Voucher codes, cashback and offers are regularly under the watchful eye of advertisers, whether it’s evaluating incrementality, impact, lifetime value or other KPIs. But why do so many merchants decide to offer discounts? I believe this is where you should start when considering discount marketing - asking the right questions.
Since the UK 2008 recession, online shoppers have become more accustomed to finding online deals to ensure they’re getting the most value from every pound they spend. The popularity of voucher code and cashback websites has grown exponentially and, as a result, these websites are now brands in their own right.
There are currently more than 200 voucher code websites in the UK only. In 2013 there were 65 million searches related to discounts, which shows deal-sensitive consumers aren't going away anytime soon. As the voucher market is growing, more and more merchants are trying to increase their sales and brand exposure by utilising a discounting strategy.
In 2014 UK shoppers spent £16.5 billion through deal websites, 14% more than they did the previous year, according to the Internet Advertising Bureau’s Online Performance Marketing study. £15.4 billion of the total £16.5 billion was spent through affiliate marketing sites - cashback and voucher websites make up for 54% of our industry. They can be a great way of incentivising consumers to buy products or services and can drive incremental sales when utilised accordingly.
Asking the right questions
Online shoppers have become more savvy when looking for deals, which asks for a well-thought out approach. Discounting products or services can be risky. As a merchant you want your strategy to differentiate you to a consumer, rather than devaluing your offering. Brands that have discounts and voucher codes available all the time run the risk of consumers getting used to finding these discount vouchers, and if they can’t find one, turn elsewhere. Some brands are now even seen as ‘discount brands’ i.e. consumers expect to find offers for their product. It's important to develop a strategy to ensure you won't be seen as a predominantly discount brand.
Which takes me back to my first point: asking the right questions. As a merchant you need to ask yourself if offering discounts is something you would like to be associated with and what it will mean for your brand. Take a moment to ask yourself what your brand stands for.
As an agency, we work with various clients; some prefer to focus on content-based publishers without offering any discounts, whereas others are willing to offer discounts and vouchers strategically. It's important to understand what their KPI's are. As an affiliate account manager, it's your role to advise the client and manage the programme and those discount offers accordingly.
If a brand decides to go ahead with discount marketing and developing this strategy, it's important for the merchant to decide what they would like to achieve. Do they want to attract new customers, to shift stock, boost average order values, get customers to try new products or, simply, to increase sales and revenue at times they normally struggle?
A discount code can definitely benefit your programme as long as it is used tactically and as part of a larger strategy. Look at the impact a voucher code affiliate will have on your programme. Data is one of the key factors, so make sure you run activity based on data instead of assumptions. Look at the KPI's of your programme, your data and optimise your programme based on this. Is it worth offering a discount voucher if a user would have bought the product or service for the full price as well?
There are a lot of different offers available, which can be used for different purposes. The offers you use will also depend on the margins you have available and how you would like to position yourself as a brand. Popular types of deals that can be used are pound (£) or percentage (%) off vouchers, free shipping or ‘free’ gifts. If your client positions themselves as a high-end brand or has lower margins, you may want to focus on customer loyalty offers and free shipping instead of focussing on regular discounts.
Driving new customers
The acquisition of new customers is always one of the key metrics for merchants. After all, new customers simply equal more sales and more sales equal more revenue. However, statistics show that it’s not that easy to drive new customers. The probability of selling to an existing customer is 60 – 70%, whereas the probability of selling to a new prospect is 5-20%, according to returnonbehavior.com.
This is where the affiliate channel comes in as it has demonstrated to be a very effective channel when it comes to new customer acquisition. The continued growth of voucher code and cashback websites gives merchants an opportunity to target a consumer base that would have been more difficult to reach through other digital channels.
A valid point if you consider that 71% of the online shoppers believe that they will get a better deal online than in stores. As mentioned earlier, the big players in the industry have become brands in their own right and consumers tend to use their services to carry out their online shopping.
In this case it’s important that the merchant supports affiliates by targeting promotions to the target audience/new customers. This can be done via several options. It can be as simple as offering free delivery or a set amount of discount for new customers on their first purchase. Make sure that offers displayed on creatives are targeted towards new customers, or pay out a higher commission for new customers to encourage affiliates to give additional exposure and extend their reach.
We must not forget that the affiliate channel is more than just voucher code and cashback websites. It's very important to utilise the full 'affiliate-mix'. Loyalty, content, voucher, cashback, email, price comparison and retargeting are all valuable and important for a versatile and all-round affiliate programme. Brands having a presence on voucher code and cashback websites are very important for the affiliate channel, however investing time in using publishers for brand awareness can also drive precious, targeted traffic to a merchant’s website.
Bloggers or key influencers usually have an established following which makes it possible for you to reach out to a ‘new’ audience. Partnering with one of these publishers can be a good way to increase exposure and by offering an exclusive offer it’s more likely you convert their followers to your customers.
Sales, discounts and offers can be used in numerous variations to push sales and drive new customers. Weekly and monthly offers can increase the average order value or can be used to increase sales and to meet targets at the end of the month or quarter. An example of such an offer could be ‘’Free shipping on orders above £60’’ or ‘’£20 off when you spend over £180.’’ Both examples can also be useful to increase the average order value. Look into the average order value of the last couple of months and offer free shipping or discounts on orders that are more expensive by £50 for example.
Offering free shipping can be very effective, especially if your client positions themselves as a higher-end brand and therefore doesn’t want to use sales and discounts to drive revenue. When shopping online, 58% of women and 44% of men are concerned about the cost of shipping. Another important fact is that online shoppers tend to spend 30% more per order when free shipping is included (source: Wharton).
A merchant should also think about planning offers around their seasonal calendars. Holiday-specific offers are a great way to drive revenue, especially with Cyber Monday and Black Friday just around the corner. UK shoppers spent £3.3 billion over the weekend with Black Friday reaching the £1 billion sales mark last year.
With online shoppers being more accustomed to finding online deals, brands need to think about utilising a discounting strategy. Even though discounts and offers might not be right for every brand it’s important to utilise the full ‘affiliate mix,’ including the ever popular voucher code and cashback websites.
With a good understanding of the brand, clear goals and KPI’s in mind, as well as testing the waters, a brand is most likely to meet their objectives, without devaluing their offering. Discounting products or services can be risky but in an area where the competition is on an ultimate high it’s important to take ownership of your share of the sales.