This article is all about designing and operating a profitable coupon marketing strategy. You’ll learn about the 4 different types of coupons in terms of promotional offers, and the psychological triggers behind the effectiveness of coupon marketing strategies.
In 1887, Coca-Cola distributed the first-ever coupon.
Between 1894 and 1913, an estimated one-in-nine Americans had received a free Coca-Cola, for a total of 8,500,000 free drinks.
By 1895, Coca-Cola was being served in every state.
Since then, coupons have become an integral part of retailers’ marketing strategy, with the digital coupon redemption value reaching $91 billion in 2022.
Interesting statistics around couponing (top picks)
- Over 142 million US adults redeemed digital coupons in 2020.
- The use of digital coupons rose in 2021, reaching 145.3 million users. For comparison, there were 126.8 million digital coupon users in 2016, and their number has been growing every year since.
- The average coupon redemption rate in the US was in 2021 0.77%. (Statista)
- In 2019, the total value of all coupons distributed in the US was $467 billion. Of that, only $3.6 billion worth of coupons ended up redeemed, which is also the total amount of savings consumers achieved.
- In 2015, consumers redeemed 2.84 billion coupons (of 319 billion coupons distributed), according to intelligence commerce network operator Inmar.
- Total coupon distribution dropped 15% to 200.13 billion in 2020. The downtrend is accelerating as coupon statistics for 2019 show distribution fell 12% to 235.46 billion the previous year.
- The US coupon industry is growing slowly, with a coupon use increase of 4% since 2017. (Statista)
- The redemption of digital coupons in the US surpassed the redemption of paper coupons for the first time in Q2 2020.
- Experts predict that the use of digital coupons will rise in 2021, reaching 145.3 million users by the year’s end.
- Digital coupon redemptions are predicted to surpass $90 billion by 2022.
Loyal Guru works with grocers to offset or improve their coupon strategy with our powerful offer personalization platform.
Analyzing recent results from one of our clients, GROCER X achieved 9,98% redemption rate on UPSELLING campaigns, 19,58% redemption rate on cross-selling campaigns with loyal customers and 4,28% with sporadic shoppers.
What are the different types of coupons?
Based on promotion type, coupons allow retailers to offer of a wide range of discounts and deals, such as:
- Percentage-Based Discounts, the most prevalent coupon kind.
- Free Shipping, frequently offered in conjunction with a minimum order size to improve the AOV.
- Free Gift, usually require customers to buy at least one other item, which is usually of a certain value.
- Dollar-based offers, based on the dollar value of a product make individuals feel like they’re wasting money if they don’t utilize them.
What consumers use coupons (by generation)
- Coupon use is prevalent across all generations, with 9 of 10 respondents stating they use coupons for their food, over-the-counter medications, household items and health and beauty purchases.
- Millennials are getting in on the coupon action, too! A report released by NCH Marketing Services shows that when millennials become parents, their value-seeking behaviors reflect those of Gen X and baby boomers, with 89% of millennial parents using coupons when planning their shopping, compared to 78% of millennials without children.
- Millennials with children are more likely to have increased their use of a smartphone to keep a shopping list (48%), get coupons or deals (53%) and download retailer loyalty offers (52%).
- Seniors are getting wired, too, as online coupon usage nearly tripled for those ages 50 and up (18% in 2014 versus 7% in 2010).
- 53% of men use online coupons vs. 47% of women. Online coupon usage for females has more than doubled in the last four years (25% in 2014 versus 11% in 2010).
|Generation||Digital Coupon Use|
How do shoppers want to receive their coupons (by channel)
- 45% of respondents liked to receive coupons and promotions for food and groceries through their email inbox. On the other hand, only 11 percent of respondents stated that they like to receive them through social media.
- 93% of coupon users are very likely to use coupons or discounts they receive via email
- 40% of consumers share email deals via email to their friends
- 28% of consumers will share retailer deals via social media
- 47% of consumers relied primarily on coupon apps, while 44% use cash back and points apps. The latter is one of the key coupon industry trends for coupon issuers looking to attract new customers and grow their business.
|Year||Number of digital coupon users (in the US by year)|
How do coupons influence shopping behavior?
- Almost 70% of consumers love receiving coupons.
