The ultimate guide for coupons to increase conversion & retention 

Overview

1. Discounts vs. Vouchers vs. Coupons
2. Customer Psychology: Why everyone loves Coupons
3. Setting up a coupon – the basics
4. 6 data-based strategies for coupon marketing

Discounts vs. Vouchers vs. Coupons

Before we go into the nitty gritty, let’s do a little excursion into semantics, so we’re all clear on what we’re talking about.

Discounts

Temporary (or final) price reductions for specific products. On their own, they are directly tied to a product or service. For example, you can offer a discount if customers pay for their subscription for the full year instead of one month.

Read more about discounts and how to leverage them for higher conversions in our blog feature.

Coupons

Discounts or perks that are redeemable at the point of sale for specific products (or your entire stock).

Customers can get coupons in physical form (via snail mail, as magazine cutouts, flyers, etc.) or digital (promo and discount codes) to redeem them when they purchase the product or service.

Depending on the type, customers can combine different coupons, stack them or only use one per person (or per purchase).

It’s very common that coupons of a higher value can only be redeemed with a purchase minimum (e.g. “get 25€ off when purchasing products for more than 100€”).

In contrast to discounts, the product price stays the same in your store, since the discount will only be applied at the checkout.

Discount- or promo codes

Can be counted as coupons, as they’re usually the digital equivalent to the printed-out coupon tickets of stationary stores, restaurants, etc.

Vouchers

Hold a monetary value that customers can redeem for most or all products and services of your business. In contrast to coupons, vouchers usually have a monetary value and no discount percentage and they can be sold as a product itself.   

Customer Psychology: Why everyone loves Coupons

Now that we know what coupons do, it’s time to find out why they are an incredibly useful marketing and sales tool. We’ve dug into customer psychology studies and found out that coupons literally spark joy.

1. Coupons make happy & decrease stress

According to scientific research conducted by the Claremont Graduate University (via MediaPost), the use of coupons increases the level of oxytocin, a “happiness” hormone. In 38% of cases, the test participants even remarked that coupons made them happier than kissing or cuddling.

The same research found that coupons actually reduced stress-related symptoms such as respiration rates, heart rates and sweat levels. Apparently, a coupon acted as stress-relief for one third of participants (keep this in mind for difficult customer support cases and customers in risk of churn).

2. Coupons make people feel smart

A big difference between a discount and a coupon is the fact that a discount is for anyone, and a coupon is for selected few who are smart enough to find and make use of them.

An admittedly older eCommerce survey from Blackhawk Network showed that 40% of surveyed customers feel smart when they can find the best deals.

3. Coupons can’t impact your product value negatively

Discounts are known to be great marketing incentives, but they can also have the complete opposite effect. Research shows that many people will sub-consciously perceive a product as less valuable if discounts have been applied too often, or for too long or are deemed too high. That’s why some luxury brands wouldn’t be caught dead offering discounts.

A coupon, on the other hand, feels more like something the customer has earned:

• as part of a loyalty program,
• by reviewing your products or recommending them,
• by doing research,
• by subscribing to your newsletter.

A high coupon discount therefore has no negative impact on the value of your products.

4. Coupons are popular across the board

One might think that low-income households are the most interested in coupons, but new studies have shown that the high-income households apparently keep their income high by actively looking for coupons.

A current study by SimplyCodes surveyed US customers and found that customers with a household income of over 150.000 US-Dollars are among the most active coupon-“hunters”.  

So, if you cater to higher income customers, coupons might be a good way to attract your clientele without having to resort to discounts and their disadvantages (see point 3.).

5. Coupons can make people spend more

The idea of finding and getting a deal can make coupon users less alert when it comes to their actual spending.

Utpal Dholakia Ph.D.writes for Psychology Today that people who are hunting for coupons:

• often buy things they might not have bought otherwise,
• buy more than they need
• or rather go for an impulse purchase (but with a coupon!) instead of waiting for an organic discount price.

This also means, that you can test out coupons with a lower discount before planned sales campaigns (e.g., Black Friday, Winter sale, etc.) to increase your margins.

Setting up a coupon – the basics

We know what coupons do; we know why coupons are popular among customers. Now, you probably can’t wait to set up a coupon for your products and services.

