December 16, 2003, 12:00 AM

Online coupon use grows, but finding the right balance is still a challenge

Retailers and manufacturers can sink a coupon program’s effectiveness by setting redemptions thresholds too high or too low. The ideal offer? About 20% off purchase, says online coupon provider CoolSavings Inc.

Internet coupons continue to grow in popularity: about 38% of U.S. online households now use the home printed coupons, according to Forrester Research Inc. Yet as in the offline world, structuring online coupon programs to drive the greatest response and deliver the most marketing benefits for the retail or manufacturer sponsor can be challenging. Coupons programs risk failure by offering too much as well as too little, Matthew Moog, CEO of online coupon provider CoolSavings Inc., tells Internet Retailer.

 

“The biggest risk online as well as offline is when marketers use a coupon that does not have a minimum purchase required, a huge mistake. That’s basically like printing money,” says Moog. Moog notes that a small group of users will attempt to take advantage of $5 to $10 coupon with no minimum purchase required by purchasing items just below the e threshold. “The incentive to figure out ways to get around your fraud detection system to use it multiple times, or to pass it on to friends who will do the same thing, is pretty high,” he adds.

 

Yet many major retailers have made that mistake, Moog notes. To minimize the risk, CoolSavings recommends that retailers who want to use a coupon offer that aggressive have a limiting system on the back end that is able to issue a unique code to each coupon that is redeemable only once, like a gift certificate.

 

Coupon sponsors also make mistakes at the other end of the spectrum by offering too little to drive response, such as 10%, 5% or a very small dollar amount off; or by setting the purchase threshold for a discount offer too high. “Our experience is that in most retail merchandise categories you need to be at 20% ideally. It happens to be the price point that makes a difference and actually add incremental response and conversion,” Moog says.

 

CoolSavings will typically recommend to coupon sponsors an offer such as $5 off a $25 purchase. Though many retailers initially counter that they want to set the purchase threshold at $50, Moog notes that the coupon’s function is primarily to bring consumers in the door. “The reality is that if the retailer has those kinds of products in that price category, the consumer will almost always end up spending $50 anyway. The discount is what got them there in the first place,” he says.

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