Discount codes have become a popular marketing tactic for brands, with consumers showing a strong preference for shopping from brands that offer discounts. In fact, 80% of consumers are more likely to shop from a new brand if it provides a discount coupon, and this number jumps to 89% for millennials. While coupon codes can be an effective way to attract new customers and increase revenue, there are also downsides to consider. In this article, we will explore the pros and cons of using coupon codes and help you make an informed decision about whether they are right for your brand.
The Pros of Using Coupon Codes
Attract new customers and increase revenue: Coupon codes can accelerate the conversion process by reducing the perceived financial risk for consumers. They create a feeling that the customer is getting a good deal, which can lead to increased sales. Coupon codes can also generate traffic from untapped sources, such as coupon listing sites and social media shares.
Gain market share: Coupon codes provide a competitive advantage, especially in price-driven industries. By offering discounts, you can draw shoppers away from your competitors and hold onto them in the long-term. The lifetime value of the customer can subsidize the short-term loss of profit.
Re-engage current customers: Sending exclusive coupon codes to current customers is a smart way to re-engage them and create new buying opportunities. It is easier to convince a happy customer to buy from you again than to build trust with a new customer.
Capture data and enable marketing personalization: Coupon codes, when generated as unique codes, enable you to track their redemption and each user's behavior. This information can help you personalize the marketing experience for each individual in the future.
Track affiliate and influencer campaigns: Coupon codes are often used to track the effectiveness of brand ambassador or influencer campaigns. You can personalize the experience for each influencer or affiliate and trace all code redemptions back to the source, determining the ROI from the campaign.
The Cons of Using Coupon Codes
Cut into your profits: Coupon codes can significantly reduce your profit margins, especially when considering other costs such as advertising, promotion, and operational expenses. Unless your site and follow-up marketing are optimized for additional sales and cross-selling, coupon codes may not make financial sense.
Reduce the value of your product or service: Offering discounts through coupon codes can lower the perceived value of your product or service. Customers may become accustomed to discounted prices and expect them in the future, which can cannibalize revenue and create a discounting culture for your brand.
Be exposed to fraud: Coupon codes are often associated with fraudulent activities. Generic coupon codes can be easily shared and used by anyone, even those who do not meet the redemption criteria. This can lead to a loss of control over your brand reputation and potential misuse of the codes.
Using Coupon Codes the Right Way
When planning a coupon campaign, it is advisable to use unique codes rather than generic ones. Unique codes are designed for single-use, meaning that every user has their own code that cannot be re-used or duplicated. This helps prevent fraud and allows for better tracking and personalization. Technology platforms like ShortStack's Prize Manager can simplify the setup and management of coupon campaigns.
In conclusion, coupon codes can be a valuable marketing tool for attracting new customers, increasing revenue, gaining market share, re-engaging current customers, capturing data, and tracking campaigns. However, it is essential to consider the potential drawbacks, such as reduced profits, devaluation of products or services, and exposure to fraud. By using unique codes and implementing them strategically, you can harness the power of coupon codes effectively for your brand.
- Q: How do coupon codes attract new customers?
- A: Coupon codes reduce the perceived financial risk for consumers, making them more likely to try a new brand and make a purchase.
- Q: Can coupon codes help increase revenue?
- A: Yes, coupon codes can create a sense of urgency and a feeling of getting a good deal, leading to increased sales and revenue.
- Q: Are coupon codes only beneficial for online businesses?
- A: No, coupon codes can be used by both online and offline businesses to attract customers and increase sales.
- Q: How can coupon codes be personalized?
- A: Coupon codes can be generated as unique codes, enabling tracking of each user's behavior and allowing for personalized marketing experiences in the future.
Overall, coupon codes can be a powerful tool in your marketing arsenal if used strategically and with consideration of the potential drawbacks. By weighing the pros and cons, you can make an informed decision about whether coupon codes are worth implementing for your brand.
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