Advertising might have seen its fair share of changes over the years but one thing remains consistent: giving customers a deal is probably the first thing marketers think of when they’re trying to get them to try out a new product. As technology has advanced, deals have gone digital, with coupon codes and mobile apps replacing the standard circulars of old. In 2015, 80% of retailers who invested in digital advertising reported they spent at least a portion of their advertising dollars on mobile coupon strategies.

However, the question needs to be asked if this strategy offers the kind of brand awareness and market growth companies are seeking—or if marketing professionals are erroneously choosing coupon advertising as a marketing mainstay because it appears safe. When we do the math, we can clearly see that the average ROI on mobile coupon advertising isn’t quite as high as many brands may hope.

If you’re considering digital coupon offers as an aspect of your brand’s growth strategy, you must first consider the potential cost, which includes not only the cost of the discount that will inevitably cut into your bottom line but also the cost of implementing the program, converting consumers to buyers, and paying for the technical aspects of the program. These combined costs have the potential to make that seemingly safe marketing bet decidedly less so—especially when there are more profitable options that have the ability to maximize conversions while limiting campaign costs, both incidental and direct.

Calculating the Average ROI on Mobile Coupon Advertising

Calculating the ROI on mobile coupon advertising is challenging as you can’t always obtain the most accurate numbers until after you have run the campaign. One thing you can’t argue, though, is that coupons are effective for at least a one-time conversion, as 79% of consumers report that they have tried a new brand based on receiving an offer. However, that one-time conversion might actually come at a loss.

Here’s what you must consider when calculating the potential return on investment of mobile coupons for your brand:

• The price of your featured product: This is the amount the consumer pays for your product.
• The cost of the discount: This is the immediate cost to your company for selling the product at a discount.
• The cost of the campaign: The is the overall amount you pay to make consumers aware of the coupon deal.
• The number of times redeemed: This is how many times your coupons are used at purchase.
• The campaign cost per redemption: This is the cost of the campaign divided by the number of times your coupon is redeemed.

Additionally, it should be noted that while the average redemption rate for mobile offers is 25%, the actual redemption rates of the coupon can cause your costs to fluctuate significantly, as you cannot successfully predict how many consumers will use your coupon. And, mobile coupons have some unique traits that limit their effectiveness over the long term, meaning you may not be making up that loss with future purchases at full cost.

Issues that Reduce Mobile Coupon Impact and ROI

When a company chooses to implement a mobile couponing strategy, they’re often seeking out ways not only to make an immediate profit but to increase market share. However, this isn’t always as effective as brands may hope for a number of significant reasons:

• Mobile coupon advertising comes at an immediate cost: Taking a loss, even a small one, when trying to sell a CPG product is a risky strategy. Right out of the gate, you’ve already cut into your bottom line by reducing your product’s price—with no guarantee it will pay off in the end.
• Product perception may be harmed: There’s a reason why high-end brands don’t focus heavily on discounts; consumers often equate low-cost with low-quality. This is an issue for brands as quality is quickly becoming a brand differentiator. Reducing your price can reduce the perception of that quality—and 86% of consumers report they’re willing to pay more for better quality, across industries.
• It may not accurately target the right audience: Consumers who seek out discounts tend to be price-focused. That means that when they’re looking for a new product to purchase, they’re not going to use loyalty as a basis for purchase, but price. Unless you discount the product every time they buy, you can’t hope to gain return customers over the long-term.

Mobile coupons may be trendy with consumers, but many brands will find themselves disappointed by the ROI and long-term impact of such campaigns. They can be quite costly and, when your goal is to gain greater market share, they lack longevity. Most of these mobile couponers will only stay with your brand until the offer is redeemed. For a longer tail option that keeps consumers coming back, mobile shopping apps that offer rewards may be the best alternative.

Using Mobile Shopping Apps as an Alternative to Coupon Programs

Coupons are limited in their long-term impact for your brand because they are only used once. As an alternative, shopping apps that offer points that build into valuable rewards are used repeatedly by the consumers who download them, automatically giving this strategy an edge over coupons.

They work by connecting brands with consumers as they’re ready to make a purchase. About 60% of shoppers use their phones to find products before they buy. Therefore, partnering your brand with mobile shopping apps can significantly increase the likelihood of your products being discovered as the users of these apps tend to be very actively engaged.

Another unique benefit of these platforms is in the way they allow your brand to track and influence consumer behavior. With coupon-based programs, the only individual habits you can track are from those consumers who actually redeem your coupon. With a shopping app, however, you’re better able to pinpoint what’s trending in the consumer’s space with real-time data. This allows a much more diverse market sample that can be highly valuable if your brand’s primary selling point isn’t its price but its quality.

Finally, as mentioned, some shopping apps – like Shopkick – offer rewards, not discounts. These apps work by creating brand awareness through strategically timed notifications that increase the likelihood of purchase, much like a coupon does, but without the need to offer a discount.

When you consider the relatively short shelf life of mobile coupon-based strategies, as well as the surprisingly high cost, you may find that the ROI simply cannot justify a coupon campaign for your company. Coupon-based programs often don’t target the right consumers and they can cost your brand not only its limited marketing dollars but also its reputation by lowering its perceived value. Mobile shopping apps, however, can follow your consumer throughout their purchase pathway, helping you create timely opportunities for brand interaction. That interaction breeds growth, ultimately resulting in a greater share of the market for your brand.

At Shopkick, we offer our partners the ability to connect with their target audience without implementing costly coupon campaigns. If you’re interested in partnering with our solution to increase your company’s market share, brand awareness, and customer engagement, contact our team today.

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