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Updated Apr 05, 2024

Using Coupons to Drive Engagement and Retention

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Julie Thompson, Contributing Writer

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With the rise of online shopping, it’s easier than ever to track customer purchases. Based on consumers’ previous purchases, companies can make upselling and cross-selling recommendations or send custom offers or coupons targeted to customers’ interests. 

Consumers value strong relationships with vendors they’ve done business with, and strengthening communication efforts in personalized ways, like sending coupons, can build customer loyalty. We’ll explain more about using coupons to drive engagement and share the pros and cons of this strategy.

Editor’s note: Looking for the right POS system for your business? Fill out the below questionnaire to have our vendor partners contact you about your needs.

How to use coupons to drive engagement and retention

All retailers can send custom offers to customers to encourage new purchases. Here’s how it works.

1. Send coupons that deliver value to the customer.

Here’s an essential point for retailers hoping to gain relevance and grow customer relationships: It’s not all about you; it’s about them. If you want your messages to stand out amid the communication onslaught consumers receive on any given day, you must understand their needs and deliver value.

Customers are engaged with a wide range of retailers and make ongoing decisions about where to spend their money. While they certainly consider price, it’s not the only factor. Customers also value unique, personalized experiences with retailers that provide higher value than they might receive elsewhere. Marketers must consider how they can effectively position themselves as high-value providers that are tuned in to customer needs across all channels.

To have a positive impact on customers, you need to target your coupons. You won’t score sales by promoting child care or pet care products to consumers who don’t have children or pets, for example. Instead, make your offerings relevant to a customer’s specific situation.

TipBottom line

To provide a great customer experience, deliver excellent value, provide efficient customer service, and focus on personalized communications that reflect customers’ purchase history and stated preferences.

2. Use technology when you create coupon promotions.

Using tech tools can help you create more relevant, compelling offers. Consider the following tips: 

  • Use customer data to inform offers. For example, high-value coupons are an excellent tool for reengaging past customers. However, it’s essential to look at their purchase history and preference data to spur the desired action. If they previously shopped at a specific store location or were interested in a particular product group, use this data when crafting your offer. The best customer relationship management (CRM) software has robust customer data management features that allow you to access deep customer insights.
  • Utilize mobile coupon technology. When issuing coupons, you should pay attention to the technology that’s familiar to your customers. For example, most consumers are comfortable using smartphones, so mobile coupons are desirable. You can send mobile coupons as part of your text message marketing efforts. Other options include issuing coupon images via email and social media and offering web- or app-based coupons. 
  • Make coupon redemption seamless. Policing coupon expiration dates or making redemption difficult can backfire. However, creating a seamless coupon redemption process will boost trust and loyalty. For example, if you allow offers to be used multiple times or to be shared with non-customers, the impact can be dramatic. However, you must carefully weigh the benefits of such permissive couponing and ensure it won’t hurt your bottom line (more on this below). 
Did You Know?Did you know

Some of the best point-of-sale (POS) systems include mobile coupon integration and custom coupon creation.

3. Practice secure coupon distribution and redemption. 

Taking great care with your targeted, personalized coupon offers can yield excellent engagement and retention results, but it’s crucial to ensure that customers don’t take advantage of you. With this in mind, many retailers that offer high-value coupons implement coupon security practices that prohibit reuse and sharing. 

The single-use model employs security on two fronts: offer distribution and redemption. This model ensures the following:

  • Retailers can generate millions of unique, single-use coupons or promo codes daily. These offers can be accepted, validated and redeemed by POS systems or e-commerce platforms in real time.   
  • Consumers can obtain only the offers that are meant for them.
  • Consumers can obtain an offer only once, even if they try to access it multiple times over different channels.
  • An offer can be redeemed only once, even if customers try to redeem it via a different channel.

Single-use offers have another significant benefit: You can collect valuable data because you know where and when each offer was used. You gain crucial information about your customers and their purchase patterns and preferences that can be applied to future marketing initiatives. 

Single-use offers fueled by the right technology will help you personalize your offers risk-free, ensure accurate metrics, and allow for improved A/B testing.

Pros of using coupons

Offering coupons is an excellent way to expand your target audience and increase sales. It can also encourage existing customers to boost their spending or purchase frequency. Here are some additional benefits of using coupons:

  • Coupons help you connect and reengage with customers. Staying in front of customers after they’ve made a purchase is vital to effective engagement and retention. While some consumers are wary of retailers’ customer tracking methods, most still welcome personalized offers based on their shopping history. They appreciate discounts on complementary items and offers that align with their needs, interests and purchase history. 
  • Coupons help you attract new customers. Coupons and discounts can help you attract new customers and boost your overall brand awareness. And new customers are likely on the lookout for coupons. According to a Capterra report, 78 percent of online consumers didn’t follow through with a purchase because they couldn’t access a coupon code. Offering coupons might also lead customers to switch brands entirely. 
  • Coupons help you meet customer expectations. Many buyers expect discounts from companies they buy from, so giving out coupons can be considered standard practice. Customers also see coupons and discounts as rewards for their shopping loyalty, and these rewards may even exceed their expectations. 
  • Coupons give retailers a competitive edge. Offering discounts and coupons can help you develop an edge over your competitors. Consistently offering discounts and coupons can also help you earn repeat business instead of sending customers to your competition.
Did You Know?Did you know

According to Statista, 92 percent of U.S. shoppers used coupons in 2023, with 79 percent utilizing online coupons.

Cons of using coupons

Coupons do have some downsides. Consider the following potential drawbacks before you implement a coupon strategy: 

  • Coupons can cut into profits. Too much emphasis on coupons can reduce your profits and even devalue your product or service, leaving customers waiting for a new coupon instead of impulse buying at full price. Ultimately, you may experience reduced or delayed sales as repeat customers await a better deal.
  • Coupons can reduce your offering’s perceived value. With coupons and discounts, you run the risk of lessening the perceived product quality or value of your offerings, further eating into your profits.
  • Coupons can be expensive. Before offering a discount or coupon, ensure you understand your profit margins; failing to do so can increase your risk of losses. Consider your overhead costs and the costs of materials and production. Also, factor the cost of a coupon service into your calculations.
  • Coupons may increase online shopping cart abandonment. Many retailers have inadvertently caused customers to abandon their online shopping carts by previously offering a coupon or discount code. Now, a customer who may be willing to buy products without an added incentive will hunt for a good deal and abandon their cart if they don’t find one.

Sean Peek contributed to this article.

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Julie Thompson, Contributing Writer
Julie Thompson is a professional content writer who has worked with a diverse group of professional clients, including online agencies, tech startups and global entrepreneurs. Julie has also written articles covering current business trends, compliance, and finance.
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