Online Coupons: Friend or Foe to Web Retailers?

There isn’t a human being on the face of this earth that wouldn’t mind saving roughly anywhere from 5-25% on his or her order every time they shopped online. Online retailers are well aware of this and tend to use coupon codes not only to reward frequent customers, but also to drive sales when they’re running promotions.

You’ve seen it: “Buy these $250 lime green alligator driving mocs and get the matching belt for ½ off,” or “Enter promo code TIGHTWAD for 10% off your purchase.” So what do you do? You buy the $250 lime green alligator driving mocs just to get the matching belt for $70 instead of $140. Wow! What a deal! And I know you’ve also added more items to your cart simply because you were getting 10% off. Denial isn’t just a river in Egypt my friend; we’ve all done it.

But when do you, as an online retailer, draw the line with your coupons? Let me give you some food for thought. For those of you who aren’t familiar with the site, it’s utterly genius. Anyone who receives a promotion code can post it on this site for all to see and for all to save. It’s terrific from the customer’s point of view, but when you’re the one selling products online, it can easily become a nightmare.

Below is a screenshot of what a nightmare might look like for a retailer:

Retail Me Not

Looking closely at this example, you can see that this particular retailer has chosen to give out multiple coupon codes for several holidays and not limit the number or delete them after the period has expired. The “success rate” in the green button to the left of the coupon code is kept in real time, thus the offer for 30% off roses, birthday bouquets, fresh holiday flowers & more that was supposedly valid from 11/25/09 – 12/2/09 is still indeed valid. It’s almost a year later to date. Can you imagine how much money this company has lost as a result of giving people 30% off their order and not limiting their codes? I mean, 30% off God knows how many products for a YEAR! Ugh, I’d rather not know…

Not only do a large amount of untamed coupons damage your profit margin if incorrectly used, they may also make your products look cheap if you’re giving deep discounts.  With that, they might even make your business look like it’s in desperate need of sales which may lead to other implications. Not good!

So what do I suggest as a web developer and e-commerce consultant? Funny you should ask. Here are some “best practices” for coupon codes that will help make money and help you keep track of what promotions are working and which ones aren’t:

1. – Make two different sets of coupon codes (one set for repeat customers and one set for new customers)

2. – Limit the number of coupons you send out by making estimates of how many repeat customers are going to use them or how many new customers you want to entice

3. – Talk with your web developer and make sure that your shopping cart software will allow you to put limitations on the number of redemptions per code AND that your shopping cart software will allow you to enter an expiration date for each code

4. – You don’t have to sell the farm! Start off with a free shipping coupon or 5-10% off to see who bites. If it’s inadequate, make the necessary adjustments

5. – Have fun!