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📝 Intro

Companies often email targeted discount coupons to their customers.

How effective are they, and to who should they be targeted?

This study from Stanford and Booth School of Business, University of Chicago discovered a surprising result.

Coupon emails are much more than simple discounts, and it doesn’t matter much whether people actually use the coupons - your sales will increase regardless.

P.S.: Remember, you can create ‘special days’ for your brand and use them to send out creative and effective promotions

Previous insight: When to use slow vs fast ads (100+ more insights here)

Email coupons aren’t only discounts, they’re effective ads too

Channels: Email | Promotions | Discounts | Ecommerce
For: B2C. Can be tested for B2B
Research date: June 2016

📈 Recommendation

Use email coupons (e.g. “$20 off if you spend $100 on our new collection”) and target them to a broad range of your customers, not only those you think are price sensitive. 

Many people, probably most, won’t use the coupon (e.g. because it doesn’t cover all products, the minimum spend is too high) but will still visit your website and buy other products.

They are especially effective in reactivating customers that haven’t bought in a while.

🎓 Findings

• Targeted email coupons increase sales. Surprisingly, most of the increase is not from using the coupons, but from more website visits, where people then buy other products not in promotion.

• In a series of 70 different experiments, 52,043 customers of a ticket resale platform received targeted email offers (e.g. “spend $300 and get 10% off”). An analysis of results found that:

  • Sales increased 37% (by $3.03, from $8.07)

  • 90% of the increase was from purchases not covered by the offers

  • Average sales were still 19% higher than normal ($1.55) the week after offers expired

• The effect is strongest on higher spending customers and those that haven’t bought in a year or more.

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🧠 Why it works

• Targeted email promotions don’t only work as discounts, they are powerful ads, too.

• As ads, the offers have a reminder effect of the company’s products. So we check them out and might buy some - especially if we haven’t in a while.

✋ Limitations

• The study focused on one company, a ticket resale platform. The offers applied to categories of tickets (e.g. excluding Major League Baseball). Therefore they sit between product-specific offers (e.g. $0.50 off a box of Cheerios) and store-wide discounts (e.g. 20% off of any purchases above $20). This makes it riskier to generalize the results to all promotions.

• The researchers did not specifically test different offer values (e.g. $10 vs $20 off) and requirements (e.g. spend minimum $100 vs $200, different category restrictions). It’s unclear what the impact of those is.

🏢 Companies using this

• Most online sellers email targeted coupons or promotions to their customers, although it’s unclear how broadly or narrowly they target them.

⚡ Steps to implement

• Broadly target your email coupons to reactivate customers.

• If you find too many are redeeming the offers - reducing revenue - consider increasing the requirements to redeem the offers (e.g. increasing the minimum spend, limiting them to specific categories or products).

• When your coupons are usable store-wide, use % discounts in your offers (e.g. 10% off). When they are product-specific, use $ amounts (e.g. $5 off). Sales will be higher.

• Try to increase your email marketing opt-in rates by using a visual, dynamic (e.g. images, video) explanation of why it will benefit them.

• Be careful to not send them too often, or customers will come to expect them.

🔍 Study type

Field experiments (analysis of 70 experiments at a large North American ticket resale platform between July 2009 and December 2011)

📖 Research

Do targeted discount offers serve as advertising? Evidence from 70 field experiments. Management Science (June 2016).

🏫 Researchers

• Navdeep S. Sahni. Stanford University

• Dan Zou. Booth School of Business, University of Chicago

• Pradeep K. Chintagunta. Booth School of Business, University of Chicago

Remember: This is a scientific discovery. In the future it will probably be better understood and could even be proven wrong (that’s how science works). It may also not be generalizable to your situation. If it’s a risky change, always test it on a small scale before rolling it out widely.

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