Coupons are a proven means of boosting sales in retail. The customer receives a coupon or discount ticket and in exchange for that coupon receives a price discount on a certain product or group of products. For seven years, the American TV series “Extreme Couponing” has been following people who never pay full price and who are always on the lookout for the next best deal. In the land of opportunities, couponing has become a kind of popular sport: Every year 305 billion coupons with a total value of 470 billion US dollars are distributed. There are now numerous online seminars and blogs that deal with couponing strategies.
Couponing is becoming more popular in Germany, too. According to statista.com coupons are considered to be good because of their savings potential. Although offline coupons still dominate, especially in grocery retail, coupons in newsletters and in shopping apps are also meeting with increased approval. In fact, consumers redeemed about 56 % more coupons via the Internet in 2017 than in 2016. The advantages for retailers are clear: Over 80 % of those who redeem coupons admit to buying more, or stocking up, because of the coupon. Every fifth coupon redeemer admits to spending more than originally planned because of the coupon. According to Acordo Group, in 2017 the average discount for a coupon was between 20-30% of the product price.
Retailers achieve the highest redemption rate possible by tailoring coupons to the personal interests and preferences of their customers. The key word is relevance. What good is a coupon for meat to a vegan? What is a customer without a baby to do with discount coupons for diapers?
It is not only the product selection but also the amount of discount that plays an important role. It is well known that the standing low price strategy of putting “Everything 20 % off” backfired. Of course it was not only the pricing strategy that was to blame. Other factors such as the lack of that promise that the customer will have an emotional experience when he completes his building project with the right tool also played a role. A retailer’s pricing strategy should always go hand in hand with a strong brand.
Personalized content as an important success factor
When coupons are used in a targeted way, retailers can increase customer value, purchase frequency, redemption rates and even customer retention. How does that work?
Retailers can increase customer value by also offering discounts on high-priced items within a product category (up-selling), for example. They can also use personalized coupons to make customers aware of new product categories from which the customer has not yet purchased (cross-selling). If a customer frequently purchases diapers, recommendations for baby accessories are extremely appropriate.
Our customers confirm that personalized offers during discount campaigns significantly increase redemption rates. The AI solution prudsys Realtime Decisioning Engine (prudsys RDE for short) analyzes individual customer preferences from the current customer behavior at all customer touchpoints as well as historical behavioral data. This way it can automatically determine highly personally relevant product recommendations that are really of interest to the customers. These product recommendations are then either combined with individual discounts or specific scales of discount.
Boost business using intelligent discounts
The pricing of a product depends on many factors: current demand, regional factors, seasonality, inventory and competition. Intelligent pricing algorithms analyze these factors in real time, automatically pricing millions of products. When calculating the amount of the discount for a product, the retailer also considers: How much of a discount can he offer on a certain product and still be profitable? Due to the number of product prices, countless influencing factors and the need to calculate the appropriate discount right down to the individual level, it is impossible for retailers to manually calculate prices. Intelligent algorithms that calculate the appropriate price in the blink of an eye enable retailers to act quickly in an extremely volatile competitive environment.
However, the retailer can also use the AI solution to determine what individual discounts look like based on customer value: A particularly loyal customer who shops frequently and buys a lot from a retailer can be rewarded with a higher discount on an relevant product than an occasional shopper.
If the retailer knows what he hopes to achieve with intelligent couponing, an AI solution can be a very effective support.
How do customers get the coupons?
Customer newsletters and mobile shopping apps are great ways to use personalized couponing. Mobile coupons can be scanned directly onto a smartphone using a barcode. This way the retailer can also see the campaign from which the coupon originates.
In the store, receipts, loyalty cards and in-store kiosk systems are suitable for intelligent checkout couponing. If the retailer combines such an in-store kiosk system with playful elements, he can further expand the shopping experience. That could be, for example, a one-armed bandit that rolls dice to determine the amount of the discount. Gamification actively includes the customer, creates emotional shopping experiences and thus contributes to customer retention.
Would you like to know how to use intelligent couponing for your business model? Book your personal web session with prudsys now.