Last Updated: March 14, 2023
Savings.com reveals top performing discount types & techniques using data from more than 1M shoppers.
Based on digital coupon redemption data from more than 1M shoppers, Savings.com’s annual look at coupon and discount trends reveals the ideal way to use discounting to boost sales volume and loyalty… without going overboard on price cuts.
Reaching digital customers who are both eager and skeptical requires precise campaign calibrations. Are coupon codes effective? Do shoppers prefer reductions by price or percentage? Is there a discount “sweet spot" that drives clicks and conversion?
We recently conducted an in-depth e-commerce analysis addressing these questions and compiled a detailed Shopper Redemption Index.
Our team worked with merchants across several retail categories tracking hundreds of offers comprising various discounts and mechanisms. We monitored more than 1.3 million clicks and over 300K purchases totaling more than $37M in sales to identify optimal marketing tactics.
- Offering discounts via coupon codes dramatically increased clicks and conversions while quadrupling sales from online deals. Merchants should consider testing if coupon codes perform well with their target audience.
- Discounts offering percentage price breaks yielded higher redemption rates than deals offering dollar reductions.
- Twenty percent discounts were the most productive % off deals, accounting for the majority of promotional sales. Offering a greater discount did not increase sales or clicks.
- Merchants opting for $ off deals generated the best results with discounts between $21 - $30, attracting three-quarters of bargain-hunting clicks.
To Clip or Not to Clip: How Coupon Codes Drive Performance
Some merchants eschew coupon codes citing potential customer frustration, checkout disruption, or association with online scams. Nevertheless, consumers love them.
Nearly half of online shoppers search third-party websites for digital coupons before completing purchases, and psychological research shows that redeeming discount codes promotes happiness while reducing stress.
Coupon codes also improve retailer health by increasing web engagement and sales.
Analyzing results from merchants offering online discounts with and without digital coupons showed that deals tied to coupon codes generated significantly more clicks and conversions, quadrupling daily sales revenues.
Discount codes produced consistent results in nearly every retail field. When deployed across six separate merchant categories, digital coupons significantly boosted daily sales in all but one.
Even in the one category where coupon codes generated fewer sales (home improvement), the conversion rate and sales per click were comparable with and without codes (but offers without codes generated more raw clicks).
Digital coupons reap better sales for most merchants. Beyond promoting discounted prices, they foster a sense of urgency and dissuade consumers from comparative shopping. Crafting custom codes also enables detailed campaign tracking, making them a natural choice for many retailers.
Next, we wanted to find out which types of discounts provided the best results.
Price or Percentage: Measuring Performance by Discount Types
Retail offers can take many forms, but the most common discounts -- and easiest to implement via coupon -- are reductions by either dollar amounts (“$ Off") or percentages ("% Off"). Tracking the relative performance of each approach resulted in mixed results.
Overall, the data showed that % Off deals yielded redemption increases of nearly 50 percent, but produced no significant difference in click rates or sales per click. These numbers also varied by merchandise category.
One rule of thumb is that % Off deals are more appealing on lower-priced merchandise, and $ Off reductions get more bang for the buck on higher-end goods (where the quantifiable savings are more impressive). The demarcation line between approaches is generally $100 (known as "The Rule of 100.")
This adage was reinforced by our observations. Percentage-off discounts scored the most redemptions with inexpensive categories like “Flowers, Food, & Gifts," fewer with middle-priced goods like “Apparel & Accessories," and least with bigger-ticket purchases such as “Home Improvement & Outdoor."
That trend repeated when analyzed by revenue, with $ Off sales producing higher returns in the two pricier merchandise categories.
Merchants choosing between % Off and $ Off discounts should consider their promotional goals and the value of the product in question. Percentage-off deals generate higher redemption rates suited to introductory offers targeting new customers, while dollar-off discounts generate more revenue when applied to pricier goods.
The last piece of the performance puzzle is identifying the size of the discount to offer.
Hitting the Sweet Spot: Measuring Performance by Discount Amount
When assembling a promotion, selecting the optimal discount sometimes seems like an art. Price breaks must be substantial enough to entice, reasonable enough to reassure, and prudent enough to make business sense.
Based on voluminous data, our study determined this is more a matter of science than intuition. The analysis identified definite sweet spots for maximizing returns; anything more -- or less -- is wasteful.
% Off Deals
To find the most tempting % Off deals, we tracked the metrics for a range of online offers featuring price breaks from 10 percent to more than half off. Perhaps surprisingly, lower discounts generated far better responses.
In a sampling that covered nearly one million consumer interactions, three-fourths of clicks went to promotions featuring 20 percent discounts or less.
The 10-20 percent discount also induced slightly higher redemption rates, producing even more lopsided sales revenue results.
High percentage discounts would seem more commercially appealing but consumers may not believe promotions that appear too good to be true. Discounts of around 20 percent earn the most trust, clicks, and sales while preserving more profits for merchants.
$ Off Deals
When promotions featured straight dollar discounts, customers were less enthusiastic about minimal price cuts yet still favored relatively moderate offers. Almost three-quarters of clicks went to reductions of $21 - $30.
That reduction amount did not perform as well for redemptions, however. With $ Off deals, redemption rates were more linear and increased slightly as discounts grew higher.
Yet due to the sheer volume of clicks on $21 - $30 off discounts, that range demonstrably supplied the best revenue return.
Offering nominal dollar discounts doesn't generate enough interest but much larger reductions inspire more skepticism than clicks. Anchoring price breaks between $21 - $30 lets merchants maximize promotion performance.
Competing for shrewd shoppers in the e-commerce arena requires well-tailored promotions and marketing tactics. Cash-strapped consumers are hungry for savings but wary of internet scams.
After crunching the numbers on millions of data points spanning myriad strategies, we identified essential elements for optimal discounts.
Our top-line results suggest coupon codes supplying moderate price breaks are the best way to generate clicks, conversions, and revenue. Merchants seeking to attract new customers or sell inexpensive goods might choose % Off coupons with discounts of around 20 percent. Remaining retailers should opt for $ Off codes offering price breaks between $21 - $30.
For more in-depth insights from our benchmark study, including recommendations tailored to specific business sectors, contact us regarding the full Shopper Redemption Report.