or attract more customers when there is high demand.
*Example: Summer sales on winter coats / Christmas sales on Christmas themed sweaters.
Special customer discount: This discount is offered to a specific type of customer. This could be a student, employee, disabled person, military personnel, children below a certain age or a senior citizen. Niche WooCommerce stores often use this discount to appeal to a particular group of customers.
*Example: For a Veteran’s Day sale, you can promote coupon codes in military Facebook groups.
Free Shipping: Shipping costs are a common reason why many shopping carts are abandoned. Offering free shipping is a great way to alleviate this and increase conversions.
*Tip: Combine free shipping with a minimum purchase value limit to increase your average order value. You can also limit this discount type to specific countries and groups of customers, and avoid reducing your margins by excluding this offer for shipping costs that go over a certain amount.
Free Gift: A free gift with a purchase can be a great way to add value for the customer. If used strategically, it can also be used to increase the average order.
Example: Some online stores extend WooCommerce functionality by installing a plugin that can automatically add a pre-programmed free gift when a minimum purchase order is reached or a coupon code is successfully applied.
*Tip: Offer free gifts to get rid of inexpensive non/slow-moving products.
Pros & Cons of Discounts & Coupons in eCommerce marketing
The main benefits of coupons and discounts include:
- Attracting new customers
- Increased awareness for new products
- Helping to get rid of unwanted or slow-moving inventory
- Providing a way to get your customers to try a new brand that is more profitable for you
- Getting old customers to return.
The key to maximizing the benefit of special promotions is using them to build your customer base. These special offers can become a major part of your marketing campaign, provided you use them strategically.
*Tip: A great way to use coupons in a long-term marketing strategy is to ask regular customers to provide their name and email address to receive the coupon. In this way, you can build an email marketing base to encourage their return when you offer new products or future discounts.
The biggest disadvantage of coupons and discounts is that they cost you money. Every discount you offer means less profit. To minimize this, try and determine whether the offer is worthwhile by calculating the difference to your profit margin by how effectively the offer brings in new or returning old customers to your store.
Another drawback is that when poorly implemented, coupons and special discounts can “spoil” your customers. Shoppers that have become too accustomed to discounts are proven to be more difficult to convert when the promotion is over. They are also less likely to be loyal and often move on to a competitor in search of similar or better bargains.
*Tip: While promotional offers will always result in reduced profits, the cost of purchasing the product from your supplier does not change. When considering the value of a coupon campaign for your business, you need to find a way to determine if the discount improves your profit in the long run.
10 ways to use coupons & discounts to maximize sales
How can you plan promotional offers so that the benefits of the campaign are as high as possible and the costs are as low as possible?
Here are ten ways to use coupons & discounts to maximize sales in your online shop.
*Tip: Depending on your goals, these can be used individually or in combination.
Discount only individual products: Instead of offering discounts on multiple items in your online store, it is much more profitable to limit them to a few specific products or even a single product. This approach is particularly suitable for online stores that have a wide range of products and can recoup the cost of the discount from the sale of other products. It can also be a useful tool to attract first-time buyers.
*Example: 20% off on many products does not necessarily attract more attention than 50% off on a specific, highly sought-after product.
Offer special offers for a limited time: Use the psychological tool of scarcity by not only limiting the discount in terms of quantity, but also in terms of time. This strategy is useful if you want to generate hype focused around a specific event.
Take advantage of fixed costs: Design your promotional offers in a way that takes advantage of existing fixed costs.
*Example: You could sell service contracts at a discounted price and then perform the service when your employees are not busy.
Be spontaneous: Don’t let your customers get used to certain discounts. Rather, be creative and surprise your customers with a unexpected special offer to keep them engaged.
*Example: Offer an Flash Sale at the end of the month when most of your customers receive their salaries to encourage impulsive purchases.
Be smart with volume discounts: Volume discounts are a classic among discounts. In order for them to be effective, it makes sense to offer volume discounts on products that your customer buys in bulk. This type of discount is worthwhile in terms of value if bulk purchases enable you to save costs that are higher than the cost of the discount.
Link discounts to special occasions: From an ecommerce psychological perspective, it makes sense to combine discounts with big events, special occasions or seasonal holidays. You need to be more creative for your promotional offers to stand out as special occasions such as Christmas or ‘Back to School’ are saturated. Fortunately, there is no shortage of occasions.
*Example: Offer special discounts for friendship bracelets on Friendship Day (First Sunday in August) or give coupons for macaroni on World Pasta Day (October 25th).
Avoid overlapping discounts: When a promotional campaign is poorly planned, it happens that different discounts overlap. This can lead to some products being sold at unprofitable prices. An example is when you offer a fixed value discount, a quantity discount and free shipping on the same product.
Be creative with special offers: Come up with fun and creative promotions where discounts are tied to certain conditions. There is no limit to your imagination. The more creative and unusual, the better to generate interest.
Example: If you sell teen clothes you could launch a discount campaign where ‘Your age = % discount off”, and thus link the percentage discount to the age of the customer. You could also experiment with other factors such as height, shoe size etc.
Give a discount on the next purchase: From an eCommerce perspective, discounts relating to the next purchase are very smart. This ensures that the customer buys again if he wants to receive the discount. The cost of the discount decreases, while the psychological effect is likely to remain the same.
Do the math: When you plan a discount campaign, you should always calculate how many units you need to sell for the campaign pays to be profitable. Know many sales you need to make to compensate the cost of the campaign and plan accordingly.
There are countless ways to use promotional offers in a smart productive way. The tips in this post are just a few examples, but show that costly discount battles with your competitors are not necessary.
When planning a discount or coupon campaign, it is important to keep in mind that every WooCommerce store is different and therefore the type of strategy you use must be tailored to suit the goals you are trying to achieve.
To be most effective, try and use an optimal combination of different special offers. In this way you will stay ahead of the competition, attract and retain customers, and most importantly, increase sales to boost profits and growth.