Discount Codes: A Devil in Disguise for eCommerce Sites

by Spencer Belkofer June 8th, 2011 

discount-codes

There seems to be a never ending list of reasons for shopping cart abandonment. But one of the most overlooked reasonsone that can be toxic a sites checkout processis the use of discount codes. I know what youre thinking. But waitI included a discount code field to increase conversions and create more customers. How could it be detrimental to my conversion rates?.  Let me explain

According to a recent Forrester Research study, the people who are leaving sites during the checkout process arent people who can barely use a computer or got confused about how to move to the next step during checkout. The majority of online consumers, particularly those who are responsible for high shopping cart abandonment rates, are more than capable of completing the checkout process. Internet consumers are now quite used to checking out online. They know which fields they have to fill out and which ones they dont.

In the same vein, if a consumer is in the checkout process and sees a discount coupon code field, theyre no longer going consider it to be one of those useless, unrequired fields that websites use to gather as much information as the consumer will give them. On the contrary, when consumers see a field to enter a discount code, a gigantic bell immediately rings in their head. Discount Code?HmmmIf theres a discount, Ill bet I can find it."

This phenomenon has been cultivated into a online shopping habit by sites like RetailMeNot, whose entire purpose for existence is to spread coupon codes across the internet. (Of course, other than gaining revenue for advertising.) In fact, RetailMeNots Advertise page touts:

Every month over 5 million people visit our site immediately before making their purchase decision.

The worst…and I mean absolute worstare sites that list your coupon code right next to your competitors. This is prolific in the web hosting industry. As a test, I searched for Brand Name + Coupon Code and the #2 result was:

Shopping Cart Abandonment

The Scenario

A consumer has finally decided which web hosting provider they want to use. Theyre on step 8 of 9 during the notoriously long web hosting checkout process. And then they see that there are apparently discounts that he or she is missing out on. The user opens a new tab in their browser and starts searching. When they find the coupon code they were looking for, they also find your biggest competitors coupon But for 66% less than your already discounted price.

The Result

Do you think theres a strong chance that the would-be buyer is now going to look into your competitors? You bet they areespecially the competitor who claims to be just as good but at a third of the cost.

This isnt just shopping cart abandonment. Its brand abandonment.

What To Do…

Find Alternatives to Coupon Codes

In the best case scenario, you'll find a way to not use coupon codes at all. (Or, at least, not make the field visible to viewers who've found your site organically.) There's no "one size fits all" solution, so it will take some innovation. For example, one of the ways coupon codes are often used is in email marketing. Rather than include a coupon code in the email, have the email recipient land on a page where the discount is already configured into their price or shopping cart. This also has additional benefits like easier tracking and not having your coupon code spread across the world via sites like RetailMeNot. (There are obviously some cases when you want to have your discount codes spread across the net, but that's for another post!)

Use Discount Codes Less Frequently

It's hard to deny that there are some situations in which the use of a specific, trackable discount is the best solution. But, it's not always necessary…not even most of the time. If there's a way to create an offer for a particular segment of customers without using an offer code, then use that instead. It may be a hassle to alter your tracking paradigm in the short term, but the long term implications, i.e. higher conversion rates, will outweigh the costs.

Choose Affiliate Partners Wisely

Finally, be careful who you choose as an affiliate partner or reseller. As can be seen in the image above, this site (who will remain nameless) doesn't have any particular brand's interest in mind. The only thing that site owner is concerned about is making as many dollars on as many affiliate relationships as possible…regardless of the ethical implications of his or her practices. While the comparison happens to be about web hosting, don't think that your industry is above some marketers' intellect or interest. If there's money to be made for a middle man (which there should be in any effective reseller or affiliate plan), there will likely be some people out there who will put themselves before your brand.

I know this all might come across as somewhat counter-intuitive, but think about it. If you're reading this, you're probably a pretty savvy shopper who knows how to find deals if they're out there. How many times have you jumped ship, at least temporarily, to go see if you can find the ultimate discount that will save you some serious loot? I honestly never thought about it until coming across the research. And the I realized I did it nearly every time I saw a field for a discount code!

Spencer Belkofer

Spencer Belkofer is the owner of Lumin, an internet marketing firm in Alabama. When not working to grow his business, Spencer researches and writes about all things related to online marketing.

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2 Responses to “Discount Codes: A Devil in Disguise for eCommerce Sites”

  1. Spencer, Very interesting topic! I have mixed feelings about this. Yesterday I did just what you described. I went to an online website, filled up my Shopping Cart, went to check out and, lo and behold, saw the box for the discount code. I went to RetailMeNot and they had a 15% off coupon with 100% success that expired in a few days. I immediately went back to the shopping site and used the code, knowing that if I didn't, the coupon would expire. I was delighted to have saved money and felt like I got a deal!

    On the other hand, I have also done the opposite, filled up my Shopping Cart, hunted for online coupons and became distracted, never to return to my Cart.

    A great solution to this is Mr. Rebates (mrrebates.com). You go to Mr. Rebates before you head to a shopping website. Mr. Rebates is a click through site that gives rebates of 1-25% for whatever you buy through member sites. The best part is that they will either mail you a check or deposit your rebates directly into your PayPal account. Your rebates can really add up if you do a lot of online shopping.

    Of course the best shopping experience is when you combine Mr. Rebates with a RetailMeNot coupon. Sweet!

    • Carolyn,

      Thanks so much for the feedback!

      Like you said, I think it can definately go both ways. I think the real problems start to occur when there aren't any current coupon codes that are working or when the site lists your coupon codes next to competitors.

      Thanks for the heads up on Mr.Rebates…I'm on my way to check it out right this second.