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📝 Intro

Coupons are very effective at driving sales. But they’re only useful if people actually redeem them, by buying.

So here’s a new technique that makes people more likely to use them.

Turn them into an activity to be experienced with a friend.

P.S.: Email coupons have a surprisingly strong indirect effect. Research found that 90% of the sales increase they caused was from people buying products not in promotion. In other words, they work great as effective general ads for your brand.

Previous insight: Make an ounce worth more than an ounce (more insights here)

Turn earning a coupon into an experience to share with a friend

Channels: Coupons | Promotions | Discounts | Referrals | Word-of-mouth
For: B2C
Research date: September 2022

📈 Recommendation

To unlock a coupon, ask people to share an experience (e.g. watch a video together) or do an activity (e.g. answer an online quiz) with a friend.

Doing this with a friend makes both people much more likely to redeem the coupon and buy your products.

🎓 Findings

This research studied three main ways that people could receive a coupon and then measured how likely they were to share the coupon and redeem it:
- Coupon sent by a friend (e.g. forwarded email). This was the least effective.
- Coupon given directly by a company (e.g. via email, in a store).
- Coupon obtained by doing an activity with the friend that sent it. This was the most effective
As part of a series of 4 experiments, people were:
- 26% more likely to share a coupon given on Facebook when it was earned after doing an activity with a friend (vs just receiving it from a friend)
- 20.6% more likely to redeem a coupon from a drinks company on WeChat when it involved playing an online game with a friend (vs directly receiving it from the company). They were 20.8% less likely to redeem it when a friend simply sent it to them (vs receiving it from the company)
The effect weakens or disappears if the activity is with a stranger, not a friend.

🧠 Why it works

We tend to look at our relationships through two main lenses:
- Exchange relationships (i.e. paying someone to do your taxes), based on a tangible cost and benefit
- Communal relationships (i.e. helping a friend move), based on building and strengthening social links
A friend referring us a coupon blurs the lines between the two relationships - mixing our social relationship with our friend with an exchange relationship for monetary benefits. This blurring of norms makes us uncomfortable, making us less likely to redeem the coupon.
When we share an experience with the person referring a coupon to us, we look at the coupon’s role as a social activity, not the economic incentive it provides. So we feel more comfortable accepting and redeeming the coupon.

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✋ Limitations

Cultural values could reduce or strengthen the effect. For example, in more individualistic cultures, or cultures where there is less of a taboo around discussing money matters, the discomfort caused by a coupon’s economic benefits may not be as strong as in a tightly-knit communal culture where money and friendships are kept separate.
The experiments were done in 2020-2021, during the height of the COVID pandemic and lockdowns, which affected normal behaviors. For example, people may have felt lonelier and more in need of social interaction, and jumped at the virtual experiences more than during normal times. It’s unclear if post-COVID the effect might have weakened, or strengthened.
In this research, the social aspect of sharing the coupon was strengthened by having the giver and receiver of the coupon engage in a joint activity - it’s likely there are other ways to strengthen the social aspect of the coupon. For example, having someone share a coupon with a friend to celebrate how long they’ve been friends may position the coupon as a social tool enough to overcome discomfort about its economic incentive.

🏢 Companies using this

Coupons centered around a shared experience between the giver and receiver of the coupon are a relatively new phenomenon, but some companies have begun experimenting with them.
- E-commerce giant Alibaba ran a competition having customers and their friends form teams, cheer for one another and build a virtual skyscraper, complete with shops, in exchange for coupons.
- Italian chocolate brand Raffaello ran a holiday promotion inviting customers to develop postcards with their friends and loved ones to redeem coupons.
- Ecommerce site Pinduoduo has established its business model around “team buying” with regular prices for normal purchases and discount prices for team buys, where a group of people together shop and buy products for themselves.

Cryptocurrency exchange Binance offers users tokens (that can be used for discounts and perks) additional tokens if they invite a friend and play together.

⚡ Steps to implement

🔍 Study type

Online experiments and field experiment (with 912,365 coupons for an F&B brand given away on Chinese social network WeChat)

📖 Research

“We Earned the Coupon Together”: The Missing Link of Experience Cocreation in Shared Coupons. Journal of Marketing (September 2022)

🏫 Researchers

Eric Fang. Lehigh University.
Beibei Dong. Lehigh University.
Mengzhou Zhuang. University of Hong Kong.
Fengyan Cai. Shanghai Jiao Tong University.

Remember: This is a new 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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Coupons earned with a friend drive more sales