Put Your Online Coupon Ducks in a Row

Sorry for that title. But you know that no online marketing campaign – of any kind – gets those terrific returns unless you plan for it. You need to know your market and what you want to communicate to it before any tactic will work, coupons included. We have explored how online coupons can be used to ignite business, and what kinds of business models there are for using coupons.  In this post, we review your planning steps to make sure the effort you put into an online coupon campaign is not wasted.

This is the fifth and final post in our online coupon series.  You can find the first four at these links:

Coupons can generate traffic and sales. Online businesses need to evaluate how using coupons fits into a strategic marketing campaign with benefits that exceed the costs of price competition.

While the strategic issues will be somewhat different for every business, the basic marketing considerations will shape how each business will implement the tactic. These factors are Marketing 101, but we too often hurry past them to launch a tactic.

Know Your Market

Enough said. But it is important to keep this front and center: the people in your market segment shape the way to make your offer, and this is nowhere more true than on the Internet.

Define the Objectives of the Online Coupon

Direct mail campaigns have been used for years to achieve a variety of marketing objectives:

  • Market share
  • Product introduction
  • Customer acquisition
  • Sales promotions
  • Inventory clearance, and more

You might have similar objectives for your online coupons, but the tracking and communication tools of the Internet can help to make the coupons even more effective. The exact content of the offer, and the timing, duration and placement of the coupon will vary depending on the objective.

Analyze the Economic Value

All online coupons have costs. There are costs in creating them, distributing them, tracking them, and especially in funding the discounts they carry. Often, using coupons will put you in a loss position on those specific items, so the offer is worthwhile only if the longer run economic returns are there. One of the most important reasons to use online coupons is to acquire a new customer, so the lifetime value of a customer is an obvious basic consideration. Do you know the lifetime value of your customer?

Choose the Timing and Duration to Achieve Your Objective

We believe coupons are most effective for short-term boosts in traffic and sales. Using a coupon as a permanent tactic is just a unilateral price cut, and that cannot be good for your business in the longer term. That said, there are businesses that continuously offer coupons, but rotate the offer among products or services. Or, you might have a variety of offers in a variety of channels to reach your market in slightly different ways, while always building the brand.

Tracking and Analysis Always Required!

If you take the trouble to launch a marketing campaign, it is essential to learn from it. Even if it fails to hit your objectives, you will know something more for the next time around.

Coupons have grown up online. Even if you have not used them in the traditional marketing channels, consider them anew as part of your internet marketing strategy. As a source of new customers and new relationships, coupons may prove to be one of your most powerful tactics.

Groupon Re-Tools Coupons for the Internet

The most basic think about Groupon is that if you are a subscriber, a deal a day comes your way via email (or maybe Twitter). Over 35 million people now subscribe to Groupon’s local area offers in over 160 cities in the U.S. and over 100 more in about a dozen other countries. Groupon recently rejected Google’s offer of $6 billion and is reportedly preparing for a $15 billion IPO during 2011. The company is a money-making machine, taking in a sizable share every time a special offer is purchased.

Is Groupon Right for You?

Groupon seems to work best with local retail businesses like hair salons, restaurants, and clothing stores, but it can be used for many other kinds of products or services. A more analytical way of putting it is that the system favors businesses that can offer a commodity on a volume basis at price points that can attract a lot of people. That said, the price points don’t eliminate the luxury or premium goods segments – if you can handle volume and have local outlets, Groupon might work for you.

Why it Works

Business owners take a steep discount to have a deal of the day available for 24 hours, but they make no upfront payment. Offers are not activated until enough people buy it, ensuring that the deep discount is partially compensated by volume. Since small businesses have been overwhelmed by responses, Groupon encourages limiting the number of coupons available (unless you happen to be a huge national chain like the GAP which could handle 445,000 redemptions). Businesses report acquiring many new customers through Groupon.

How it Works

Groupon expands city by city, starting by recruiting highly rated local businesses that it believes will be successful. It attracts local subscribers, and then pushes a daily email to them with the offer of the day. You can purchase online or on mobile device (iPhone or android app). Once enough people have purchased (the deal is ‘tipped’), you can redeem the offer. Print the coupon to present for discount, or show the vendor your coupon on a mobile device.

Relationships Build Groupon

Personalization helps target offers to you, though you can always browse your city
for more. Groupons direction of evolution is toward more and more social integration as it runs hard to stay ahead of the many competitors it has spawned (including Google).

Groupon has a lot of competitors, the largest of which is LivingSocial. But it is much larger than any competitor, and growing rapidly. If Groupon is active in your market, it is a powerful marketing tactic you should consider.

5 Great Online Coupon Networks

It seems like a new online coupon network pops up every day. Marketers are a creative bunch, so new twists on methodology add dimensions to the nonstop competition.  In this post, we look at a group of 5 of the bigger networks, followed by a short list of wannabes.

This post is the third of 5 about online coupons. You can get the previous two following these links: online coupon overview and reasons to use online coupons.

