How Much is Your Coupon Code Box Costing You?

When a web-savvy customer sees a promo code field in the checkout process, it’s a call to action – a call to search Google for a coupon code, and there are plenty of affiliate deal and coupon sites to be found. (Hey, even Alan Rimm-Kaufman does it!)

This action is a distraction and can cost you big bucks — especially if in this economy you’re already heavily discounting your merchandise.

There’s no shortage of coupon sites in search results:

How Coupons Can Clip You

1. The coupon immediately eats your margin by X% and an additional Y% for paying the affiliate who didn’t refer the customer, only cherry picked the commission.

2. Depending on how you track channel conversion, you may be cannibalizing other marketing channel attribution like email or SEO.

3. You erode trust with the customer and potentially damage your brand. Coupons can cheapen your image, and you condition the customer to expect a discount next time too. They may never pay full price from you again.

Fixing the Problem

Is the solution to cut out coupon offers? No, rather cut out the coupon box at checkout, and show it only to customers who have a coupon code. There are a couple ways to handle this:

1. When a customer arrives via an affiliate link or email with a promotion, the URL includes a parameter indicating the shopper has a promo code which is stored in the shopper’s session. When the shopper arrives at the checkout page, the parameter is looked up in the session and the box is displayed. Customer enters promo code manually. All other customers do not see a box.

2. The URL parameter includes the promo code and the discount is automatically applied at checkout. The customer does not need to enter a code, nor does a coupon box need to be displayed.

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30 Responses to “How Much is Your Coupon Code Box Costing You?”

  1. Will says:

    Curious how this would play out if you used promotional/coupon codes in offline advertising? For a multi-channel retailer, those codes are everywhere – catalogs, in-store flyers, postcards, etc.

  2. Vanessa says:

    Great post Linda! This is a topic that I have actually really been looking at, and I wasn’t really sure how I wanted to go about “fixing” it. This is great info, that I will definitely be considering. Another thing to consider is that those coupon code websites that are featured at the top of Google search results are likely being paid a higher commission or making bonuses because of their “performance”, when in all actuality they are (I think you said it best) “cherry picking” those sales.

  3. David Minor says:

    It’s difficult to do away with the promo code box since you can’t really control how a customer comes to your site (and as Will points out, offline campaigns become much harder). Removing the box invariably leads to customer service calls from confused customers.

    For customers that want a deal every time, we created a perpetual $1 off coupon at the top coupon search result for our company. It gets the occasional use, and if it saves or encourages a sale or two, it’s worth it.

  4. A workaround is to use a different URL for offline marketing that redirects to the home page or otherwise “tags” that customer as a promo customer. For example http://www.yoursite.com/winter09

    You bring up a good point David about the customer service calls, but if the customer is tagged through the promo (online or offline) this shouldn’t be a problem.

  5. While I agree in theory that displaying it has some negative effects, removing the coupon box unless they enter with a specific URL can be problematic.

    I was lucky enough to have had this same conversation with Bryan Eisenberg a couple of months ago. His suggestion? Place the coupon/promo box in a less prominent place in the checkout process so those that have a coupon code would be the ones to search for it and those that don’t have a code might not even notice it.

    We’re incorporating that suggestion (among others) into a redesign of our current checkout process.

    • I think that’s a fine idea but it doesn’t address the coupon-conditioning – if I use a coupon code once on your site I’m going to expect for all subsequent purchases I’ll be able to find a coupon. Of course, with auto applied coupons it’s the same problem – customer might start the shopping process at an affiliate site rather than a direct visit each time. Alan Rimm-Kaufman suggested using the term “voucher” instead of coupon code which is also a good idea – some may think that’s different than a coupon code (like a credit note or something).

  6. 3rd solution

    I have affiliate experience with coupon codes web sites, and what I could see was this scenario over and over again.

