How Do Coupon Extensions Work: A Primer for Ecommerce Merchants
by Eric Trouton, on Dec 17, 2020 9:00:00 AM
Shopping online is easy, fast and fun. Most buyers use ecommerce platforms to shop online on a regular basis, and because they can now buy everything, from sneakers to spinach, from within the comfort of their own home, many bargain-hunters are turning to coupon browser extensions such as Honey and Capital One Shopping (formerly Wikibuy) as an easy way to get big savings on their purchases.
What are coupon extensions?
Coupon extensions are browser extensions that buyers can install in their web browsers (ex. Google Chrome) that allow them to discover and automatically apply coupons in shopping carts on ecommerce websites.
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Extensions identify and catalog coupons in three ways:
- They scrape them from the code of an ecommerce site when an extension's user manually types the code in at checkout;
- Users can directly submit coupon codes to the extension so they can be shared with other uses; and
- Some merchants may choose to partner with the extension and create coupons specifically for them.
Here are the steps it takes for a buyer to activate a coupon extension:
- They download a free extension to their website browser (ex. Chrome, Safari or Firefox).
- The extension will collect data on currently available coupon codes across a variety of ecommerce websites.
- When they buy something on a website, that extension will either automatically apply the largest coupon code available to their cart, or simply present a pop-up list of recently used promo codes.
Coupon extensions, and the platforms that participate in them, have three main purposes:
- Profit: Browser coupon extensions profit by charging commissions to participating retailers or affiliates. However, buyers on your site can use Honey, Wikibuy or other coupon extensions to find codes whether or not you as a merchant have elected to “participate.” In some cases, coupon extensions will actually direct buyers off of the site where they have already added a product to their cart by promoting a similar product on an affiliate site, thereby hijacking the user journey.
- Data: Data on buyers' shopping behaviors isn’t usually sold by coupon extensions, but it is shared in aggregate and anonymized form. This data is key to their business model and highly valuable to their partners.
- Long-Term Reward Programs: Most coupon extensions offer loyalty rewards for repeat use that they eventually can monetize.
Are Coupon Extensions Bad?
Coupon extensions are reminiscent of the Pennysaver. For thrifty buyers, coupons can help save money on every purchase, and in many cases, provide the motivation that convinces a buyer to purchase a specific product.
That's where the similarities end.
Psychology aside, coupon extensions are a lot more intrusive than clippings out of a weekly newspaper.
While they can benefit buyers by saving them money, coupon extensions can cause problems for ecommerce merchants by:
- Allowing for the use of unauthorized coupons: Buyers who may not have completed a required act to earn a coupon (ex. subscribing to a newsletter) will have access to it via the coupon extension and can use it to significantly reduce the value of their cart.
- Eroding coupon strategy: Most ecommerce merchants use coupons very strategically to encourage purchases without overly eroding their margins. Coupon extensions eliminate merchants' ability to control their coupon strategy by allowing the rampant use of unauthorized coupons.
- Reducing profit margins: The combined effects of unauthorized coupon usage and lack of merchant control over their own coupon strategy result in decreased profit margins.
- Misleading marketing attribution data: Many ecommerce merchants rely on coupon codes to track the effectiveness of their marketing campaigns (ex. a special code might be mentioned as part of a podcast ad as a way to track how many of that podcast's listeners make a purchase). By making limited use codes available to any user, the extensions eliminate the merchant's ability to rely on that data to evaluate marketing ROI.
Ecommerce merchants aren't the only ones harmed by coupon extensions. There are also two ways that coupon extensions negatively impact buyers:
- When they install coupon extensions, buyers grant those extensions permission to read and change all data on the websites they visit and give them the ability to collect and use data that buyers may consider private. Once they get that data, the legalese included in their terms and conditions allow the extensions to use it in many ways. This doesn't mean buyers should stop using coupon extensions. Instead, if you're a buyer interested in using these types of extensions to save money when shopping online, you may want to consider creating a separate user account on your browser when using coupon extensions so they have less access to your personal information during normal browsing.
