Digital coupons have many advantages, but their redemption rates are extremely low. To address this issue, marketers need to focus on increasing customers’ intention to search or subscribe for coupons and their intention to redeem acquired coupons. They can do so by designing coupons that go beyond a strong offer and seek to enhance the entire customer experience for coupon seekers and users. Necessary steps they can take include customisation, making offers more relevant, a shorter and simpler acquisition/redemption processes, and managing privacy risks.
Digital coupons are a popular promotional tool for marketers because of the high internet adoption rate (4.6 billion internet users in 2020). With advantages like instant availability, low
cost of searching, and customisability, digital coupons have all but replaced paper coupons. Unfortunately, the redemption rate of online coupons is extremely low despite all their advantages. In 2018, in the US, only 0.7% of online coupons were redeemed. This low redemption rate is a major concern for marketers, especially as they are allocating larger budgets to online promotions. A study based on the online ticketing industry investigates this problem to answer the question: How can marketers increase redemption rates of digital coupons?
The study found that the coupon redemption process starts with the intention to search and subscribe for coupons. Two factors drive this intention: coupon acquisition value (the balance of pros and cons of acquiring coupons) and coupon proneness (the tendency of a user to want and redeem coupons).
The components of coupon acquisition value include perceived economic benefit (saving
money), perceived usefulness (saving time and effort, exclusive offers, advance seat booking), perceived convenience (WhatsApp integration, no need for physical tickets, anytime/anywhere access), emotional value (feeling greater efficacy, competence, and pride at being “smart shoppers”), privacy risk (spamming, personal information needed to register), and time value of coupons (long searching time, limited redemption time, long checkout time).
Coupon proneness depends on components like a positive attitude towards digital coupons
(finding them to be convenient, money-saving, and making shopping more enjoyable), past experience (favourable → repeat use of coupons and/or provider; unfavourable → avoiding of coupons and/or provider), perceived enjoyment (break from work, spare time activity), social media reviews, and personal innovativeness (looking for new apps, first to explore new offers, sharing latest offers in social circles).
Intention to search and subscribe is translated into intention to redeem by factors like
customisation (relevant coupons based on usage), high face value (covering convenience or internet handling charges), credible source (branded provider like Coupondunia, Cashkaro, Paytm or Bookmyshow), convenient medium of coupon delivery (apps, WhatsApp), suitable linked offers, distance to redemption location (ideally less than 5-7 kms), high redemption efforts (multiple steps, time-consuming checkout), complex terms and conditions, consumption frequency (shopping frequency versus coupon delivery frequency), and coupon expiry date (short expiry date → lack of interest).
Although the study was based on online coupon sellers for movie tickets, the researchers
found that its results could be extended to other products and categories as well. Therefore, it has relevant insights for all marketers who want to increase redemption of online coupons by users. They should change their focus from only compelling offers to elevating the entire experience by considering all the factors discussed above. They can consult experienced coupon users on improving the experience for various types of coupon users based on what the user is looking for.
They can tailor their offers and make them more relevant to customers based on usage data. They can also customise coupons based on customer segment, for example, by age or gender or interests. They can further choose linked offers carefully so that users feel that they are getting their money’s worth. Issuing coupons on special occasions like birthdays can improve the emotional connection and increase users’ desire to redeem. Marketers also need to work on reducing redemption distance, simplifying the process, and managing privacy risks for customers.
Coupons should be valid for longer durations that give customers enough time to redeem
them. The face value of coupons should cover incidental charges like convenience fees, internet handling fees, or packing fees. Developing apps similar to Paytm, one of the most trusted offer delivery apps, will also increase chances of coupon acquisition and redemption. Finally, using customer data to identify more frequent coupon users and sending them more offers will also benefit. Focusing on designing coupons while keeping all relevant factors in mind will increase the chances of online coupons being redeemed.