How Promo Codes Can Help eCommerce Businesses | The Pro's of Promo Codes (2024)

A study completed by the Center for Neuroeconomics Studies at Claremont Graduate University found that when customers receive a promo code their level of oxytocin actually increases. This is the hormone that is responsible for making us feel happy. So, do not be too quick to disregard promo codes as something that your customers won’t notice or value. Irrespective of if a customer is completing their first purchase via your site or supporting you for the tenth time this month, a small incentive like a 10% off or free shipping can improve the shopping experience directly.

As happy customers are good for business, promo codes can also offer advantages to eCommerce businesses. In this article, we share a few practical ideas of how you can offer discounts and deals to your customers. From free gift ideas to turning it into a competition, promo codes can come in many different shapes and sizes.

Pros of Promos: How Promo Codes Can Help eCommerce Businesses:

What Is a Promotional Code?

A promotional code (or simply called promo code) is a string that can contain letters and numbers that an eCommerce store can share with its customers. These codes which are also called alphanumeric codes are typically about 5 - 10 characters long and most of the time only capital letters are used. Sometimes this code will spell out a word that is connected to the type of discount that it offers like FREEGIFT10. Though, it can also just be a string of nonsensical letters and numbers.

Upon checkout, the customer can then enter the code in a coupon code box to receive a discount. Sometimes this code box can also go by the name of a discount code, gift code, coupon code or offer code. Irrespective of how it is labeled, it is welcomed by your customers (that is if they have a valid code to enter obviously).

There are different types of promotional codes that eCommerce businesses can use. The following are some of the most popular types:

Amount off

With this type of promo code, your customers will be able to save a set amount off their whole order or an individual item. In some instances, this might only apply if they purchase, for instance, two of the same item.

Percentage off

With this type of promo code, your customers will be able to receive a certain percentage off. As the store owner, you get to decide beforehand what this percentage should be and whether it should apply only to specific products or the whole cart.

Free shipping

Offering free shipping as a promo code is one of the most popular (and smartest) approaches. You can either offer it to all orders for a set period of time or limit it to orders that are more than a specific amount.

Free gift

With this type of code, a customer can qualify for a bonus item with specific purchases. Try to add it as an incentive for orders that are 15% more than your average order value. This way it is a reasonable target that customers will be able to reach, but your business will ultimately still generate more sales. Popular free gifts include bags, socks, or coffee beans.

Coupons Versus Promo Codes

While eCommerce stores are pretty much restricted only to using alphanumeric codes that customers can enter online, promo codes also offer more benefits than traditional cut-out-and-keep coupons. By using codes, you have the option to limit the number of customers who may take part in a specific promotion. You also have the option of sharing it with only specific users such as first-time buyers or subscribers on your mailing list who indicated that they want to unsubscribe.

The Pros of Using Promo Codes

When done right, promo codes can be a win-win situation. They can offer your customers that extra reason they might need to shop from your online store which means that you will generate more revenue. On the other hand, your customer would not mind supporting your business because they can get the products that they have eyed for a while at a better price.

In addition to helping you generate revenue and create happier customers, promo codes can also help you to note the progress of your marketing strategy. You can, for instance, use it to see via which social media platforms and channels do you get the most conversions or traffic. You can do this by linking a specific discount code with a specific paid ad or marketing channel. This is easier than it sounds as different promo codes can be used for the same offer. For example, the promo code FBSALE50 would apply to Facebook, while something like SURVEY50 could be shared with customers who completed a survey that you sent as part of an email marketing campaign.

As a matter of fact, they can actually encourage your target audience to engage with a marketing campaign. If customers know that there is something in it for them by sacrificing their time to complete an online survey or sharing your social media content, you are more likely to get participants. For instance, if you link a promo code to completing a survey, you can also use it as an opportunity to get contact details and other customer information which helps you to generate leads. So, promo codes can, in fact, also add more value to your marketing campaigns.

The Cons of Using Promo Codes

While promo codes in general can be very effective tools, there are some disadvantages of using promotional codes. The most obvious disadvantage is that it can decrease your profit margin.

While it more often than not increases brand awareness and brand loyalty and helps you to grow your email subscription list, you do also run the risk of attracting the wrong type of customer for your brand. By sharing promo codes publicly, you can also attract people who are not part of your target audience. This will ultimately not help you with your efforts of growing brand loyalty. Plus, there is always the risk that you attract customers who are looking only for the best buy that they can find and not a new favorite online store or brand.

How to Use Promo Codes

The most common way to use promo codes is to require that your customers purchase a minimum order amount in order to redeem the code. In other words, your customers will have to spend a fixed amount in order to receive the percentage/amount off or get the free shipping or gift. However, if you are feeling particularly generous, you could also decide to apply your promo code to any purchase, irrespective of the total due by the customer.

You can also include in your terms and conditions that only specific products or categories qualify for the promo code. Alternatively, you can also exclude certain products or a brand, for example. In fact, online stores often exclude their more expensive high-end brands or products from the promo codes that they are running.

Here are some ideas for how you can use promo codes:

Allowing multiple codes

“Stacking” or “stacks” refer to when customers may redeem more than one coupon per order. Though, not all websites will be able to support this option. If your site can support it, there is no right or wrong approach when it comes to using multiple codes. Just bear in mind that whatever you decide does not end up hurting you financially.