Example of Honey’s warnings about access levels.
- Coupon extensions can create a poor or confusing user experience for buyers when shopping on ecommerce platforms. It's not always immediately clear what coupon extensions have changed or inserted in your shopping cart at checkout, and the extensions often use intrusive pop-up notifications. Some coupon extensions offer cash back for buyers but don't make it very clear that there are withdrawal minimums and withdrawal windows.
Those are just a couple of reasons why many ecommerce platforms choose to actively block coupon extensions.
Despite the risk, there are several coupon extensions that have millions of users.
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Discover a solution built to help you block the negative effect coupon extensions have on your bottom line.
Popular Coupon Extensions
A few popular coupon extensions have emerged in the past few years. Each functions a little differently, but all pitch similar benefits to buyers.
Here’s a side-by-side comparison:
|Honey||Rakuten||Capital One Shopping (Wikibuy)||Piggy|
|Owned by:||Paypal||Rakuten (Hiroshi Mikitani)||Capital One||Piggy LLC|
|Browser Compatibility||Chrome, Safari, Firefox, Edge, Opera||Explorer, Chrome, Safari, Firefox, Edge||Chrome, Firefox, Edge, Safari||Chrome|
|Auto-Injection of Coupons at Checkout||✔||No or limited capabilities||✔||✔|
|Promotion of deals on other websites||No or limited capabilities||✔||✔||No or limited capabilities|
|# of Retailers||40,000||50,000||40,000||5,000+|
|# of Users||17M||16M||13M||1.5M|
|Cash Back?||For online shopping portal only||Ebates||Rebates for online store||Yes|
Are Coupon Extensions Safe?
Each of these four, popular coupon extensions has been in the news for alleged privacy and security issues. This is often less about identifiable cyber breaches and more about nebulous or dense policies that are hard for buyers to understand.
The nature of the scanning and data collection activities a coupon extension performs presents some gray areas.
Shoppers who use these extensions are giving them access to their financial and some personal information. With this level of access, buyers must trust the extension itself, and every employee who works there, to use the information they gather only in the ways in which they would want them to.
Here's how different coupon extensions approach privacy and security.
Honey is owned by PayPal and used by 17M people. In November 2019, PayPal bought the coupon browser extension for $4B. Interestingly, right before Christmas, Amazon issued a warning to Honey users, explaining that it is a “security risk” and akin to malware.
Honey fought back on social media, defending its practices.
But what about sites that are retail websites? This could present a security or privacy concern for some users.
Protect Your Ecommerce Margins
Increase average order value by blocking discount codes from coupon extensions like Honey, CapitalOne Shopping, Piggy, and more.
Rakuten and Ebates joined forces in 2019. The company was founded by a Japanese tech giant and has issued more than $1B in cash rewards.
Instead of safety issues, Rakuten has a low star rating with Consumer Affairs because users find it hard to get ahold of support when they have issues.
Capital One Shopping (Wikibuy)
Capital One Shopping's (formerly Wikibuy) terms of services states that it collects email information (including purchase activity and transaction history), browsing and ecommerce history, including how much you’ve paid for certain items and data about transactions with participating merchants. The mobile data it collects includes IP address, browser type, browser language, screen settings, website use and interactions, precise location data, social media data and more.
Note that this is pretty standard. Any coupon extension you use is likely collecting data like this.
Piggy’s website talks a lot about how its app is patent-pending and that it has been vetted by antivirus agencies, including Symantec and Norton. Piggy has a B- rating from the Better Business Bureau. Most of the complaints were addressed but relate to not being able to withdraw cash from an account.
Piggy harvests the same data as any other coupon extension and will know what you are spending, when you are spending it, and where you are spending it.
How Can You Protect Your Margins?
Stop extensions like Honey from enabling unauthorized coupon codes on your site.
Using cleanCART, you'll be able to recognize when visitors are using a coupon extension, which extensions they are using, and stop them from reducing purchase value without interrupting the user experience.