    Scenario:
    1. a visitor is in the shopping cart
    2. he sees the coupon code field but he hasn’t got one
    3. he either leaves or type into Google “getelastic coupon code” (by the way, I do the same all the time thanks to the ability to have several tabs open at the same time)
    4. finds an affiliate web site with the code, which didn’t contribute much to the sale
    5. sales done, and an affiliate is laughing as easy money

    Here is the best bit, the solution!
    Place next to that discount code field 5% discount code for those who don’t have it.

    Benefit:
    - less people will leave and search for it

    NOTE:
    always test it, if it works with your type of business

  7. I like your blog and wanted to say keep up the good work. Do you plan on posting more soon?

  8. I’ll add a 4th way in which coupons can clip you:

    Many people (especially “competitive” shoppers) hate the thought that they’re paying more than others. If they don’t have a coupon, and don’t feel like searching for one, they might just go elsewhere and you’ll lose the sale entirely.

  9. Bryan Eisenberg wrote about coupon codes and conversions in his 2003 ClickZ column “How To Increase Conversion Rate 1,000%” http://www.clickz.com/1756031 . It’s still worth reading.

  10. David Minor says:

    @Jeffrey We did an A/B test with the coupon code box hidden behind a javascript reveal and found no difference in conversions – we suspect that the results depend on the nature of your industry.

  11. Form really small businesses, you can sort of do what Fandango does with Trialpay. If the user enters an invalid promo that they found online (most are old and don’t work anyway), add some messaging advising how they can get their purchase for FREE (if under $25) using Trialpay.

  12. I like several of the creative suggestions from other readers.

    We believed that customers were leaving our sites and hunting for coupon codes on Google when presented with the coupon field in the checkout flow. We assumed that a portion of those customers were never returning to complete their order, either because of finding another site where they may have found a better deal or just got distracted. Either way, we felt we were not only leaving money on the table from this order but also downstream effects from a loss of customer acquisition.

    We A/B tested a number of different creatives including removing the coupon field all together, hiding it behind a div, making it hidden behind a link, and moving it to another page in the checkout flow. We found an improvement in close ratio and revenue per visitor on several of these other options. We have since added logic that allows for the coupon field to be on or off by default (depending on the site) and can be triggered using a parameter in the url to toggle.

    So for example, for one site we may have it visible by default but if the customer comes from an email campaign where a discount is already being applied, we would use a session parameter to hide it. For another site we have the coupon field hidden by default and the only way you can get use a coupon is from an affiliate so from the affiliate links it is visible, but for the rest of our traffic it is hidden.

  13. Pat Grady says:

    Change your affiliate program so that you don’t pay any affiliate that refers someone who is already on your site (loaded a page of yours within the last 15 minutes). Attacks two problems — the problem of cherry picking couponers who didn’t introduce a buyer to you – and – adware poachers who set a cookie (using tricks) for people already on your site.

    Further, these two common actions hurt you a way not mentioned earlier – you value add affiliates, the ones you want to refer you traffic, are hurt by clever cookie setters – find a way to pay them when a clever overwrite has happened and when they are rewarded properly, they will send you more high value incremental traffic!

  14. Beau Gray says:

    Your solutions work well if your business doesn’t operate in multiple channels. But how do you solve to promotion codes exposed to customers off-line?

  15. @Beau,

    I addressed this in my first comment for offline promo codes:

    “A workaround is to use a different URL for offline marketing that redirects to the home page or otherwise “tags” that customer as a promo customer. For example http://www.yoursite.com/winter09

  16. Ted S says:

    Fascinating post. I know I’ve been guilty of doing this myself (it’s worked) and I’ve had some discussions about it too. I’d love to see an etailer do a split test and measure the conversion impact and margin impact and blend the two…

    Some hypothesis thoughts… (1) more people who get coupons will convert; (2) the cost of the coupons overall may erode those margins, (3) people without codes may bail entirely.

