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Are vouchers truly useful for businesses?

For new businesses looking to promote themselves and build a customer base, successful marketing campaigns are key. Coupons and vouchers aren’t new to the world of business, however, with many industries making the digital transition, online discount codes and vouchers have rapidly become widespread– with sites like Groupon becoming extremely popular.

Many e-commerce websites now ask customers to enter a discount code at the checkout stage – this is to encourage even those customers who do not already have a code to look around on other sites for a valid code that will get them that discount. A great deal of us will admit to using discount codes at some point on our online or in-store shopping trips. Whether it’s exclusive limited-edition discount codes, student discount or a birthday discount deal, we all like to get a good deal.

So, in this digitally focused age of extreme couponing and Groupon savings, we ask – what do these bargains actually mean for businesses and consumers?

Why do companies use voucher codes?

Discount codes are mainly used by companies in order to attract customers to buy their products and stand out from competitors in what has become a very crowded market – usually through the use of a time-sensitive code. Vouchers and discount codes can be a sound strategy for competitive businesses; companies often discover that by offering a discount of just 10%, they can increase sales to their business over the competition. Research has shown that retailers with an active discount code are eight times as likely to gain a sale. In 2016, 16% of total sales consisted of transactions that used a discount or voucher code.

These codes can also help businesses to overcome many challenges in the world of e-commerce, from customer acquisition to retention – and this is especially notable with social media discount campaigns. Voucher codes have also been shown to help companies grow their brand awareness, as they encourage customers to follow the business on social media to gain access to more benefits and discounts.

Whilst the advent of e-commerce has allowed many industries to succeed, voucher codes are not just found online or in your email inbox. Businesses also often give out voucher codes to existing customers as a loyalty reward, which encourages them to return and use the company again in the future. For online retail outlets such as Boohoo, ASOS and Missguided, voucher leaflets are regularly delivered along with their parcels to customers. These act to encourage customers to make another purchase at a later date, boosting customer retention rates.

It is common for companies to manage their own codes and distribute them whenever and wherever they see fit. Voucher code websites such as Groupon however have become one-stop shops for thrifty consumers seeking the best deals and discounts. Reports indicate that in the last quarter of 2017, Groupon had over 48.3 million unique customers on the site. It is clear that discount codes have become a must-have for customers.

Do these discounts actually save customers money?

It is clear that consumers are relying more and more on coupons and discount codes when they shop, some consumers however have questioned how much they are actually saving, and whether these methods are simply marketing tools.

An investigation by Which? found that a number of the codes available on sites such as Groupon and VoucherCode.co.uk were actually out of date or completely invalid. Mark Pearson, owner of myvouchers.co.uk commented that: “The majority of our listings are official codes direct from retailers, but we see it as our job to list any code that has a chance of working so, if a code comes from a consumer, we’ll check it works and then list it as ‘user-generated’, making clear we can’t guarantee how long it will work.”

Many of the e-commerce sites that do offer a working code offer these for a limited time only; this is to encourage consumers to take action straight away and buy now. This is especially noticeable with fashion websites, who send regular emails to customers with a working discount code to encourage purchases and boost their customer retention. The most commonly shared discount codes are 10% and 15%, as brands realise that they can afford to give customers a small saving if it encourages future sales and means that they get the edge over their competitors.

Takeaway businesses often use direct mail to encourage people from the local area to make an order from their restaurant, rather than from their competitors in the area – from leaflet distributionto text messages and emails. Chain takeaways such as Domino’s for example have become well known for including discount codes with their food. Deals such as ‘buy one get one free’ or ‘two for Tuesdays’ are guaranteed to help save customers a little bit of money. Again however, discount codes from takeaways are usually offered on a time-sensitive basis.

What about the benefits for small businesses?

For start-up businesses and SME’s, giving out discount codes can be daunting, as owners must consider whether the initial loss is worth it when they are trying to make profit. As outlined however, discount codes can be very useful when used as ‘introductory offers’ as they can encourage customers to make their first order, recommend you to a friend or sign up to your newsletter. The biggest decision of all lies in how much discount you decide to give out and when to activate the discount code or voucher. If used carelessly, it could result in a potential loss of profit for your company. If used correctly however, it can increase conversion rates, boost customer loyalty and help you to attract new customers.

Sources

https://www.theguardian.com/money/2009/mar/26/discount-codes-online-shopping

http://www.acumendesign.co.uk/our-blog/view/advantages-and-disadvantages-to-digital-vouchers

http://mashable.com/2013/01/21/online-coupons-business/#3O4N2s88dqqP

https://medium.com/hi-kit/the-stats-dont-lie-discount-codes-and-free-shipping-increase-sales-3ae1baa5d936

https://www.statista.com/statistics/273245/cumulative-active-customers-of-groupon/

https://www.shopify.co.uk/blog/15514000-14-ways-to-use-offers-coupons-discounts-and-deals-to-drive-revenue-and-customer-loyalty

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