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Each can bring different revenue and customer acquisition rewards.
A daily deal discount offer recently proved itself as a strong customer acquisition tool for manufacturer and online shoe retailer Okabashi Brands Inc. But when it comes to making money right away, coupon codes are better.
The limited-time deal, offered in August through KGB Deals, gave consumers $40 worth of flip-flops, sandals, flats and heels for $16, a 60% discount. 484 consumers bought the deal, 78% of them new customers, says Hadi Irvani, the retailer’s director of e-commerce. “And I think they will come back and buy more,” he says.
That’s important because the average customer owns nearly five pairs of the retailer’s shoes, Irvani says. But as tempting as it might be to offer consumers a flurry of such deals, Okabashi has to be careful, lest it dilute its brand by too much discounting. “We sell shoes at a lot of high-end resorts and spas,” he says.
Whether and how to offer limited-time online discounts and daily deals is a burning issue for many retailers; among the first questions they must answer is whether the deals are mainly designed to increase sales or attract new customers. Interviews with retailers and analysts who cover daily deals and online discounts indicate that many merchants are looking at limited-time offers more as a customer acquisition or product promotion tool. “We choose to use Groupon last spring to help raise awareness of a brand new category for us—Photos to Art,” says Damon Campolo, senior director of business development for Art.com, No. 105 in the Internet Retailer Top 500 Guide; the retailer offered for $44 a canvas print product that normally cost $89.98. He did not reveal sales figures.
At Okabashi, the retailer turns to coupon codes when the main goal is to directly boost sales through the specific offer, Irvani says. For instance, since May, the retailer has sent to customers 20 days after a purchase an e-mailed link that directs the shopper to a 15% off coupon. The consumer can share that coupon with friends; if one uses it to make a purchase, the original customer is rewarded with a coupon for a free pair of shoes. “We make more money on coupon codes than we did with the KGB deal,” he says.