Sojourner Truth Chris Higgins

Should SME e-commerce offer coupons? A step-by-step guide.

Posted by Chris on (about a 6 minute read).

Coupons have become an essential part of commerce. They used to be paper things that you cut out of newspapers, and are now codes that you get in your email.

Think back to the first coupon. Before that, you went to a shop and bought things. If you wanted a discount you could negotiate, if the shop worked that way. You could probably sample things that were new to entice you to buy them.

(Aside: I look at Indian sweet shops as the modern link to how shopping used to be for all products. There is no brand except the shop brand, they make most of what they sell or source it though local relationships. They try to create differentiation though cost or innovation or quality. You can sample food items.)

Then Coca Cola came up with the idea of a coupon. You got a voucher for a free glass of coke at a shop. That was 1887. Over the next 20 odd years they gave away 8.5 million free drinks. Coupled with aggressive distribution, this rolled out coke across every US state, setting it up for today’s success.

Big stores and brands use discounts and coupons strategically. They clear out old stock, or lure you with discounts on a small set of items to drive broader sales, of create excitement, or match competition. Of course they would rather sell everything at full price, but they know the business and build in the discounts as marketing costs.

Small companies have a more difficult time.

I meet many SME’s who are simply not sure what to do. Some take the easy way out and refuse to offer discounts, feeling that customers will expect it and they brand will be damaged. Others mark up their prices and then offer discounts on everything.

Others try to follow e-commerce practices. Offer a discount to cart abandoners, or to bring back on old customer. These can be hard to personalise with basic tools. There is an online store that I bought something from two years ago and they keep emailing me with discounts to thank me for my loyalty. I wonder if these work?

The big step that most SME’s miss is the strategy and measurement of e-commerce. They begin the journey believing that their product is so awesome that they just need to get it in front of an audience and it will sell.

So they get their website, and no one comes or buys. So then they start advertising and getting traffic to the site and some sales come in, but do the sales cover the cost of advertising with a profit margin? They might try a voucher or discount, but the do the sales generate enough data to say whether it works?

You definitely want to avoid the trap of “we tried X advertising and it doesn’t work for us/our audience”, based on small sample sizes.
So what to do, assuming that you can’t pay for more expensive marketing automation platforms?

Document and measure everything.

At the end of each month, you should have an excel sheet for:

  • Your social media, listing each post and the engagement metrics, including clicks to your website.
  • Your website analytics, especially traffic sources and sales
  • Your email campaigns, with the opens, clicks and sales
  • Your offers and vouchers, with the results
  • Your advertising campaigns with the results.

You’ll start seeing some obvious gaps, where a platform says you got 100 clicks but google analytics says you got 50 visitors. Its ok for now, don’t freak out. Just keep measuring it. But more importantly the data should help you get an objective view of your results, and steer you away from bias about what works and what doesn’t.

The next big thing to understand is statistical significance. For you, this means that the difference between two things is not due to random chance.

If I post a social media picture of my product and another one with a beautiful woman, and the women gets more likes, I can leap to the conclusion that my audience prefers pictures of women to seeing my product. Jump forward a month and my posts are all of beautiful women.

Sounds crazy but this happens all the time.

If I had posted 100 product posts and 100 women posts at different times and measured the engagement and sales, and then told you that women posts give me better results? That would be far more convincing.

Similarly, if I send an email to 100 people and 5 people click, then I send a different email to those 100 people and 10 people click, I can say the that the second email was much more successful. But this result is probably not significant - there is a probability that the outcome was just random chance.

If I send the 1st email to 1000 people can got 50 clicks, and the 2nd email to 1000 people and got 100 clicks, now it is statistically significant. This wasn’t just chance.

If you want to be precise (or are just curious) there are calculators for statistical significance. Here is one.

But if you are ok with the softer version, just avoid small numbers. Look at the results of lots of social media posts, or lots of emails, or lots of traffic and don’t jump to conclusions based on single events.

Coming back to the initial question - should you offer coupons/vouchers/discounts.

The answer is almost certainly yes. They create so much motivation, whether it is FOMO from a time limit, or the final push someone needs to make the purchase of one brand over another ($100 discounted to $80 must be a better product than the one at $80 full price).

At the same time, this needs as much measurement as the rest of your marketing. You can’t just set and forget coupons and discounts. At the end of the day, if they don’t increase sales or profit in the long term, then what’s the point?

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