A recent report from Edison Research division called The Social Habit shows that 70 per cent of email readers open emails from a brand or company in search of a deal, discount or coupon. High-end businesses tend to run discounts only on an annual or semi-annual basis to maintain a certain level of brand equity. This may appear a successful strategy but it may also ignore the opportunity costs of luring new customers in a slightly-lower tier.
The benefit of today’s technology, including customer management systems and POS systems, is the incredible amount of data that becomes available about a business’s customer base. This allows the promotional messaging to be geared towards a very specific audience. Avoid cannibalising high-value customers by targeting those lower-tier, more frequent purchasers or those who have hesitated to make a purchase.
At this point, customers are used to coupons and specialised offers as a basic component of their brand relationships. It’s also an important tool for independents to compete with chain store jewellers. Here are a few steps to consider before you decide to add one to your next email campaign.
Make sure coupons have a goal
Every coupon should have at least one main goal: to drive customers to take a specific action. If the goal is to increase sales during low traffic times, consider using a bounce-back coupon. Maybe the goal is to sell complementary products to increase the overall purchase amount.
Decide on a percentage or dollar discount
When offering a discount, maximise the perceived value to give people the notion that they have the best deal possible. Take a ring listed at $50. Does a discount of 20 per cent or $10 sound better? The math indicates they are equal but the perceived value is not.
In his book, Contagious: Why Things Catch On, Jonah Berger focuses on the “Rule of 100”.
When the price is under $100, use a percentage discount. If the price is over $100, use an absolute value. In the above example, 20 per cent off sounds greater than $10 off.
Choose the coupon type
There are many coupon types. Some of the popular ones are referral coupons, bounce-back coupons, new customer coupons, VIP, exclusive, and large-purchase coupons.
Referral coupons – according to The New York Times, 65 per cent of new business comes from referrals but the numbers don’t just stop there. Nielsen follows this statistic by claiming that people are four times more likely to buy when referred by a friend. Tap into your existing customer base by giving a discount to referrers as well as new customers.
Bounce-back coupons – these take the traditional coupon to the next level by requiring a customer to use them on a return visit. The goal with a bounce-back coupon is simple: give your customers a reason to return. Because of this limitation, bounce-back coupons are great to distribute during the holidays and other periods of high volume to assist in growing transactions during the slower months that follow. For example, share a bounce-back coupon during the Valentine’s Day rush that must be used in March or April.
New customer coupons – since 70 per cent of email readers open emails in search of a discount or deal, it makes sense to give a coupon in the first email they receive. Welcome new customers to your store with a small discount or gift to give them a reason to continue opening your email newsletters.
VIP/exclusive offer coupons – rewarding your regular customers helps build brand loyalty. A quarterly email with a coupon attached to VIP customers will show that they are valued. Also target this type of campaign to frequent customers with lower individual-purchase amounts.
Large-purchase coupons – to help increase sales, offer customers a discount based on their total purchase amounts. Before the discount and amount can be determined, calculate your average dollar sale (ADS) to get a baseline for the typical purchase amount. After that, increase the minimum purchase amount for the coupon by 20-30 per cent and offer a small discount. It’s an easy way to reward people for spending more in your store.
In conclusion, high-end retailers should experiment with promotions and determine what works best for their business and audience. The importance of maintaining brand image can’t be understated; however, completely avoiding coupons may be limiting the reach to potential new customers and restricting additional growth opportunities throughout the year.