How Companies with Coupons Lose Customers

While companies spend an extraordinary amount of time developing coupons and segments of people who will receive them, research demonstrates that the simple act of prompting customers for a coupon code could reverse those gains. Let us discuss how.

1-2 Weeks to Apply
Useful for All Industries

What did the research find?

Customers who were prompted for a coupon during the checkout process, but didn’t have one, were more likely to abandon their purchase when compared to a group that received no prompt at all.

In fact, the lost sales by the coupon-less group were large enough to offset the gains from segments that did receive a coupon.

What could cause this behavior?

Prompting customers for a coupon code can delay purchasing and increase shopping cart abandonment as those customers seek additional discounts elsewhere. The prompt also signals a form of price discrimination by suggesting that other customers are receiving a better deal, decreasing overall willingness to purchase from the company.

How could you apply this?

The researchers recommended looking for ways to make your coupon prompt less conspicuous during checkout. Companies have also tried posting an easily-accessible coupon to satisfy those searching for one, or pairing coupons with special landing pages in hopes of minimizing offer prompts to regular shoppers. All ideas worth exploring further.

One last thing…

A separate study ran an experiment where half of the participants received a $10 coupon code. Those who received the coupon had a 14% increase in oxytocin, an 8% decrease in stress hormones, a 4% decrease in heart rate, and a 27% decrease in respiration – reactions similar to a positive social interaction. There was no change in the group that did not receive a coupon.

Shor, Mikhael & Oliver, Richard L., 2006. "Price discrimination through online couponing: Impact on likelihood of purchase and profitability," Journal of Economic Psychology.