Economic impact of coupons
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Last year, consumers redeemed 2. Crafty customers know when and where to find a good deal, and brands that issue special offers create win-win scenarios for shoppers who save money and retailers who grow their sales.
Big brands are increasingly adding coupons to their marketing mix to boost their bottom line. Knowing that their customer base will include shoppers who happily pay full price and buyers who eagerly wait for a new coupon to appear, smart brands deliver special deals to different segments of their contact list to encourage everyone to complete their next purchase.
When was the last time you purchased something new from an unfamiliar brand without a coupon? For most shoppers, buying something for the first time at full price without having any personal experience with the item or peer reviews to lean on can be intimidating.
The Business Benefits of Coupons
But even a slight discount can change a buyer's attitude towards a risky purchase. Statistics from VoucherCloud reveal that 57 percent of shoppers are motivated to complete a first-time purchase when they are able to redeem a coupon. In the absence of a special deal, customers would otherwise abandon their carts; some shoppers feel a first-time buyer discount is a prerequisite for brands looking to acquire new customers. That is because 62 percent of consumers invest two or more hours each week scouring the web for promotions.
Fortunately, retailers can rest assured that any coupons issued may still attract loyal, lifelong customers. In fact, 91 percent of buyers who redeem coupons say they would visit the same retailers again. As long as shoppers find value in your offerings, coupon clippers may even purchase your products again later at full price. A global survey by RetailMeNot, found that of its 10, participants, 51 percent agreed that they were influenced by deals, discounts or sales when shopping online. In the U. Think of discounts and promotions as an easy way to soft sell shoppers.
Many times when a coupon is available, customers may spend more of their energy and time convincing themselves not to purchase. Sample- or trial-size products cost little-to-nothing to produce, yet they are a major revenue driver for retailers online and offline. Brands offer a risk-free proposition to consumers who can try something new, which they may even like, for free.
The stores that do manage to impress shoppers with their samples earn consumer loyalty and trust and generate profitable sales due to our natural desire to reciprocate goodwill. Retailers, too, have their own reasons to love sampling, from the financial samples have boosted sales in some cases by as much as 2, percent to the behavioral they can sway people to habitually buy things that they never used to purchase.
Coupons create happiness
Stores that give away free value start new customer relationships off on the right foot. Over time, the retailer's perceived "generosity" makes it more likable and that also leads to positive brand associations, which may improve customer referrals and sales. According to academic and behavioral scientist Dan Ariely, zero is a special price. To many, it is worth a lot more than its face value. Almost irrationally, consumers "perceive the benefits associated with free products as higher" than their absolute value. In a paper for Marketing Science journal, Ariely found that, "People appear to act as if zero pricing of a good not only decreases its cost, but also adds to its benefits.
We value it more, which is why so many brands take advantage of the " free gift with purchase " tactic to increase average order totals among shoppers. Defying conventional logic, consumers are more drawn to free items more than they are to discounted products, even when the discount helps shoppers save more money or get more value from their purchase. The conclusion was, "Shoppers As emotional creatures, people are more inclined to accept free offers than discounted ones.
The results speak for themselves. Ultimately, the best discounts, promotions and free products strategies help you:. Image sources: This post originally appeared on Receiptful's Ecommerce Success Academy and is republished with permission. One additional pair of comparisons between the coupon-primacy shoppers and other coupon users was of interest.
What Science Says About Discounts, Promotions and Free Offers
The coupon-primacy shoppers reported using fewer coupons, on average, per trip- to the grocery [4. Thus, these coupon users who assumed without checking that they were getting the best deals tended to be lighter users of coupons overall.
Last year, consumers redeemed 2. In general, coupons should be awarded to groups of customers smaller than the entire customer base. Brands offer a risk-free proposition to consumers who can try something new, which they may even like, for free. Crafty customers know when and where to find a good deal, and brands that issue special offers create win-win scenarios for shoppers who save money and retailers who grow their sales. Paul J. Despite relative recovery from the economic recession of the past few years, small businesses are still suffering from consumers cutting back on discretionary spending.
These shoppers said they did not consider brands other than the one they had chosen, yet neither did they assume their choice represented the best deal. These consumers apparently used other criteria to select a brand. It may well be that their choices were fairly routinized, based on non-price factors. Through their comments at the end of the interview concerning the effect of coupons on their shopping behavior, the subjects shed some light on feelings and thoughts that play a role in the use of coupons.
All but 10 of the shoppers had comments to share. While a thorough content analysis of these comments is beyond the scope of the present paper, useful insight is provided by looking at the sorts of statements made as a function of the consumers' coupon usage. To accomplish this, the shoppers were ranked according to their responses to two items: The heaviest users of coupons clearly got some satisfaction out of using them.
