Do promo codes really help with customer retention?

The real impact of promo code marketing strategies on business goals.

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What are promo codes?

From giants like Google to your local supermarket, they all use it. And at some point, all of us have been influenced by discounts and offers. We’ve chosen to order food from the restaurant with the 20% off promo code even though the food isn’t the best. We’ve bought the soda brand which has a promo discount even though we usually buy a different brand. Promo codes undoubtedly offer immense value to the price-conscious buyer.

However, from a business standpoint, promo code discounts and offers might seem counter-intuitive. How does a business profit from giving out discounts to customers? And if promo codes aren’t good for business, why is everyone handing them out?

How do promo codes work for a business?

For a business, gaining market share depends on some standard factors. Most customers are pretty clear about what they expect — great service at the lowest cost. As this is quite clearly an unrealistic expectation, customers today settle for acceptable service at the lowest cost they can find.

What do you do when your service/product doesn’t really stand out among your competitors and your sales targets aren’t being met?

You offer customers an incentive to choose your business instead of your competitor’s. The incentive could be a slight reduction in cost, cash back on purchases, offers on perks like free delivery etc.

The strategy involves spending some money on a customer to get them to transact with your business in the hope that they’ll continue transacting and give your business returns, exponentially higher than what you spent on them.

Businesses use promo codes in different ways. A promo code without a strategy is ineffective and a waste of money. However, if promo codes are used with a goal in mind, keeping in mind a target audience and an airtight marketing campaign, they can yield incredible results.

Here are some examples of effective promo-code based marketing strategies:

  1. Google: Promo-codes for turning new sign ups into long term customers
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Here’s a promo code strategy specifically targeted towards new sign ups. $100 worth ad credit just for spending $25? That sounds like an impossible deal. However to use up the $100 credit, you’d have to use Google Ads to run ads for a considerable amount of time, enough for a new user to discover value on the platform and keep them hooked.

2. Swiggy : Building brand image with a promo-code

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Swiggy, a food delivery business based in India, has associated it’s promo code with it’s brand. Constant use of the promo code enforces a psychological connection to the brand itself.

3. Amazon : Product specific promo codes

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E-commerce giant Amazon uses promo codes not just to drive overall sales but to improve sales of specific product categories by using product specific coupon codes. This not only helps sales but also provides a mechanism to track the ROI of individual product campaigns.

4. Kate Spade : Promo codes to drive cart abandonment campaign conversions

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Kate Spade has mastered the art of high converting re-targeting campaigns by converting cart abandonment reminder emails with a time bound promo offer. This is an extremely effective strategy as it targets the customers who are already interested in making a purchase. Kate Spade can also go one step ahead by using social media re-targeting campaigns display relevant product ads to these customers.

How effective are promo codes really?

When implemented correctly, promo codes can boost sales dramatically in a short period of time, improve customers’ shopping experience while allowing for direct tracking of the ROI of a marketing campaign.

Contrary to what traditional marketers abide by, promo codes can also be strategically used to improve retention. However for promo codes to be successfully incorporated into a business’s retention strategy, a key requirement is the analysis of past user data. By analysing customer behaviour, spending trends and engagement with a business, marketers can draft effective promotional marketing strategies to boost retention.

Fortunately today, we have tools built specifically to run promotional marketing campaigns to boost retention. We’ve created MARS which is an AI powered marketing automation tool which analyses past user data and sends out just the right amount worth of discounts to each customer to get them to make a purchase or a transaction with the business.

Want to learn more about MARS and see it live in action? Visit our website for more.

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