Pairing it with a prize

You can take your use of promo codes one step further by offering a promo code to all your followers or a select few. Then, when they claim their promo code, they can also receive an automatic entry into the final draw for one big prize. The prize can, for instance, be one of your new products. By following this approach, you can also use it as an opportunity to introduce new product ranges like a new brand of tea or the latest gadgets.

Sharing a promo code with any follower

A simple approach is to share a promo code as a one-off discount with all your followers. You can, for instance, ask them to sign up for your email newsletters in order to get the code. Not only will this approach increase sales, but you can also boost interaction this way.

Sharing a promo code with select followers

If you are scared that just sharing a specific promo code with only some customers will make you appear stingy, rest assured that it can actually make your brand appear the opposite. By targeting a specific group of followers or limiting the number of participants, your deal will become more exclusive, and, in turn, more effective.

Sharing a unique code with each follower

You can also take it one step further and create a unique code that you share with each follower. The advantage of following this approach is that you can gather much more specific information about each user’s shopping habits.

How to Pair a Free Gift With a Purchase

Unlike some of the other options where it is simply taking off an amount and the promo is done, free gifts come with more logistics. So, if you have decided that you will be offering a free gift with a purchase, here are a few more things that you should consider.

It should be appealing

Everyone likes to pay less. So, it will be hard to resist a generous 30% off and most will call it a win if they only saved 10% off their purchase. Though, when it comes to gifts, customers are more picky. It should offer enough value that your customers will feel like winners for supporting your online store. Not only should it appeal to your customers, but it should also fit in with your brand. For example, if you are selling craft drinks, a pair of socks will just be odd.

It should be lightweight and small

While the value of the gift should be substantial enough, it should ideally be lightweight and small. The reason for this is simple – shipping. Larger gifts might need bigger packaging which can increase your shipping rates.

It should be easy to source

For this promotional campaign to work, you need to deliver on your promises. So, choose free gifts of which you have sufficient stock or items that will be easy to order if you should run out of stock. As you will probably experience a surge in sales (after all that is the goal), you must be prepared to deal with increased numbers.

Using Influencers to Share Promo Codes

While you can choose to share these promo codes directly with your target audience by means of email newsletters, you can also enlist the services of influencers. There are numerous eCommerce businesses that share exclusive promotional codes with influencers who in turn can share it with their following.

If you are already working with influencers, this approach can help you to monitor the effectiveness of an influencer marketing campaign better. Influencer Marketing Platforms, can facilitate this process by providing tools to track and analyze the impact of promo code sharing. In fact, it can also help with future campaigns as your influencers will look like heroes to your target audience for sharing exclusive opportunities with them.

One thing, though, to consider when using influencers to share promo codes is only to use codes that are easy to say aloud. It is not uncommon for codes to be a random string of letters and numbers, but as your influencers will most likely share the promo codes verbally too in videos on TikTok, Instagram, YouTube or Facebook, a promo code that spells out a word just shares much easier.

Other Ideas for Using Promo Codes

Monthly discounts

If you find yourself struggling to meet monthly targets, you can consider sharing promo codes when you have hit a difficult month. It can be an effective way to reach your goals.

Customer milestones

In 2021, personalization will become even more valuable. One way that you can offer a more personalized shopping experience to your customers is by sharing promo codes to help celebrate certain milestones. It could be as simple as a code in their birthday month or a promo code once they have completed a certain number of purchases. This type of promo code can also help you to introduce a customer loyalty program, if your brand has one.

Abandoned cart promo codes

If you are finding that increasingly more customers are abandoning their carts, you can send them an email with a promo code. This can serve as a good incentive for customers to complete the checkout process. However, you should obviously take the time to figure out why customers are abandoning their carts in the first place. Perhaps you do not share an estimated delivery time? Or maybe your shipping fee is just too high? Without fixing these issues, offering a promo code will just be a plaster for a much bigger problem.

Promo codes for sharing on social media

If you want to boost sales and increase your online presence, offering a promo code to your target audience for liking or following you on social media can help you with word of mouth advertising. For example, when a customer shares a recent product purchase on Facebook, you can reward them with 10% off their next purchase.

Alternatively, you can simply stick to the good old incentive for recommending your brand to friends or family (even if it is not by means of social media). You can either offer the promo code to the customer who made the referral or the friend or relative who was referred. Some brands even decide to make it fair and share it with both the referrer and referred.

Virtual events

If your eCommerce store plans to host a virtual event, like for example a video shopping event, you can reward those who attend with an exclusive promo code. Needless to say, for this to be effective, the actual discount code should only be shared after the event (or perhaps towards the end of the live stream).

Wrapping Things Up

As promotional codes can easily be adapted to suit a wide range of formats, they are often used by eCommerce stores. All in all, it is a relatively easy way to boost sales.

That being said, the advantages of using promo codes from time to time go further than merely a quick spike in sales. When they are done right, they can also help you to improve brand loyalty and monitor the effectiveness of your marketing campaigns (especially if you are working with influencers). From rewards for joining newsletters to discounts for referring friends, there are countless creative ways that you can use to incentivize your target audience for shopping with you and getting the word out about your brand.