Should I Use Voucher Websites To Promote My Business?

By Angus  |  31 Dec 2014 16:00:00

Groupon Goods and a number of similar discount voucher websites that cater to online merchants have proved to be a massive hit with consumers over the past few years. With Groupon itself boasting over 70 million subscribers worldwide, it’s no surprise that the level of exposure on offer attracts many businesses. 

If you are looking for rapid sales growth then these websites certainly have the potential to deliver, however before jumping in there are various factors to consider. In this post I am going to summarize the pros and cons of selling through discount voucher websites to help guide your decision.

Benefits

Guarantee Of Revenue

Every merchant would love to be able to guarantee the amount of revenue received for a promotion. The way voucher websites work is that you set a discount, a time limit for people to accept the offer, and crucially, the minimum number of customers you require to run the offer. If this minimum is not met then the offer is void.

Say for example that we sell widgets for £50 and run a 50% off discount but will only go through with this offer if a minimum of 20 people buy, after subtracting the voucher sites share (typically 50% of revenue), then we are guaranteed income of at least £250.

Discounts normally have to be at least 50% which is fairly hefty to say the least, and for some businesses completely unviable. If however you have high fixed costs / low unit cost, or generally just a low cost structure then these discounts can still make business sense.

Can Be Used To Shift Obsolete Stock

Another scenario where discount vouchers can be helpful is in clearly obsolete stock. If certain inventory is moving slowly and was going to be significantly discounted anyway, it is arguably preferable to sell for slightly less but to shift it all at once and avoid having your brand image compromised by questionably large discounts appearing on your website.  

Free Advertising

A significant advantage of Voucher Websites over other forms of advertising is that it is free to place your advert. Even if you don’t get the required sales to run the promotion, you will still have gained free public awareness for your business and they may come back another time.

In addition to this, most voucher websites will also give you the information of people who have purchased from you so that you can target them with other promotions at a later date. This is incredibly valuable in helping you make the most of voucher promotions by enabling you to increase the customers’ lifetime value.

Given that display advertising and email marketing can be very costly and offer no guarantee of any return, these points are of significant benefit. However…

Drawbacks

Attracts Low Lifetime Value Customers

As one would expect, many customers using discount voucher sites are bargain-seekers who will regularly switch their preference to whatever is cheaper on the day and often won’t spend beyond the value of the coupon. If the promotion you are running is a loss leader then this completely undermines the point of going on voucher sites in the first place.

The statistics from a recent Rice University study suggest that 80% of purchasers on these types of website are first time customers. Voucher websites would argue that the whole point of promoting your business through them is to get people through the door and convert them into regulars, however the same study reports that only 20% return. 

By structuring your offer carefully and with some follow up marketing activity you should be able to improve this. One suggestion would be instead of offering a discount on the total bill, to offer discounts on certain parts of an overall order so that you can ensure profitability.

Can Damage Your Brand

Another potential downfall of using discount vouchers is that it can damage your brand if done too regularly. The result of this is that it can make people reluctant to buy from you at your normal price. The answer to get around this is to use these types of promotion sparingly, especially if you are a luxury brand.

Conclusion

To summarise, voucher websites can certainly play a role in promoting an ecommerce business, and as long as the promotion is considered thoroughly they can be a very successful way of significantly increasing sales and brand awareness.

They are one of the lowest risk advertising methods available so if you do not have a large advertising budget and are looking to get your business off the ground then I would definitely suggest taking a look.

That said, they do appear to be better suited to some products than others, and many people still associate these types of promotions primarily with bricks-and-mortar retailers.

The products that appeal to voucher code users tend to be occasional purchases that fulfill a “want” so don’t bank on repeat purchases and build in acceptable margin from the start.