Are Coupon Extensions Helping or Hurting My Business?

by Andrew Reed, on Mar 11, 2021 9:00:00 AM

Has your online business grown over the past couple years? Was 2020 an amazing year for your online sales? If so, you are not alone. 

Ecommerce sales have been on a steady 14% rise since 2010. And in 2020 alone, ecommerce shot up an astounding 44%, or roughly 380 billion (with "b") dollars.

More online shoppers means more people using discount codes via extensions like Honey; who reduced merchant revenue by a record $1.6 billion last year.

Do coupon extensions such as Honey and its rival Capital One Shopping help drive online sales, or are they hurting your revenue and ecommerce strategy?

Here's what you should know as you think through how to use coupons and discount codes as part of your ecommerce strategy.

Coupon Extensions Do Not Operate Like Paper Coupon Books

Enticing customers with coupons is a tried and trued marketing technique. But with coupon extensions now scraping codes off your website, the ecosystem has changed.

In the old days, coupon books were mailed to potential customers and contained coupons offering them a discount on your products or services.

In a traditional marketing funnel, coupons are used as a top of funnel strategy. You offer a limited number of coupons to increase awareness of your business, and offer discounts to new and/or returning customers, driving them to your business to boost a small number of discounted sales.

Traditional Marketing Funnel

Screen Shot 2021-03-09 at 8.22.44 AM

(Source)

But if coupon codes are being automatically injected into your online checkout cart, that means the shopper was not given the code until after arriving at your store.

Not only that—in many cases, the shopper has made it all the way through the funnel to the point of purchase without knowing the discount would even be offered. 

In his Tech in 2021 presentation, “the Great Unbundling”, independent analyst Benedict Evans’ speaks briefly on how shoppers used to use the internet in order to compare prices and find the cheapest options. By contrast, today's consumers are less interested in finding bargains and instead search for the best product for their needs.

(Source; Slide 36)

This means when a shopper makes the decision to convert on your site, it is likely they are more compelled by the quality and messaging of your product than the discount you may be offering them.

So these automatically injected codes aren't being used to drive buyers to your site. Rather, they're being handed out at the moment before conversion where most —roughly 98%— of patrons have already abandoned their purchase. 

The 2% of shoppers that are in your cart have already demonstrated high purchase intent, so when coupon extensions offer them discounts at checkout, they are likely just eroding the profit margins on a sale that you would have made anyway.

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How This is Harmful to Online Businesses

There are several ways coupon extensions can hurt your margins, damage your brand reputation, and disrupt your business strategy.

The first is by scraping your website for previously entered codes and then automatically injecting them for all of their users who visit your site, whether the codes were intended for those users or not (ex. the CapitalOne Shopping extension recently shared one retailer's employee discount code).

Employee Discount

The second way that coupon browser extensions cause harm to online retailers is by searching the web for better prices for a product your buyers are about to convert on, and then showing them the cost difference and providing a link directly to the other retailer

Capital One Shopping Price Comparison Example

Often a coupon strategy is built around handing out discounts to entice shoppers to take particular action (sign up for a newsletter, follow on social media, reward first time or returning buyers, etc.), and when you’ve built this strategy, you have aimed it at a very particular audience. 

But when these codes are scraped and injected on your site, you lose control over the audience that has access to your codes, and you also lose the ability to accurately measure the effectiveness of your marketing strategy because many of the customers who are now recipients of your discounted prices did not participate in your desired action and are walking out with a discounted product without earning it. 

Even worse, if you are using affiliate marketing, it is possible that you end up overpaying for the affiliate's services because your affiliate's code was hijacked by Honey, CapitalOne Shopping, or a similar coupon extension and shared with their user base. 

On top of all this, coupon extensions charge you a commission for the sales they claim to be driving to your website. So a 10% discount could quickly end up costing you 15-20% as you pay affiliates to shrink your revenue margins.  

These extensions can also have an impact on your brand reputation, as pop-ups and disruptive redirects negatively impact the experience of online shoppers and drive them away from your business.

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Wrapping Up

Extensions like Honey and CapitalOne Shopping offer coupon codes to shoppers who are already at the moment of conversion, moving the impact of coupons from the top of the marketing funnel to the bottom, where a customer has already decided to make a purchase. 

So instead of these codes driving awareness of your brand and earning you helpful marketing information, they are simply driving down your average cart value while also taking away your control of your own marketing strategies

In any business, it's important to arm yourself with the right tools to maintain control over your margins. Products like cleanCART put the power back in your hands by allowing you to track and maintain these errant coupons that may be causing harm to your online strategy, while preventing coupon extensions from auto-injecting discount codes at checkout.

coupon-extension-blocking-tools

Topics:ecommerce

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