• by Jack Loechner , Staff Writer @mp_research, June 29, 2015

According the Electronic Retailing Association blog by Greg Sheppard, CEO of Affiliate Traction, collecting and synthesizing research from several respectable sources, 70% of the U.S. population will not buy your brand without a discount simply because they cannot afford to do so.

Shoppers want a good deal, says the report. While free shipping and low prices factor in, especially to those who, without a discount, simply cannot afford to buy certain products, coupon offers can make a serious positive dent in a merchant's online profitability.

A recent BIGinsight Consumer Survey finds, says the report, that coupons best in-store promotions, word of mouth, online advertising, inserts, and offline advertising as the primary determining factor in deciding where to shop. And, recent data from Shop.org says that while free shipping, ease of website use, and a flexible return policy are important to shoppers, it’s low prices that are number one with shoppers.

According to Census data, households with HHI under $75,000 buy their favorite brands four out of 10 times. They buy when their favorite items are on sale or they have a coupon. Households with HHI over $75,000 buy their favorite brands eight out of 10 times, but only 29.2% of Americans have HHI over $75,000, says the report.

The writer notes that, with 70% of Americans having HHI under $70,000 and acting on a brand preference only when a sale or coupon is in play, merchants who try to save money by not offering a coupon, are actually ignoring 70% of potential buyers if they had an incentive.

Additional findings in the report, supporting the use of coupons, include:

• According to Forrester, new customers spend, on average, 3.1 times more, and existing customers, on average, spend 2.6 times more per order. And, according to five census and data companies, finds the report, a 15% discount resulted in an average order value of $192, but a 5% discount netted a $303 average order value.
• In one example, the average shopping basket value of a coupon-less sale is $53.88. Subtracting $10.78 for affiliate commission resulted in a profit of $43.10. When a 10% coupon discount was offered, basket value rose to $183.32. With the discount applied and affiliate commission of $33 subtracted, the net profit rose to $131.99 yielding a 3.1X increase in ROI.
• Another example found that, over the course of 12 months, coupon usage resulted in a 1.5X lift in average order value and a 1.8X increase in profitability. In the example, the implementation of coupon discounts resulted in coupons contributing to 17% of revenue in the first 12 months and 20% of revenue at the end of the second year.
• The average conversion rate for all affiliate types studied is 2.1%. Search returns yield 1.3%, social returns 7.7%, partners return 15.2%, and coupons return 39.6%, emphasizes the report.

Not only do coupons incentivize people to spend more, deliver more profit, build loyalty and increase conversion rate, concludes the report, coupons give access to the 70% of shoppers who may not otherwise be a prospect.

N.B. Editor’s note: while these data may not be statistically projectable, nor universally representative, or even applicable, they do give rise to thought.

For access to this blog, and more information from ERA, please visit here.