Because each coupon can technically be a contract between you and your customers, it’s good to know how to set up a coupon in a way that makes it easy to use and impossible to misuse.

Make sure to include all necessary information on the coupon, so your sales personnel can easily see and decide if a coupon is valid. The following information should always be part of the coupon to avoid customer frustration (or even legal issues).

Coverage

Define, what type of products your coupon is for. Coupons are a great way to

• introduce new products or services
• sell leftover stock or bundles
• attract new customers
• re-activate inactive customers
• up- or cross-sell to loyal and active customers

Think about whether the coupon should cover the entire product line or only specific products or product groups.

Time frame (validity)

Is the coupon redeemable until the end of time or do you only offer it for a specific time frame?

A limited time period is actually recommended for your coupons since it increases a sense of urgency for your customers and it prevents customers showing up with coupons from 10 years ago.

Discount percentage or amount?

According to a survey by dontpayfull.com, customers expect a discount of 10 – 30% of their shopping cart (or product) per coupon.

However, when setting the discount, make sure that you’re not paying on top but still generate revenue.

Quite often, the messaging of the coupon is as important as the discount itself, so depending on the product and the perceived savings, it doesn’t always have to be 10% 30%, if you’re able to make it sound more attractive.

For example, if your coupon is for the entire shopping cart, 5% sound a lot more attractive than if the coupon is only valid for a very specific product selection that customers usually don’t buy in bulk.

Redemption rules

Have you heard of the time that a Pepsi customer tried to get Pepsi to exchange loyalty points for a real fighter jet?

Your customers are smart, so make sure they don’t outsmart you with clear and safe redemption rules. Your legal team is a great collaborator to make sure your rules are crystal clear and placed, printed and positioned where they are visible. 

Here’s a few questions you should ask yourself that can help you define some rules:

• How many coupons can be redeemed per product / person / purchase?
• Can different coupons be combined?
• Are coupons valid digitally and/or in stationary stores? (and if both, what info does the coupon need to have, to be redeemable, e.g. a digital code for printed coupons)
• Are coupons valid in all branches?
• Are coupons valid for a specific time frame?
• Can items purchased with a coupon be returned for the full price (or at all)?

6 data-based strategies for coupon marketing

We know what coupons do, why customers love them and how to set them up properly. Last but not least, let’s dive into some marketing and sales studies to find out how to best leverage your coupons, so they help with your acquisition, conversion and retention.

1. Offer your customers coupons before they reach the checkout to prevent cart abandonment

According to Statista, the cart abandonment rate worldwide has increased dramatically in the last 15 years and is currently at a hefty 70% on average.

A survey from the Baymard Institute found that 70% of companies have a coupon code field, so customers with a code can easily redeem it without leaving the checkout.

However, the same survey found that many customers who do not have a code will pause when seeing the form field and even leave the page to look for it. In fact, a big coupon study by CouponFollow (PDF) had “finding and applying coupons at checkout” as one of the Top 3 pain points for customers during mobile shopping.

The CouponFollow study also found that 59% of surveyed customers will spend up to 5 minutes looking for a coupon before checkout.

Consider offering coupon codes throughout the first web shop visit, so first-time customers get a bigger incentive to purchase from you. An especially popular practice is to offer coupons after customers sign up for a newsletter or a membership program (thus, enabling you to stay in contact with them, even if they abandon their cart).

You can read more about checkout optimization here.

2. Offer coupons via mail after cart abandonment to increase conversions

If registered customers abandon their cart, they are not lost to you. Waiting a few days to send a reminder mail in combination with a coupon has above-average conversion rates according to Klaviyo.

Not only is the open rate for these reminder mails around a whopping 50%, but the conversion rate across food & beverages, sporting goods, apparel and accessories and office supplies is around 3,5%.

3. Experiment with digital and print-out / snail mail coupons

Print is not dead, especially when it comes to print-out flyers, catalogs and coupons.

According to the Valassis 2k18 Coupon Intelligence Report (via SnailMail), back in 2018, 48% of shoppers actually prefer print offers in their mail. 42% love coupon books in newspapers and 39% enjoy digital discounts as part of loyalty cards.

