Coupons can be an exceptionally strong tool in your marketing toolbox, but only if they’re used correctly. In this article we’ll focus on illustrating how to budget for coupon redemptions. When you’re budgeting for redemption, you’re budgeting for success.
1. Determine Your Audience
Whether you’re circulating a coupon aimed at your entire potential customer base or only a specific segment, it’s important to understand who your audience is and how you’re planning to reach them. After all, there’s more than 116 million print coupon users and just over 68 million digital coupon users, and 90% of consumers report using coupons. You can’t reach all of them all at the same time, and you shouldn’t try.
For instance, if you want to reach out to Millennial customers, you may assume you need to go strictly digital, but that’s not necessarily true. While 81% do use paperless discounts, about 82% of Millennial consumers use coupon books (versus just 79% of Boomers!) and 85% use coupons received in the mail. They do use the internet to find coupons — 63% use social media, while 66% use manufacturer sites and couponing sites, and nearly 70% use retailer sites. The middle ground between print and digital — print-at-home coupons — also puts Millennials in the middle at 78% (versus 74% of Boomers and 81% of Gen Xers).
Similarly, when marketing to affluent shoppers, you may be tempted to assume they don’t care about coupons. However, they’re about as likely as all consumers in general to use coupons, and in some cases, they’re more likely, namely using digital discounts (70% versus 66% of consumers in general) and only buying a product if there’s a coupon available (76% versus 72% of consumers in general). They’re also somewhat more likely to be influenced by a coupon to shop at a store they don’t normally frequent (33% versus 30%).
2. Consider How Coupons Will Be Used
Once you’ve identified your audience, you can begin to understand how they use coupons and thus how to meet them at the right moment. For instance, 86% of shoppers use coupons to plan their shopping list. However, half of Hispanic shoppers make their shopping list first, then search for coupons that will fit their needs. Even so, offer them the right deal, and these shoppers will adjust their list accordingly most if not all of the time (17% and 4% respectively).
Remember that 77% of consumers will select their retailer based on where they can use their paper coupons, and a solid 20% increased their shopping at particular retail locations based on the fact that they accept digital coupons.
3. Understand the Potential Redemption Rate
When you consider our first two points together, you’ll realize that without looking at where your audience is, where, and how they expect to find and use coupons for your brand, you may end up totally missing the mark. This leads us to the biggest budgetary concern: coupon redemption rates, which is the percentage of total coupons distributed to be both redeemed by customers and submitted by retailers for reimbursement.
This is so important because it determines the way your investment into this particular type of marketing actually measures up against your bottom line. Overspend and you won’t make enough money back for the campaign to necessarily have been worth it. Underestimate how many coupons will actually be redeemed, and you’ll undercut your revenue despite the number of sales involved.
Average online coupon redemption rates tend to be between 5% and 20%. Meanwhile coupons in the newspaper see a 1.2% redemption rate, free-standing print inserts see between .5% and 2% redemption rates, and email-via-desktop sees about 2.7% redemption rates. Subscription-based coupons tend to see a redemption rate between 3% and 10%. But this is only generally speaking. Looking at the 2015 report from Inmar, you’ll see that of the offers made in 2014, nearly 63% were non-food related and just over 37% were food related, whereas in terms of redemption, those numbers flip, and 64% are for food, and nearly 36% were for non-food purchases. This means that you’ll need to spend some time looking into the average coupon redemption rates for your industry and in your area.
4. Understand the Advertising Value of Coupons
It’s worth pointing out that you need to consider the marketing potential of coupons beyond actually being redeemed. For one thing, their presence acts as an advertisement, whether the customer exposed to them wants to take advantage of the offer or not. Marketed correctly, this will generate a positive brand image that will improve recall and keep you top of mind once they are ready for your products or services.
You should also consider the fact that on-demand coupons (i.e., one-time promotions accessed via promotion code) see redemption rates on average between 30% and 50%, with some reaching as high as 85%. In cases like these, once the customer is online and ready to shop, they’re ready to be engaged in buying more than just what they came for.
5. Develop Your Budget
You need to make decisions about coupons that are right for your business based on your customers’ behavior. To develop a coupon strategy that works, you need to be sure you’re budgeting for redemption and putting the right number of coupons into the market at a value you can afford. That means not only knowing your customers, but knowing what works for your industry as well, so you can choose the right format and redemption method for the best success.
Now that you know how to budget for coupon redemptions, it’s time to put that knowledge into action and develop a winning coupon-marketing strategy. This will help ensure you’re budgeting for redemption, and will help coupon redemption rates stay in line with your overall budget.