Online Coupon Giants

  • Groupon.  This is the 800-pound gorilla in this category. Google is reputed to have bid recently for Groupon, with a purchase price as high as 6 billion dollars, and was rejected (and is now preparing its own coupon network called ‘Google Offers’).  Groupon has a powerful business model that incorporates a pricing structure that allows a business to pay only for actual sales and leverages the social networks of participants to reach new customers. Groupon has a slew of competitors headed by Living Social, but they are all far behind in this competition.  We’ll be publishing a more in-depth piece on Groupon in a few days.
  • Google Places.  If you have one or more local businesses, chances are you have a Google Places account (if you don’t, set one up before the end of the day). In the very first screen of your Places account, Google invites you to “Attract new customers by creating an offer for your business”.  These offers will display with your listing in localized search results, and they will also display on mobile devices (unless you toggle off that distribution). You will have the options to add an offer code and image if you wish.  Google will even give you a preview of what the printed coupon that customers will bring into your stores will look like.
  • Valpak.  Valpak has been a giant direct marketing firm for a long time. Now they have an online distribution network you can access to promote your business to the geographic areas you choose (note that Valpak is not your only option in this category – a brief search will yield many coupon networks).  For a local area, just visit the general contact screen and you will be sent to a form that will be submitted to a representative in your area.
  • RetailMeNot.  This large network has mainstream stores like Barnes and Nobel, Victoria’s Secret and Banana Republic. You can either select coupon codes (which link to the vendor’s landing page), printable coupons, or grocery coupons. A nice feature is the map display of coupon opportunities available in your neighborhood. RetailMeNot has recently added a social component to allow bargain hunters to interact directly with each other. You can use your favorite social network login, like Facebook Connect, to participate.
  • Coupon Cabin.  Coupon Cabin is one of 8 online coupon outlets in a group run by Network Solutions. These systems capture email addresses and send customers coupon codes for online redemption at participating vendors OR printable versions for in-person redemption.  Coupon Cabin has hundreds of vendors, many of them making online offers only.

More Online Coupon Networks to Check Out

http://www.grocerycouponnetwork.com/ Printable grocery coupons very similar to the traditional coupons you get in the Sunday supplements (remember newspapers?).

http://www.godaddy.com/ecommerce/savings-network.aspx Domain and hosting giant GoDaddy also runs a proprietary online coupon network. I guess Network Solution’s coupon business attracted some attention at GoDaddy.

http://www.couponnetwork.com/ CouponNetwork.com offers printable coupons that can be personalized to feature “your favorite stores”.

http://www.theshoppingnetwork.com/ The Shopping Network is a more traditional brand name aggregator, but it offers “coupons/discounts” in the main navigation.

http://www.couponcraze.com/ Online coupons for redemption at a variety of ecommerce outlets for products from software to vacations.

Come back for our next installment, where we take a closer look at Groupon.

8 Good Reasons to Use Online Coupons

This is the second in our series of 5 posts about online coupons. Take a look at the introductory piece about online coupon basics and then read this one.  The next installment in about a week.

The most important, basic reason to use online coupons is to get or keep a customer. In fact, this is the basic rationale for all marketing.  Coupons can be used to get or keep customers in a number of ways that correspond to the conditions in your business.

However, coupons are often used to motivate sales through discounting. While discounts can lead to customer acquisition, you have to maintain the distinction between motivating short-term sales and building a customer base. Since low price is the lure for online shoppers in most categories, it is tempting to use coupons in price competition just to boost sales. But if you do this, you have to be very careful to make your business case for discounts with the thought in mind that you may be setting a price ceiling, not a floor.

But businesses that rely on continuous discounting create the expectation among shoppers that “full price” is for suckers only.  Why would you use a coupon campaign?

Here’s How to Use Online Coupons

We see two basic ways to use online coupons to get or keep customers.  The obvious one is to motivate purchases through discounts or other offers. The second, increasingly important in the relationship-building that online marketing promotes, is getting and keeping a customer.

Reasons to Use Price to Motivate Customers

Clear inventory: Stimulating sales in the short term to clear inventory to make room for new products or new models, or simply to boost top line revenue, is a classic use of coupons.

Increase market share: Increasing market share in a well-defined niche is where the price competition bites hard. Depending on how well differentiated your product or service can be, you will be going more or less head to head against your competitors. If discounting is easy (and your discounting is easily visible), this can be a very costly form of customer acquisition characterized by a dive to the bottom price-wise. Online coupons can still help increase market share if your markets are already highly price competitive and/or your competitors are not using them.

Counteract cyclical downturns in sales: Many businesses have predictable seasonal variations in sales. Coupons can be used to boost business in the downturns in order to maintain production capacity, cash flow, or other business requirements that can justify reducing the revenue per sale.

Get customers in the store to get additional sales: You need to have customers in the store in order to make sales, right?

Use Online Coupons to Build Relationships

Capture a new customer: The lifetime value of a repeat customer may justify deep discounts for the first sale or lead. The requirement is to have a strong customer retention program in place to extract this value. Customer retention will be the subject of other posts because building online relationships is one of the bedrock principles of online marketing. But smart marketers know that customer retention is not only key to building a brand and sales directly, but it also leads to new customer acquisition through viral distribution. Its importance cannot be overstated.

Introduce a brand or product to a new market segment or location: Breaking into a new market is hard because potential customers already have 100% of their mind share allocated. New customer acquisition in these circumstances can be spurred by offers conveyed through third party coupon networks (Groupon is the innovation leader in this category) that have their own set of loyal visitors whose eyes you can borrow – for a price.  These third party networks can help you “get found.”

Introduce a new product or service to existing customers: Online businesses have a huge advantage in their solid connections to existing customers via email, texting, Facebook and Twitter. These channels are low cost and highly targeted ways to alert your best customers about new products and services, perhaps coupled with introductory discounts or other offers. Using a coupon in this situation may be ideal if you want to require an action on the part of your customer to confirm or reinforce the relationship.

Build a brand: Coupons can help reinforce the power of a brand. Since this is always a function of placement and repetition, coupons might be one component of a brand awareness campaign taking place in multiple online channels.

Our next post on coupons will look at 5 successful coupon sites, and we’ll toss in 5 more that are not so big but illustrate ways to use coupons.  The business models vary, so you need to be aware of how they might work for your business.