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Tis the season for … holiday retail planning. Just think, four months from now Black Friday and Cyber Monday will have passed us by and retailers will be in the thick of the holiday shopping season. We thought now would be a good time to look at the resources and tools consumers count on when shopping for the holidays online.
We focused our analysis on the influence of three of the more conventional promotional strategies used by retailers online- 1) coupons offered by retailers through third-party sites including sites such as but not limited to: couponcabin.com, coupons.com, couponmom.com and retailmenot.com; 2) loyalty programs and loyalty technology providers including sites such as but not limited to: ebates.com, fatwallet.com, freecause.com, skymilesshopping.com and wellsfargorewards.com that offer consumers points by shopping at retailers that can later be redeemed for some form of reward; and 3) promotional emails sent by retailers intended to promote sales and other others.
Our analysis compared the purchase rates that each of these promotional strategies generated compared to the overall site purchase rates for the top 250 online retailers.
Our findings should make JC Penney sit up in their chairs – coupons are the most effective promotional strategy to drive purchases at online retailers. The average conversion rate on retailer sites was 3.7% compared to a conversion rate of 7.6% when consumers are referred from a coupon sites – a fifty percent lift (see below).
The other particularly effective retailer promotional strategy is participating in loyalty programs and technology providers such as Ebates that award points when a user makes a purchase at a retailer after visiting its online mall. Loyalty programs/technology providers yield conversion rates 30% higher than the retailers’ overall conversion rate. We looked at the shopping behavior of consumers at retailers that offered an incentive through FreeCause’s rewards technology versus those retailers that did not offer an incentive. The results showed that retailers who offered an incentive saw conversion rates twice as large as retailers that did not offer an incentive.
There is no doubt that these types of programs are effective – the ironic consideration with loyalty programs/technology providers will be how loyal customers are to particular loyalty programs given how big this market has become. Nonetheless, retailers would be wise to invest in a variety of these programs given the lift they are generating.
Retailers made news last holiday season after sending out a record number of emails to consumers. Email promotions resulted in conversion rates 15% less than the overall site conversion rate in April 2012. Despite the fact that emails generated purchase rates less than the retailer’s overall purchase rate, this should not be considered all bad news. Emails are intended to generate engagement and traffic compared to coupons and loyalty programs/technology providers that generally require consumers to seek them out. Given the relative low cost of emails compared to the days of placing advertisements and circulars in newspapers, email should still be considered an effective tool.
We asked consumers in our Online Shopper Intelligence survey about the tools that they most frequently used when shopping online. After search, retailer emails were the next most frequently used tool. Online shopping has created a whole host of challenges for traditional retailers – the days of a family getting in the car and driving to the mall and physically passing by all stores is on the decline. Email helps keep retailers top of mind. The majority of the tools that shoppers used when shopping online were related to price – ranging from coupon sites to group buying focused sites.
Given the importance of coupons, it is not surprising that the lines between all three of the promotional strategies we discussed are blurring. Loyalty programs/technology providers are evolving their strategies and some are offering coupons to consumers in exchange for an extra amount of points or reward if the coupon is redeemed. Such a combination can only help a loyalty program increase its effectiveness for a retailer.
Another big topic of discussion has been free shipping. Retailers dove head-first into free shipping related promotions during the holidays thinking that was an absolute must to get people to buy online. Yet, despite that, coupons were still as influential as free shipping when getting consumers to make a purchase online.
The importance of coupons to consumers underscores how important coupon sites and loyalty programs/technology providers should continue to be during holiday 2012. Retailers should consider the following:
1) Shift the messaging on email promotions to come across as being more coupon focused. Consider sending less “19.99 shirts – today only” and more “save 20% with this coupon – 1 day only.” Consumers need a call to action and to feel as if they are being empowered to seek the right deals online.
2) Consider time-sensitive promotions. One tactic that could serve coupon, loyalty and email promotional strategies is time-boxing promotions. Judging by the interest in group shopping or daily deal sites, retailers can run their own daily deals. Promote the daily deals through emails and offer coupons on sites that have a finite period of time – in hours – not days.
3) Find ways to transform these effective online promotional strategies into effective multi-channel promotional strategies. If all of these programs are proving effective for different reasons online, why not find ways to offer similar programs on mobile devices to aid in-store behavior? Retailers should consider developing emails with scannable barcodes and working with online loyalty programs/technology providers to find ways to offer rewards for in-store purchases. There are some positive examples of this out there, but more work is needed. Many of us have been in the situation where we find a discount on our mobile device only to be told by a store associate that the offer is not valid in-store. This experience can only hurt brand loyalty and customer satisfaction.
Time to get off the beach, turn on the holiday tunes and get to work! If retailers are not ready to get into the holiday spirit there is no reason that some of these strategies can’t be used year-round. As you can see from the analysis above, all of these promotional strategies appear to be effective, to different degrees, year round. Any of the strategies could be considered a great play to drive traffic during parts of the year where traffic traditionally drops off.