Ten Ways to Get the Most Out of Your Online Coupon Promotion

Oct 26, 2011

Topic: Marketing

A year ago, Groupon was turning away retailers in some U.S. markets where it had waiting lists of up to six months. Today, the company is competing not only with Living Social, Amazon Local, Milo and other national companies, but a growing host of local startups, many of them tied to local media companies like newspaper publishers and radio and television stations.

The competition means retailers have significantly more leverage when it comes to negotiating with online coupons vendors. To get a sense of what you should ask for and how to prepare for such a promotion, OIA spoke with Kim Walker, founder and president of outdoor DIVAS, and Brenda Swartz marketing manager for Brown’s Enterprises. Here are ten of their suggestions for getting the most out of an online coupon promotion.

  1. Contact multiple vendors. If Groupon can’t accommodate you on dates, Amazon Local, Living Social, Milo or services offered by local newspapers and radio and television stations likely can.
  2. Negotiate revenue split. Daily deal sites typically split coupon proceeds 50/50 with the merchant, but may be willing to lower their take in certain situations.
  3. Negotiate credit card fees. Daily deal sites may be willing to absorb some of the processing fees incurred when customers pay for their online coupon using their credit card.
  4. Negotiate quicker payout. Daily deal sites typically withhold payment of the merchant’s share of coupon proceeds for 30 days and may string out payments over multiple installments over 90 days. This can create cash flow problems if redemptions spike early, but merchants report Groupon has been flexible in these instances and accelerated payout so merchants can replenish stock in a timely manner.
  5. Restrict coupons. Restrict coupons to higher margin items and redemption to slower times of the year. Consider restricting the use of the coupon to inline apparel and footwear and/or excluding lower margin items. Be aware, however, that the coupon issuer will press you for the least restrictive offers to ensure a high redemption rate and happy customers. Daily deal sites retain the right to refund unhappy customers and charge that cost to your account.
  6. Make a special close-out buy in advance. This ensures ample supplies and will help lessen the margin hit. This strategy can work particularly well given that availability of close-outs often coincides with lulls in store traffic.
  7. Create a special SKU. Use your POS system to create a special SKU that cashiers can scan every time a coupon is redeemed.  This allows you to automate tracking of new customer redemptions.
  8. Have a script. Prepare your staff to address complaints from existing customers who may be inconvenienced by the surge in coupon traffic and annoyed they are not being offered the same deal. Staff should be prepared to explain that the promotion was offered exclusively to Groupon subscribers and use the opportunity to promote your store’s customer loyalty programs.
  9. Incentivize return visits. Consider offering new customers a $10 gift certificate or other incentive to spend $100 or more. That incentivizes them not only to spend more than the face value of the coupon, but to return to your store.
  10. Prep reps. Make sure your reps know about the event and are working with vendors to expedite replenishment orders on a weekly basis as needed throughout the promotion.