Category: Sales KPIs.

Coupons are a customer’s dream since they allow them to buy a certain product at a lower price. In the eyes of a small business, this might seem like a black hole which might cause them to lose revenue – but in the long run, the effect might be entirely different. You just need to learn how to use those coupons in order to turn things to your advantage.

What are Coupons Used For?

E-commerce businesses use coupons in order to entice and attract a user to make a purchase. In the short run, they will indeed bring less revenue than they normally would at the full price – but in the long run, they will also bring more customers trying to buy that product.

Let’s take an example: Company A and Company B are selling the same products for $20. However, Company B decides to offer coupons that will knock off $5 from the price. Indeed, they will make less money at first than company A – but once word will spread that you can find the same product at B for a cheaper price, clients will start flowing.

Company B will have sold 50 products while Company B sold only 30. With the discount coupons, Company B made even more revenue than Company A – which brought up their sales a lot.

Coupon Conversion Formula

To find out the coupon conversion rate, you will have to use a simple formula – with no variables necessary to find out. All you need to know is the number of coupons that you have known and the number the coupons that you have given. Divide those numbers and multiply its result by 100 – and you will get your coupon conversion number.

As such, the formula will look exactly like this: Coupon Conversion = (Coupon Used / Coupons Given) x 100.
Ideally, you may want to use this formula together with the rate of coupon redemption. This way, you will know precisely whether or not your offer is successful or not.

If the offer does not seem to be any profits, there are two ways for you to attempt to resolve this. First, you can remove the coupons altogether and try to sell the product at the full price – or you can offer even more attractive discounts.

In this respect, you may want to analyze the target market. If there are companies out there offering even better coupons than you, then chances are that your clients will be drawn to their products instead of yours. Sometimes, making them an offer that they can’t refuse can bring you more profits in the long run.

Final Thoughts

Coupons can be a great way to increase the conversion of your company; you just need to know how to use them. Ideally, you may want to keep an eye on the data every month – and see whether or not a certain discount has brought more clients or more revenue.

If you see no significant changes, you might want to make a change of strategies – and create a better offer for both you and the company. Keep in mind that the coupons need to be convenient for both you and the client.

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