The humble coupon’s surprising second act

Alec Gardner

22nd May 2017

Coupons have been enticing shoppers since first being introduced by Coca-Cola in 1887.

Those first coupons were handwritten and offered customers a free glass of Coke. Within 10 years, Coca-Cola was being sold in every state in America.

Although the customer journey has evolved and paper coupons are declining, the rise of smartphones has reinvigorated this universal marketing ploy.

Customers have grown to expect discounts and will often stop mid-purchase and walk away if these promotions aren’t readily available.

With competition fierce between online stores, a sale or coupon can be the deciding factor for a purchase.

Planet Retail’s 2016 trends show that 50 per cent of all savvy customers’ choices are determined by rewards such as discounts for their expenditure and loyalty. Another 32 per cent of shoppers expect to receive real-time promotions when in-store or engaged.

These statistics reinforce the shift in ideology from the right product, price, and place, to the right offer.

These higher expectations also create the risk of disappointing customers, or inadvertently changing their intended behaviour throughout the transaction.

Analytics show that customers, upon seeing the promotional coupon box at checkout, take a moment to search for a code, and then potentially abandon the purchase because they have been led to believe that a better deal is available.

Retailers can use this data, along with the customer’s history and current engagement, to determine what discounts to offer. The retail basket analysis can predict the likeliness of whether that offer will be fulfilled.

For example, if a customer attempts to make a purchase and the item is indefinitely unavailable online, the retailer could send an in-store coupon to their address. However, if they usually only engage with the store online, they might not visit the bricks-and-mortar version, and never complete the transaction.

Online coupons, on the other hand, can provide information that lets retailers analyse key aspects of the business, including:

• Omnichannel uptake: Determining which channels are being used most to redeem coupons identifies the preferred customer journey to a purchase decision, and this is essential to presenting relevant, real-time offers.
• Digital marketing investment: The data gathered from the checkout, which shows whether the customer has tried to enter a voucher, and then continued without completing the purchase, illustrates if revenue was lost because of the discount expectations.
• Fraud: An increasing amount of consumers are purchasing a number of discounted items to qualify for free shipping, and then returning some or all of the items, so the retailer doesn’t make a profit. Discovering this behaviour can let the retailer decide whether processes need to be changed.

Higher customer expectations have been created alongside the increased levels of engagement across different channels and platforms. Consequently, failing to meet customer expectations usually means the customer will go elsewhere immediately.

Retailers need to tie together data collected from the different channels and apply advanced analytics to extract the insights that let them make smarter decisions about what promotions they offer and when, what items to keep in-store versus those to sell online only, and when to offer customers loyalty incentives or discounts to secure the purchase.

Alec Gardner is the director of global services for Teradata’s Analytic Business Consulting division. He is responsible for developing the business and analytic services that Teradata provides to its clients.