It's all about the voucher codes....

Around three years ago I was working for a very large multichannel retailer. They decided to start periodically offering some of their VIP customers an exclusive temporary 'discount code'  they could use when shopping online, as a reward for the customers' continued loyalty and no doubt hefty credit account. The clever marketing department patted themselve son the back for their excellent initiative.

Cue the first Monday trading meeting after the discount code had been launched, and pandemonium breaking out amongst the trading team. It shockingly transpired that our supposed loyal customers had actually been telling friends and family and anybody else who would listen, about their discount code, so that they could all avail themselves of the benefits too. Who would have thought. The take up of the discount code had been 300% higher than expected, and as such had decimated the channel/department's stock and margin for the week. Red faces and burnt fingers all round.

Well as Dinah Washington never sang.. What a different three years makes.

Turns out our marketing department were onto something after all (even if their execution was naive at best) as these days online voucher or discount codes form a key part of a retailer's marketing strategy and as such are made widely available- they are relatively cheap but offer the retailer myriad benefits... and customer don't come off too badly either...

For us: Cheaper goods (hurray!) and potentially discovering (or rediscovering) a site we like that we haven't shopped at before.
 For the retailer: A simply way to reward existing customers thereby building their loyalty further. Ability to clear over or old stocks with targeted voucher code. Ability to attract new or dormant customers to the brand, who may in time also become loyal advocates. And of course ultimately the voucher code drives sales, and (if managed correctly)relatively cheaply too.

Inevitably a number of websites have sprung up to capitalise on retail's new enthusiasm for discount codes (and our eagerness not to miss out on a bargain in straitened times) by advertising all of these, with the ability to browse or search for a particular brand. If you're interested My VoucherCodes is thorough, whilst the Voucher Mum has a good range incorporated into its broader scope of thrift and saving money (and is a charming read).

But I'd warn that retailers should think carefully about their use the voucher code as an easy way to top up flagging sales. There is an increased risk of checkout abandonment and serious hits on profit margins using these codes, as customers on the site who were expecting to purchase at full price, notice the prompt for a discount code at checkout, and abandon their purchase, only to revisit once they've picked themselves up a nifty little discount code- so the code in that instant has not driven an additional sale, simply eroded profit on an existing one. (This can be minimised by more thought on the distribution of the codes, and on how customers are prompted for these at checkout. Some excellent suggestions here how-should-online-retailers-handle-discount-codes.)

Overall though discount codes seem like a pretty fair win win for consumer and retailer. Which of course means that actually the benefit is far greater for the retailer than the shopper- but hey, for 10% off plus free delivery, I can make my peace with that.