Although recent studies suggest that some customer groups are slowly moving towards digital coupons, a survey by Savings.com (via Statista) shows that physical coupons are still trumping over online coupons.

Share of coupon usage among customers

• All types (92%)
• Physical coupons (82%)
• Online coupons (79%)

It should be noted, that the type of industry and product might impact these preferences. Supermarkets, restaurants/fast food chains and stationary shops can still excite their customers with physical coupons, whereas most online shops, SaaS and other mainly digital vendors probably attract more customers with digital versions.

Different types of coupons

• Newspaper & magazine cutouts
• Flyer coupons (often either one single coupon or a group of coupons for different bundles, products or services)
• QR codes (in-store, on posters or online)
• As part of the print-out receipt
• Email coupons
• Social media coupons (e.g., from influencers)
• Point-based membership coupons
• “Gift” coupons after purchasing from partner companies

4. Make use of influencer coupon codes to grow your audience

Depending on whether you follow Instagram, TikTok, Twitch or YouTube channels, you probably have seen the occasional video of your favorite content producer presenting a product or service and offering a special coupon code.

Influencer marketing is huge and not just for teenagers. Even though we might only think of young women and men presenting clothing, gadget and food, there’s plenty of business influencers who do just the same but for a different buyer group. It’s less the age but rather the amount of time spent on social media that impacts influencer-led purchases (Pace University, PDF). This can also include channels such as Reddit or LinkedIn.

For successful influencer marketing you need to find the right amplifying content creators in your specific industry and customer niche and using their reach to sell your product.

The coupon codes serve several purposes in that regard. They not only offer an incentive for new customers to try out your product or service.

They also provide data on how successful a campaign has been. That way, you don’t just have to go by impressions but can track conversions as well. 

5. Increase share of wallet by offering coupons (and apply SEO for them)

Within growing competitive markets or even as a new company in an established industry, it’s crucial to convince customers to choose your products and services over others. While there’s many different variables that can impact a buying decision, discounts and coupons are huge levers.

A RetailMeNot survey from 2018 found that 80% of participants are more likely to make a first-time purchase with a new company/brand if they found an attractive discount.

Likewise, not offering any discounts can prevent almost half (48%) of customers from engaging with a brand.

Offering coupons for products and services with a high demand and a high competition can actually steer customers away from other brands while they are on the search for discounts. Remember, most customers will take some time to look for discounts and coupons before they do their online shopping. So, optimizing your search engine ranking for “product name discount / coupon” might actually increase your chances to convince customers to go with your brand.

The right keyword helps your coupon code to rank

By the way, it helps to test out different keywords to make sure your coupons can be found with google searches. CouponFollow asked what terms are most popular among American customers and lo and behold, “coupon code” did not rank #1:

1. Promo Code (44%)
2. Discount Code (28%)
3. Coupon Code (17%)
4. Coupon (7%)
5. Voucher Code (3%) 

(by the way, you can easily check and compare different search terms for your markets and languages with Google Trends)

6. Use coupons as part of loyalty and (paid) membership programs

Coupons are a huge asset of almost any membership and loyalty program. Whether customers collect points, receive coupons via email or otherwise – combined, loyalty programs and coupons can increase the number of purchases, and the money spent.

A recent study among Scandinavian customers conducted by us in partnership with Subscrybe and Vipps MobilePay also hints at the future: paid membership programs.

The concept itself is fairly popular in Norway, Denmark and Sweden. Although there is a generational divide, all generations are part of paid loyalty clubs.

As a paying club member, coupons feel even more special (but should also result in higher savings and perks. Make sure that you combine them with other benefits (early access to products, VIP status for waiting lists, special events, etc.).

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You’re all set. Now, you only need the right platform to manage coupons. Lucky for you, the Billwerk+ makes it easy for your customers to redeem their coupons during the checkout process. Sign up for free and see for yourself.

And if you want to do more to expand your revenue and increase customer loyalty: our recurring revenue management platform is perfect to set up subscriptions and membership programs and create coupons (and other incentives) to boost your conversions and increase your customer lifetime value.

Set up a demo meeting to talk about your business case and get a guided tour through our platform.