Online Coupon Strategy: Measuring Your Campaigns
by Andrew Reed, on Jun 8, 2021 9:00:00 AM
Coupon marketing has long been a staple in the retail industry, and the digital era is no exception. Just last year, 88% of shoppers reported that they had used coupon codes while shopping.
But offering discounts can be risky. And if you aren’t tracking the success of your campaign properly, you may end up paying for more than you get back.
Here are some helpful ways to keep track of your coupon marketing campaigns so you can see if you are getting bang for your buck.
Why Use Coupon Codes?
Using coupon codes as a sales promotion can be an effective marketing strategy for any online retailer trying to grow their brand awareness, build customer loyalty, or attract a new target audience.
Codes can be issued as rewards to those who subscribe to your newsletter, engage with or follow your brand on social media, or share a referral link with a friend.
They also can be a useful way to re-engage a lost customer. Sending out codes to customers that have abandoned their cart or have not made a purchase in a while can boost their chances of returning to your site and therefore are effective ways to increase customer lifetime value.
The free discount also goes a long way for customer loyalty, as you build a friendly relationship with shoppers who will see you as on their side.
Although coupon codes are a commonly used marketing tool for online retailers, they don’t come without risk. Coupons are often used to attract new customers, but it's possible that these new customers are one-time, bargain hunters that are purely price driven.
Conversely, by having a discount box on your site, you may see an increase in cart abandonment as shoppers begin to scour the web for coupon codes and then not return when they don’t discover them.
Because of this, you want to make sure you capture customer information before the point of purchase. This way you can follow up with them and try to re-engage them back to your business.
It is also possible to harm your brand reputation by offering too many discounts and deals. Customers may end up taking your business less seriously and questioning the quality of your products. Make sure to limit the scope of your campaign and target specific groups in order to reach your desired audience without harming the reputation of your brand.
Moreover, there is also the risk of coupon fraud, which is when customers are improperly given access to limited use coupons that are not intended for them and/or they did not earn. For example, this can happen when your paid affiliates decide to cheat by sharing their coupons to discount websites, or when browser extensions like Honey or CapitalOne Shopping automatically inject codes they scrape off your site.
If you have set up limited use coupons, the unauthorized use of said coupon means that a customer is stealing a coupon from another customer. If your coupons are not limited, fraud can also mean you are reaching more customers than you intended and are likely hurting your own revenue.
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Back to Business
Now that you know some of the pros and cons of starting a coupon campaign, here are some easy calculations to help you keep track and manage a given coupon’s use.
First Know Your Baseline
The first thing you want to do is figure out how your site traffic and product sales are doing before you start a campaign, across the same amount of time you are expecting to offer your discount.
This will help you keep track of how effective your campaign is both during and after your promotion.
Finding Your Return On Investment (ROI)
Next, calculate your ROI. This is the most basic way of calculating the success of your campaign. Think how much you are capable of spending and how much you would need to earn in order to make the campaign worth it.
There are two ways to calculate ROI.
ROI = (Net Return on campaign/ campaign cost) x 100
ROI = (total revenue - campaign cost / campaign cost) x 100
In either case, the number you end up with is the percentage of your campaign cost you have earned back.
It's important to remember that, like many things in marketing, your coupon campaign may be a long term investment. Because you are reaching out to customers with discounted prices, it may take some time for the campaign to pay off, especially if customers are slower to return than you anticipated.
Calculating your coupon redemption rate should be your first step into understanding some of the deeper parts of your campaign.
Your redemption rate will be how many people you reached (through ads, affiliates, social media, or email) that actually took advantage of the discount.
Redemption Rate = (amount of codes redeemed/ amount of views on each code) x 100
One important thing to keep in mind is that this metric could be heavily skewed if your coupons are being redeemed by customers who didn’t earn them. If you make this calculation, and it seems like too many customers are redeeming your coupons, it is likely shoppers are automatically injecting scraped codes with browser extensions or finding codes others have shared on discount sites.
If you are interested in learning how to block the automatic injection of coupon codes into your checkout carts, click here to read up on our cleanCART solution.
Another key metric to keep an eye on is your distribution. If you have a limited number of codes and the amount of time it takes them to be used up is longer or shorter than expected, you might want to rethink your strategy.
Also, if codes for specific people are being used up too quickly, it could mean they are being improperly shared. Keeping an eye on this and trying to protect your marketing can save your campaign from being exploited.
Another important metric to track is what kind of customers you’re bringing in with your campaign. If you are marketing towards new customers in order to grow your business, but find that customers redeeming your coupon codes are actually returning, loyal customers, it's possible you’re targeting the wrong areas.
Also, if you find that many new customers are using coupon codes meant for those in loyalty programs, it is once again likely that your codes are being scrapped or shared with customers who did not earn them.
To calculate what effect your campaign had on new customers, use this formula:
(New customers that used codes / total new customers ) x 100 = percent of new customers your campaign brought in
To see how many new customers your campaign brought compared to your most recent benchmarks, use this formula.
To calculate what effect your campaign had on returning customers, use this formula:
(Campaign traffic - Original Traffic / Original traffic ) x 100 = percent change in website traffic
Comparing to Your Baseline
Once your discount campaign has run its course, you can use your new numbers to calculate how effective your campaign was compared to the baseline numbers you came up with earlier.
You can use the formula below to calculate any metric you would like to, but we’ve included some examples to help get you started.
C= (x2-x1/x1) x 100
In this formula, x2 would be your new values, x1 would be your initial baseline metric, and “C” would be the percent change.
You can use this formula to calculate a number of things including:
To see how your campaign drove changes in sales, use the percent change formula like this:
(Promotion sales - Original sales / Original sales ) x 100 = percent change in overall sales
- Website Traffic
To see how your site traffic changed, use the formula like this:
(Campaign traffic - Original traffic / Original traffic ) x 100 = percent change in website traffic
- New Customers
To see how your ability to bring in new customers changed, use the formula like this:
(Promotion new customer - Original # of new customers / Original # of new customers ) x 100 = percent change in new customers since the campaign
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A/B Testing and Attribution
You will likely be running more than one campaign at a time, so to figure out which ones were the most effective, make sure to keep track of each one's metrics and stack them against each other.
This can be tedious, but luckily there are coupon apps that will do much of the work for you.
Comparing campaign to campaign can also be skewed by coupon browser extensions and improperly shared coupon codes. It’s common for affiliate codes to beg scraped off websits and distributed through extensions like Honey. When this happens, it can not only lead you to believe that an affiliate is bringing more traffic to your site than they actually are, but it will also result in you paying out affiliates more than they have earned.
Digital coupons are one of the most effective ways to bring in new customers or reward customer loyalty. Whether your campaign focuses on bringing in shoppers from social media, SMS marketing, email campaigns, or PPC ads, tracking how each campaign is doing is crucial to knowing your money is being well spent.
On top of this, watching your stats is important to protecting yourself from influencer fraud and improper coupon redemption. Any kind of sales promotion comes at a natural cost, but leaving the door open to bad actors is an unnecessary risk.
Take your coupon campaign strategy seriously so you can grow your business while also protecting your margins.