With 92% of Americans always looking for a deal, it’s no secret that US consumers like to save money. However, research and industry experience shows that simply lowering the everyday price of your products isn’t enough to keep today’s smart shopper happy. They expect more. They want to feel like they have discovered the best deal, especially if they perceive that they obtained a discount which isn’t readily available to other consumers. This is, of course, where nuanced coupon strategies come in very handy. But first, let’s look at the internal factors at play.
Coupons and the cuddle chemical
Those who have heard of oxytocin are more likely to associate it with significant life events such as the birth of a child or getting married. The hormone, sometimes called the cuddle chemical, is released in everyday situations such as when we share hugs and kisses with those we love, and during moments of social bonding. However, research from neuroeconomics expert, Professor Paul J. Zak highlights that the love hormone is also present when smart shoppers receive a coupon. His study found that participants who received a coupon experienced a significant boost (38%) in oxytocin levels. In addition, they were found to be happier (11%) than participants who didn’t receive the offer.
Even though consumers expect to find a coupon nowadays, this effect continues to come into play. Interestingly, the level of the cuddle chemical also rises when users receive likes and comments on social media platforms such as Instagram.
Price, brand and self-image
Research from the Association for Consumer Research suggests that ‘smart-shopper feelings’, which can result in excitement, self-confidence, satisfaction are highly likely to increase and intensify when the consumer feels a sense of control in the process of obtaining a discount.
A number of studies have found that consumers experience increased satisfaction when they receive a discount of 15%, for example, in cases where they felt responsible for having found the deal themselves rather than getting the same offer as a result of pure luck, or another factor that is out of their hands. Finding the best deal can elicit a number of responses in shoppers. For example, they could feel ‘proud, smart or confident’ (Holbrook et al. 1984), Or there might even be a feeling of playing the system, which can be quite thrilling for consumers. So we can see that, that the perception of paying a lower price can have a positive impact on the way we view ourselves. When we combine this insight with what we already know about millennials and their shopping habits, this creates an incredibly fruitful opportunity for advertisers.
As well as making purchases that are informed by an expression of their personalities, millennials are also open to trying new brands. While previous generations may be seen as creatures of habit, coupons further encourage millennials to try new products and experience new things.
Consumers want more than everyday low prices
While common sense suggests that shoppers prefer regularly low priced goods, real-life examples tell a different story. When the now former JCPenney CEO, Ron Johnson, took the helm in 2011 he decided to simplify the company’s pricing structure. However, introducing an easy-to-understand everyday low price strategy didn’t have the results Johnson had hoped for. Just a year later, J.C. Penney saw its sales slashed by 25% and experienced a $1 billion dollar loss. Not only did this strategy fail to win over new customers, but it also turned off JCPenney’s existing customer base. Shoppers want the thrill-of-the-chase feeling that they get from finding the best deals through coupons, with a more static approach to pricing this excitement simply ceases to exist. This highlights what we know from industry research: as well as attracting new customers, coupons keep them coming back.
As an aside, it hasn’t been all doom and gloom for Johnson. According to a recent article, he’s now one of the most well regarded retail analysts in the US.
What this means for advertisers
Getting a good deal is about more than cost-savings for customers. As I have previously discussed, coupons are proven to add value for advertisers in a number of ways. Carefully targeted coupon strategies make a positive impact on smart shopper behaviour. They encourage savvy consumers to buy in larger quantities and from brands that might not ordinarily be on their radar. Coupons enable shoppers to experience new things and try new products, which presents the opportunity for advertisers to gain incremental sales. We also know that shoppers who are introduced to a brand through a coupon are more likely to be return customers and develop brand loyalty.
All of this adds up to brands having new opportunities to reach new customers while helping shoppers get the best deal and feel a little bit happier in the process. Everybody wins.