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The worlds of commerce, both physical stores and eCommerce, are increasingly competitive. Multiple factors can affect the success – or failure –of a product you are selling or marketing. As competitiveness increases, so must the efforts of marketing and sales teams to find an advantage over their direct and indirect competitors.
Offering discounts on items is a marketing strategy that is as old as retail itself. But with the advent of digital shopping, these discounts have developed into promotional codes, the online equivalent of old-fashioned coupons. But just what is a promotional code? How and why do they work? And what benefits do they offer your eCommerce business?
What is a promotional code?
Collins Dictionary defines a promotional code as simply being:
“… a code offered by retailers to customers who can use it to receive a discounted price when buying products online.”
A promotional code is a series of alphanumeric characters that a consumer can enter to obtain discounts on an online store in more detail and eCommerce. These different codes may be part of ongoing or specific marketing campaigns. They may also be applied only to specific products, combinations of products, or a whole order.
There are three main types of promo code:
- Public code. This is a code that any customer can see and use. It may be displayed on your website or published on social media or via influencers. Public codes are beneficial for attracting new customers or to entice previous customers to return.
- Private codes. These are promos that are only accessible by a specific group of people. You may decide to target previous customers who have not used your store in a while, or you may choose to reward loyal customers who regularly shop with you. They could also be used if you have a mailing list of potential new customers.
- Secret code. This type of code is most usually a one-off and is most often restricted to a single customer. It may be offered as an apology or compensation if something has gone wrong, such as a faulty product or a shipment not arriving on time.
You may decide to use promotion codes continually or for one-off special shopping opportunities and offers. Many retailers – who used to use Boxing Day as one of the biggest sales of the year – have now adopted Black Friday, too. And many major chains, such as Argos and others, will often publish promo or coupon codes in daily newspapers.
Promotional codes may also come in the form of gift cards or gift voucher codes. For example, you may decide to give loved ones some Kindle gift vouchers to buy books. They would have a set of codes that they apply at checkout, just as they would with a discount code.
How do promotional codes work?
You may have been supplied with a promo code in several ways. Existing customers may have received one via a marketing email, SMS or app message. New or potential customers may receive one if they are on an email list, or it may be offered at the point of contacts, such as a website or app.
The discount code may offer a percentage of the product’s price or of your total amount at checkout. Or it may be in the form of a specific dollar amount (or GBP), also on product or total. But the promo may not be a direct financial discount. It may also be things like free delivery or specialist gift wrapping at certain times, such as Christmas or Valentine’s Day.
When you reach the checkout process stage of your online transaction, you will nearly always see a box that states ‘insert promo code here. If you have one, you insert your alphanumeric value there, and the site will add the applicable discount or offer to your purchases.
Why do promotional codes work?
The bottom line is that you want your online store to generate a steady – and healthy – revenue stream. With so many choices available to consumers, you want to incentivise them to choose your store over your competitors. It provides a win-win situation where the customer receives a discount, and the retailer receives revenue.
From a psychological perspective, promotional codes work because people enjoy receiving them. Research showed that people who received promotional discount codes had a 38% rise in their oxytocin levels and were 11% happier than people who did not receive one.
It is also worth noting that promo codes can work with both your existing customers and new ones. It maintains loyalty and customer retention for existing customers, while for new ones, it can attract them to your business and enhance your brand’s image. Amazon offers its Prime members frequent special offers to ensure loyalty and retention.
Tips for implementing an advanced coupon code strategy
So you’ve decided that offering promotional codes is a sound marketing strategy and will improve customer satisfaction and improve your revenue stream. How should you approach this if it is new to your business?
1. Avoid generic codes
The problem with using a generic code is that it can be easily shared online, especially when you consider many sites dedicated only to sourcing these promo codes. In some circumstances, that may actually suit you, especially as it will widen the number of potential new customers you may get.
But in many cases, you may want your offer to have some limits. For example, you may have 1,000 units of a particular product that you want to shift. While selling all of them may be your aim, being oversubscribed and having unhappy and unfulfilled customers can negatively reflect you. Where possible, it’s better to offer single-use codes only.
2. Urgency
As with many aspects of sales, creating a sense of urgency should be a focus. The whole idea of offering any promotion is that you would rather have the customers spend immediately – or shortly – than several months down the line. It may also be the case that you want to shift a particular product quickly, not over an extended period.
By creating a sense of urgency, you encourage your customers to spend quickly. If your offer has an unlimited time period, then many may forget about it. By giving your promo code a set expiry date for validation, you are more likely to encourage them to make a purchase.
3. Customisation
People like the personal touch, no matter what area of life you look at. By customising your offers, you appeal to that love of personalisation. But you have to be careful in how you approach this. Too personalised, especially for a potential new customer, may put them off if they feel you have too much data about them.
Customisation can take different forms. If a regular customer always buys a certain product, you can customise your promo code to reflect those previous patterns. And if they have shared all personal contact information with you to receive information – and offers – you can personalise the email or SMS you send to give the code.
Creative messaging strategies for unique promo codes
You will see a wide range of figures quoted for the rate of cart abandonment before checkout. Analysing figures from a range of studies gives an average abandonment rate of 69.57% and an even higher rate of 85.65% from mobile devices.
Abandonment can happen for different reasons, from simply not being ready to decide uncertainty or unhappiness about the price. But for online retailers, it represents a lost opportunity, revenue-wise.
Promo codes represent a great way of clawing back some of those lost opportunities and persuading the customer to revisit and make that purchase. But how you deliver the message to the owners of abandoned carts is crucial and should always be approached carefully.
If a customer has provided contact details – or is already on your previous customer database – then the best way to deliver a message is via email or SMS. This provides that sought after personalised touch and can go a long way to making them reconsider. You should always prompt customers to register and set up an account in your site’s ‘your account’ section.
Prompts and reminders onsite may occasionally reap dividends, but they have limited usage. Look at integrating code generators into your website or app. These could take the form of an automatically sent email in the event of an abandoned cart or as an on-screen message when they next visit your store. Also, consider reminders before a customer closes a page or site.
How to create promotional codes
How you create a promo code will depend on whether you provide it for use on your own channels or a partner channel, such as Amazon. With Amazon, there is a simple process via the ‘seller central’ page where you manage your products.
If you are looking to create promo codes for use on your own eCommerce platforms, there are some ways to approach it. Most shopping cart platforms have a process where you create a promotion. Then the software integrates that into the required areas, including, most crucially, applying any discount at the checkout stage.
Nearly every eCommerce website builder now has the option to add offers and discounts built-in, so it should be a simple matter of deciding what form your promo takes, going to the admin section of your site, then choosing the promotions option. If it’s your first time, proceed with caution, decide on the exact format of the offer, then add only one to check it works okay.
The takeaway
There are many aspects to having or building a successful eCommerce business. Promo codes are a great way of rewarding loyal customers or attracting new ones. They can also help to improve the customer journey while maintaining high rates of customer retention and revenue.
Promo codes are one way of communicating with your customer base. Still, before you even consider that as a strategy, you need a solid communications infrastructure that allows you to efficiently connect with both consumers and team members within your organisation.
RingCentral offers a single communications platform that allows you efficient connections across all your platforms and channels. It allows your shoppers to connect with the people they need to speak to with no distractions or delays.
Keep your customers happy with SMS messaging, call routing and integrated CRM apps that allow your agents to deliver the best possible service every time. Why not request a demo by contacting us via our webform here?
Originally published May 20, 2021, updated Jun 19, 2021