Phrases such as "I love coupons," "I really like them," and "coupons are great" were quite common from the most regular users, as were comments of appreciation for the significant savings they offer.
A close look at coupon economics reveals a form of price discrimination where the firm is maximizing revenue from consumers who can and. in the Department of Economics at the University of Tennessee, Knoxville. . Results suggest that coupons have no long term benefits on consumers'.
One moderately heavy user even said she keeps a chart of her coupon savings week-by-week, and she looks for coupons to see how much she can save each week. Thus, the "smart shopper" feelings suggested in the literature do appear to characterize those shoppers who make the most use of coupons. Several heavy users also commented that coupon savings are worth the time and effort involved, implying that they do weigh the tradeoff between costs and benefits of couponing, as suggested in the literature.
The lightest users of coupons offered rather different comments. For example, seventy percent of the 35 shoppers who said they never use coupons made comments about using coupons being "too time consuming" to be worth the "small savings" they generated.
The Business Benefits of Coupons
Others criticized the "hassle" or "pain" of clipping and using coupons. Slightly-more-frequent users also noted that time constraints limited their use of coupons. As coupon use increased, however, the nature of time-oriented comments shifted somewhat. For example, one shopper who reported using coupons on half of her shopping trips said that couponing is "kind of a nuisance, but the savings is worth the trouble.
Comments from some consumers in the study provide direct evidence of the use of a "lowest price' strategy. Some noted that having coupons encourages them to compare prices across brands, leading to better deals. Several shoppers noted that they like to use their coupons in stores offering "double coupon" values, to maximize their savings.
One woman even showed how her shopping list was organized by stores and by coupons, with coupons for multiple brands in several product categories. Prior to shopping, she had determined which products to buy where, to take best advantage of price and double-couponing differences among stores.
Clearly she was a "lowest price' coupon user. Other interesting observations emerge from subjects' comments. A few shoppers indicated that the coupons they have on a given trip often help define the set of brands they consider -- they give preference to the brands for which they have coupons. Many consumers, ranging from heavy to light users, commented that they always or usually use coupons only for the brands they regularly buy. Finally, several women said they'd rather have lower regular prices than gain savings by coupons. However, as one heavy couponer commented, "as long as everyone else is paying for my savings, I'll keep using coupons.
This study provides evidence that using coupons does influence brand choices in several ways as previously hypothesized.
About half of those shoppers with coupons used them in ways consistent with either Henderson's "lowest price" or "coupon primacy" models. The "lowest price" consumers tended to be more regular users of coupons while the "coupon primacy" strategy was likelier among light coupon users, as Henderson had speculated. Substantial numbers of shoppers, primarily the heavier users of coupons, reported positive, "smart shopper" feelings associated with coupon use.
And evidence that shoppers weigh the benefits against the costs of coupon use came from many shoppers, heavy and light coupon users alike. Thus, each of the mechanisms postulated in the literature to be involved in coupon usage appears to apply to one or another segment of users. While both heavy and light coupon users indicated they assess the costs and benefits they realize from couponing, their conclusions were quite different. Heavy couponers felt their savings from using coupons well justified the effort involved, while light- and non-users felt just the opposite. This poses an interesting question for future research: That is, are the products categories or brands that light couponers tend to buy different from those bought by heavy users of coupons?
And, if so, do the light users' preferences tend to be items for which coupons are often not available, or for which coupon values are generally small? Such findings would account for the two groups' perceptions, and, moreover, would suggest strategic changes in couponing behavior by marketers to appeal more to those who are currently light users.
The findings of the present study don't answer the question, but they do suggest that marketers might be wise to explore segmentation of coupon users according to their views and usage patterns regarding coupons. Several other coupon-use issues offer interesting questions for further study. The present study explored coupon use with respect to only a single product category per shopper. Does the way a consumer uses coupons e. Bawa and Shoemaker found that heavy coupon usage by a household for one product category tended to predict heavy usage in other categories, but they did not explore the processes by which those coupons influenced brand choices.
An investigation of this issue would help clarify the relative influences of personal and situational variables in coupon usage patterns. Another usage issue needing further study concerns those consumers who bring to the store coupons for multiple brands, and perhaps even multiple values per brand, within a product category. Such consumers might be expected to be lowest-price shoppers, but we know little about their brand-choice processes.
While the present study found some evidence of this sort of coupon usage, a larger-scale study is needed to estimate the extent of such behavior among shoppers and to explore more fully their choice mechanisms. A final area for further research concerns the relationship between coupon usage and other facets of deal-prone behavior. In the present study, coupon usage was found to be moderately correlated with frequency of reading grocery ads to find the best buys.
But heavy users did not shop more stores per week than light users.