    For multi-channelers with coupons in offline materials it’s definitely more difficult. Using unique codes can be one strategy but that’s a support problem and not always feasible. Seems like testing different implementations would make sense but ultimately if you want people using the codes as a campaign driver you have to make it easy to do and that means easy for everyone to find. Not having affiliates incentivized to push people to you who you already cookied will help reduce the number of sites listing those codes though.

  17. Better yet — don’t call it coupon code. Call it gift certificate. Nobody assumes that they can get a free gift certificate, but this way you can still issue coupons to select users. Or call it “Where did you hear about us?” and have a specific code trigger a discount.

    I did a piece about this here:
    http://blog.trialpay.com/2008/07/dude-wheres-my-coupon.html

  18. Alex, Good idea. But if some already has a gift certificate (say given by a friend for birth day) how do you apply the two codes. May be need to put a text link “add another gift certificate” etc. your second suggestion is also good.

  19. sonyelip says:

    There are a variety of promotional codes used. Free shipping promotional codes are very popular and can save 5-10% off the final purchase price. The savings can exceed the cost of gas and time needed to drive to a store and purchase the product in person.

  20. Shoppers across the world have been excited about free coupons, which are given by the companies dealing in online business. E-coupon is a sure shot way to increase online sales. E-coupons are easy to implement, you just need a shopping cart program, which will enable your consumer to enter the coupon code.Coupons are an efficient tool which can help to reach the target market segment and help sell more products.

  21. Alex says:

    I worked with a client that did not offer a lot of coupons, but a competitor did. We saw that users would leave the site to search for coupons and they take advantage of the competitors lower pricing and coupons. We simply changed the coupon box a text link and when A/B tested against the baseline saw a significant increase in conversion. Generally speaking, all a blatant coupon box does is tell users that someone is getting a better deal than they are.

  22. I completely agree.

    We saw our overall revenue AND our conversion rates INCREASE when we removed the “coupon code” from our site, and simply decreased the prices on our FlipScript products by the same amount.

    Internet shoppers are very smart, and we always underestimate their intelligence. If they can get a coupon code…they will. If they can get a better deal elsewhere…they will. And if we play games with them regarding the pricing, they know it.

    So, we stopped with the coupon game altogether, dropped the prices a bit, and took away the coupon code box.

    We still may do a sale once or twice a year to clear out some leftover ambigram items, but that’s always through a special URL (and usually only sent to our existing customer list).

  23. [...] personalization/tagging to identify customers with a promo code, and hide the coupon code field from [...]

  24. Carrie says:

    We are currently on EP 5.1.1 – we want to step up a referring site to automatically take a discount, without the customer seeing the promotion code. Fix #2 in the article, seemed like a good solution, but I am not sure where to begin to implement this fix. Any help or thoughts would be appreciated.

    Thanks,
    Carrie Pennington

  25. D-Dub says:

    Hi Carrie,

    From a high level, to implement fix #2 on EP5.1.1, one idea would be to write a new controller to handle the coupon code embedded in the URL. This controller would strip out the coupon code, apply it to the shopping cart, then forward the user to their next destination (checkout, product page or somewhere else). The coupon code would remain applied to the cart for the remainder of the customer’s session.

    This is from a very high level. For more technical details, it might be better to post in the Grep developer forums (grep.elasticpath.com).

    Cheers,
    Dave

  26. [...] for visitors unless they have arrived via an affiliate link or email campaign. These visitors are identified by a URL parameter which is stored in the shopper’s session. At checkout page, the parameter is looked up and the [...]

  27. While I agree in theory that displaying it has some negative effects, removing the coupon box unless they enter with a specific URL can be problematic.

  28. Great perspective Linda. I think that it’s essential that merchants fully consider and understand the implications of having a promo box and factor it into their business profitability model before “jumping the gun”.

    Regards, Derek

  29. [...] Bustos from Get Elastic suggests hiding the promo code box from visitors who don’t have a code and selectively showing it to only [...]

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