- Online coupon users spend 24% more than regular shoppers
- 66% of consumers say they’d make a purchase if they had a coupon, regardless of whether they initially planned to buy something.
- 63% of consumers say they will reconsider an abandoned cart if offered a coupon
- 17% of consumers will Tweet or RT a deal to save 25% or more from a brand
- Nearly 70% of millennials will look for a deal before making a purchase.
- 80% admit they’d try a new brand if it offered them a discount.
- 48% of people will steer clear of brands that don’t offer deals.
- 34% of smartphone owners will use their device for mobile coupons
- 68% of consumers believe that digital coupons generate loyalty.
Psychological triggers: Why do coupons attract shoppers?
We’ll mention 5 psychological triggers that mostly impact coupon strategy success in retail. These triggers influence shoppers actions and decisions fundamentally 24/7.
An important point to remember is that these mental triggers are not isolated. They are closely related, working synergistically and together they can create a massive impact.
Think of Black Friday: Lots of shoppers write down the date well in advance and start to prepare for it by putting some money at a side to spend on that day and have a list of desired items.
Anticipation is also used in new product launches, letting customers know in advance that something new and exciting is coming up. As an example, when a retailer is launching his new loyalty program, he can prepare coupons and vouchers to encourage the most active customers to join as soon as possible, creating great momentum for the program launch. When retailers use anticipation right, shoppers will save the date.
When there is less of something we want more. Low-stock or limited-inventory sales create a scarcity mindset. If people know something they’re eyeing is about to run out, they’ll be more likely to buy it before it’s too late and gone forever — this is especially true for high-ticket items
The idea behind reciprocity is that when someone gives something to us we feel an obligation to give something in return. Thousand of years ago commerce and trade was conducted like this.
Giving tons of value creates a reciprocity imbalance, the more value the more likely shoppers become loyal and want to reciprocate.
Free samples or trial-size products cost close to nothing to produce, yet they are a major revenue driver for retailers. Brands offer a risk-free proposition to consumers who can try something new for free. The stores that do manage to impress shoppers with their samples earn consumer loyalty and trust and generate profitable sales due to our natural desire to reciprocate goodwill.
Coupons that expire and flash sales create a sense of urgency. Buyers know deals will only be available for a limited time, which means they need to take action right away instead of waiting. If they don’t, they’ll have to pay full price later as a result.
Shoppers want to do business with companies they know, like and trust. Defining strong values, supporting important causes and humanizing the brand builds connection and likeability. Enterprise retailers often create successful coupon strategies that include supporting an NGO or specific cause.
Can coupons be bad for a brand or retailer?
Even though discounts drive sales and make consumers feel good about purchasing, not every brand, product or type of customer responds well to discounts.
In fact, coupons can also harm a brand’s customer perceived value, defined as the value or worth of a product in the eyes of the customer.
When it comes to luxury items, for example, coupons can be both ineffective and counterproductive. One study found that, when luxury items were discounted, they were seen as inferior due to being out-of-season already or less popular, making them less desirable.
That’s why Enterprise Retailers must use the right pricing strategies, at the right time, for the right customers.
Mass coupons don’t boost sales or build loyalty. Shoppers really want to have a personalized customer experience. In fact, recent research reports that 90% of people find personalization appealing, and 80% of consumers are more likely to do business with a company that offers personalized experiences.
Consumers today expect to be recognized by name, expect to have their preferences remembered, expect product recommendations and expect personalization that is relevant within the context of the situation.
Therefore, brands that understand their customers and respond accordingly can significantly improve the customer experience, create consistency across channels, increase loyalty and drive more revenue.
Your coupon management software should allow you to scale up your company’s personalized offers and design millions of AI powered promotions in minutes (not weeks), optimizing your offers and audience segments based on customer data.
About Loyal Guru
Loyal Guru empowers you to go from customer data to 1:1 personalized coupons at scale and drive results, reduce distribution costs and manage promotions, so that you can create unique and remarkable customer experiences.
Having a specialized coupon management system will save your developers a lot of time and resources as well as cut your time-to-market, as compared to using a limited coupon software or developing a custom solution.
If you are considering whether to build or buy a coupon management system, then, then get in touch with one of our team – we’ll be happy to show you examples or talk through your brand’s unique challenges.