Forbes reports you can convert 70% of the consumers from their loyal product with the thrill of the deal. How is this possible with traditional coupons converting less than 2/10 of a percent (0.16%)?
Why are consumers loyal to a particular brand. While the taste, cost or other feature is certainly a factor to keep purchasing the same brand, there are hurdles to switching:
- don’t want to risk getting an inferior product,
- don’t want to take the time to consider the options
- don’t have a reason to try something different
So what can we do to influence their decision? Coupons? Price? Something else?
Coupons? Traditionally coupons are delivered to consumers via newspapers, direct mail, receipts, apps. With these methods, redemption rates are in the 0.8% neighborhood (not close to 70%). But the story gets worse. Most of those coupons clipped by people who were going to purchase the product anyway – 80%. So when you combine the facts, you get a 0.16% conversion rate.
Price? Stanford Business studies show, that consumers will actually pay more for an alternative product if they get a special deal. It’s the thrill of the deal. In addition, the study shows that a promotional strategy will actually generate more revenue.
Does this actually work in the real world? Absolutely. I was at a liquor store with a friend of mine who was picking up his usual beverage of choice. On the way in, he got a coupon for a more expensive brand. Even though it was more expensive (even with the discount), he was happy with the purchase.
It was the thrill of the deal.
How can a coupon that traditionally has a 0.16% conversion get a rate around 70%? It’s timing.
Timing is the issue. Distributing coupons ahead of time is too far from the time the consumer is making their purchasing decision. Instead when getting the deal to the consumer as they are about to make a decision does generate a 70% conversion rate.
So the combination of timing and a promotion generates a 70% conversion rate. It is the thrill of the deal!
Bryan Pearson. March 15, 2017. “How Retailers Can Maximize The Power of Coupons” Forbes. https://www.forbes.com/sites/bryanpearson/2017/03/15/research-reveals-how-retailers-can-maximize-the-power-of-coupons/#1d4730d12f01
Marguerite Rigoglioso. December 17, 2011. “Everyday Low Pricing May Not Be the Best Strategy for Supermarkets” Stanford Business.