How To Use Promotion Codes To Drive Sales (2023) - Shopify (2024)

One surefire way to convert hesitant shoppers into paying customers is to offer promo codes for special discounts. A well-designed promotion code—particularly one with an expiration date—can get shoppers off the fence and inspire them to complete their online purchases. Here are a few ways to incorporate promotional codes into your ecommerce operations.

What is a promo code?

A promotional code, or promo code, is a phrase or a number-letter combination that unlocks special privileges or discounts for customers. Typically, they let shoppers save money when they activate the code. Promo codes are synonymous with coupon codes; although a coupon code tends to activate a price discount, promo codes can unlock buy-one-get-one free deals and other offers.

Promo codes can lure in new customers with lucrative discounts and offer existing customers the best deals on their favorite products.

Benefits of promo codes

Promotional codes work in favor of both retailers and their customers. Here are some of the ways promo codes can benefit all parties:

Benefits for businesses

Promo codes let businesses reach new customers and retain existing ones, potentially helping companies:

• Attract cost-conscious consumers. Promo codes attract new customers who love a good deal, which can drive initial purchases.
• Build brand loyalty. For existing customers, promo codes incentivize repeat purchases, fostering brand loyalty.
• Increase sales and revenue. Offering discounts through promo codes can stimulate sales and boost revenue, especially during slow periods. Even if checkout totals are lower than for full-price purchases, promos and coupons can help convert abandoned carts into sales.
• Facilitate purchase tracking and analytics. Assign unique promo codes to track the success of marketing campaigns, monitor customer behavior, and strategize for future campaigns via marketing analytics.
• Support targeted marketing. Businesses can tailor promo codes to specific demographics, locations, or purchasing behaviors, optimizing marketing efforts and attracting relevant customers.
• Assist in clearing inventory. You can use promo codes to clear out excess or outdated inventory, minimizing losses and making room for new merchandise.
• Facilitate partnerships and collaborations. Businesses can collaborate with other brands or influencers, offering joint promo codes to increase exposure and broaden their customer base.
• Aid a product launch. You can pair promo codes with a product launch to generate interest and encourage sampling.

Benefits for consumers

Promotional codes also benefit retail store shoppers and people shopping on an ecommerce website by providing the following:

• Special savings. Promo codes allow consumers to save big on their purchases, or access products and services that might otherwise be out of reach.
• A sense of exclusivity and savvy. Consumers often enjoy the sense of exclusivity limited promotions give, and this may lead to greater satisfaction with the brand or retailer offering the deals.
• A lower stakes way to try new brands and products. Promo codes encourage consumers to try new products or brands at a lower price, expanding their choices and experiences.
• A reason to return for future purchases. Consumers may choose to make future purchases at stores with regular special promotions because they associate those stores with savings.

Types of promo codes

• Public promo codes
• Private promo codes
• Restricted promo codes

Retailers offer three different types of promo codes. Each comes with unique characteristics for distribution and purchase experience:

Public promo codes

Public promo codes are available to anyone, and an array of popular stores use them. Here’s how they work:

• Available to all. Existing customers, potential consumers, and the general public can access public promo codes, which are shared on company websites, apps, social media accounts, or newsletters.
• Often come with limitations. These codes typically have a predefined usage limit or an expiration date, encouraging customers to use them within a specific timeframe. Retailers may reject expired coupons or codes.
• Often tied to a broader advertising strategy. Businesses use public promo codes to attract new customers, increase brand exposure, and drive sales during seasonal events.

Private promo codes

Companies restrict private promo codes to a specific group of individuals or a targeted audience. They do not openly advertise these codes and distribute them more selectively. Here’s how they function:

• Limited access. Only specific individuals or groups—such as loyal customers, employees, or affiliates—are eligible, and receive them via email, direct mail, or personalized communications such as SMS (text messages).
• Personalization. Private promo codes often match the preferences or behaviors of the intended recipients, providing a personalized incentive to encourage purchases.
• Special status. Retailers use these codes to make certain customers feel special or valued by offering an exclusive discount not available to the general public.

Restricted promo codes

Restricted promo codes have limitations and conditions to control their usage. These limitations can include geographical restrictions, minimum purchase requirements, or specific product categories. Here’s what makes a promo code restricted:

• Limited usage conditions. With restricted codes, retailers set conditions under which consumers can use them, like meeting a spending threshold for free shipping, or applying only to purchases made in app.

• Tailored offers. Businesses use restricted promo codes to promote specific products, or in specific geographic regions, such as offering free delivery throughout the US but not to Canada.

• Seasonal sales. You can restrict your promo codes based on seasons. A summer savings event might apply to every item you sell, but customers must redeem the code by a certain date or they’ll miss out on the sale entirely.

How to use promo codes for your business

1. Define the terms of your promotion
2. Offer discounts aligned with your revenue needs
3. Set clear limitations
4. Consider expiration dates
5. Make redemption easy
6. Track and analyze promo code performance

Promo codes can significantly impact your business’s sales, customer acquisition, and brand loyalty. Here is how to use promo codes effectively:

1. Define the terms of your promotion

Articulate the terms and details of your promotion to all potential customers. Popular types of promotions include:

• Percentage or dollar-based discounts. These promos activate during checkout and take a certain percentage off the total purchase price. For example, “All items 20% off” or “Get $10 off on orders over $50.”

• BOGO (buy one, get one) deals. This promo promises a free or discounted item when a consumer purchases another product.

• Free shipping. This promo, popular among those who shop online, offers free shipping, typically when users meet a certain spending threshold.

• Bundled deals. Some promo codes offer a discount when customers buy a bundle of related products or services.

• Seasonal offers. Some promo codes are seasonal, aligning with holidays or specific seasons to boost sales during peak shopping times. Examples include back-to-school sales and Black Friday offers.

2. Offer discounts aligned with your revenue needs

A well-designed promotion will offer customers goods and services at an affordable price. However, the price should align with what a business can afford. Consider your wholesale, labor, real estate, equipment, and tax expenses. Account for all mandatory expenses so you can avoid offering discounts so low they hurt your bottom line.

3. Set clear limitations

Define how many times a customer can use a promo code, to help manage your budget and prevent overuse. You may also wish to limit the promo code to specific products, product categories, or brands to drive sales for particular items.

4. Consider expiration dates

Most promo codes come with expiration dates, and retailers only honor active offers at checkout. If customers are disappointed they can’t redeem specific codes when they pay, direct them toward the latest sales.

5. Make redemption easy

Improve the customer experience by making it easy to redeem promo codes. For ecommerce shopping, codes should automatically apply when a consumer enters them in the discount code field on a checkout page. If you email a person a special code tied to their customer account, it should register when they sign in. This helps make the customer’s life easier and can win you valuable goodwill.

6. Track and analyze promo code performance

Use analytics tools to track promo code usage, customer behavior, and return on investment (ROI). Note which codes perform well and consider using them in future campaigns. For instance, you may find a buy one, get one promo netted higher shopping cart totals than a free shipping promotion.