How to use promo codes strategically for your online business

Getting your promo codes to bring in profit, rather than lose it, takes some thinking

Using discounts and promotions is a very common tactic for businesses - especially new businesses or ones in a crowded market. Promo codes are a short code customers can enter to get a fixed discount ($5 off your first purchase), a percentage discount (10% off your next order), or something free (Free shipping, free gift when you spend over $100, etc).

Offering promo codes can be a great way to bring in new customers and keep loyal customers coming back. Of course, when you sell something for under its full retail value, you can think of it as losing profit. But not necessarily - it’s way cheaper to keep customers coming back through small discounts than what you normally have to spend on advertising to get new customers.

The dangers of overusing promo codes

So if promo codes are so useful, should you be giving them out like candy? No. When promo codes are overused, your customers might assume that they’ll always get a better offer, and just wait for the next deal before buying anything.

Racing to the bottom means you’re now competing over price rather than quality of your products and services. While this could be a tactic for many companies, you’ll need to make a conscious decision if you want it to be yours.

When should I give out promo codes?

Inventory that isn’t moving off the shelves

This is one of the most straightforward times you should be using the power of the Promo. Either discount inventory directly, or give them away as a gift when people purchase over a certain amount.

A new service that you want people to try

Many new companies find that using promo codes helps get traction and interest in a brand new service or product. Customers could be hesitant if they haven’t heard about you, so having an intro offer is a good way to get started.

Slow seasons

You probably don’t have a need to hand out any promotion codes when business is booming...but if you’re running a seasonal business or have downturns, promo codes could be the extra kick needed to keep you going.

Holidays and special events

If your products are perfect for holiday gifts, promo codes could be a great way to convince shoppers to buy from you rather than a big department store. Promo codes can be used within a month or two of holidays, or offer free expidited shipping during the holidays.

Who to target with promo codes

To use promo codes strategically, you need to think about who you’re trying to target. Are you a new brand looking to gain an audience? Or an established brand that is seeing customers drop off? Here are a few kinds of targeting you can consider.

Attracting new customers who haven’t heard of you

Promo codes are often used for prospective customers, to make the decision to buy a bit easier for them. If you offer a great deal on something they think they’ll like, they’re less likely to abandon their cart.

People who can’t (or aren’t willing) to afford your products outright

There could be customers who are really interested in your products, but find them a bit too expensive. Giving them a discount can help turn them into a customer - even if they’re a customer who’s paying a bit less, it’s way better than no customer at all. The tricky bit is giving them a discount code, and not their peers who can easily afford your products. That’s why we see things like student discounts, discounts for pensioners, etc. These are tactics that try to guess how much people are willing to pay by categorising them. Sometimes they work and sometimes they don’t; but generally, people who aren’t willing to spend extra money are willing to put a little more effort in to get a discount by looking on coupon sites, filling in surveys, or doing other small tasks in exchange for discounts.

Rewarding dedicated shoppers

We all know that keeping loyal customers is way cheaper than constantly hunting for new ones. You can offer promo codes as rewards in loyalty programmes or by sending an email to your biggest spenders. Promo codes can be used to keep them coming back, increasing their overall lifetime value.

Reward people for giving you something useful

One way to approach promos is to think about what you can get in exchange for giving them a discount, other than their money. These days, the more you know about your customers the more you can do with your marketing strategy. Giving out a discount code in exchange for, say, someone completing a survey or adding user generated content can be a great way to get useful info about your customers.

How do I send out a promo code?

FIrst, you have to start by making a promo code. With Shopify, you can use the Price Rules API to create as many new discount codes as you’d like, straight from your admin. Find out how right here.

Make sure that new discount codes you make have limitations on them. This uses the scarcity principle. The less of something there is, the more people tend to want it. You can consider, for example, giving a promo code to the first 50 buyers which would push people who are on the fence to grab the deal. You can also simply put time, quantity, or spend limitations on it.

On your website

You can put your promo codes straight onto your website for anyone who’s visited. Generally, stores put a promo code on their website in exchange for an email newsletter subscription. They then send out a welcome email immediately with the discount code users can claim.

In emails

You can use Mailchimp or other email marketing clients to put promo codes directly in emails - allowing you to see who is clicking on it and give you insights as to how effective your email marketing is for conversions. Whether it’s welcome emails, birthday emails, announcement emails or anything else, promo codes within emails is super common.

On social

Many e-commerce websites use social media as a tool for promotion, including through promo codes. You can request that people like your page or follow you to access the discount code. You can also simply announce promotions to those channels directly, and make promo codes for individual channels (like on an Instagram story or influencer marketing).

Another tactic is to tell people to contact you for a promo code. By asking for direct messages from your Twitter, Facebook or Instagram followers, they’re putting in a bit of effort to get a promo code. This could increase conversions from those channels, because they feel they had to earn the promo code rather than it being thrown in among the chatter.

Through partners and affiliates

Affiliated companies that have similar target audiences are a great way to promote yourself. For example, a company that has a gourmet wine club might have a great audience for a gourmet coffee subscription. You can give partners marketing materials with promo codes in order to gain access to their audience, and even give them a commission as an incentive to actually promote you.

In a shopcode

Shopify has recently announced shopcodes that can be used by any Shopify merchant. It’s a QR code that takes viewers directly to a product page, and can include a discount straight in them. You can put shopcodes on your marketing materials to grab new customers, or straight on product packaging to reward existing customers.

Experimentation time

There is no one right way to do promotions and discounts - it’s all about what your audience is looking for and what your business can afford. But before offering promo codes, it’s important to think strategically about how they fit into your business plan. It’s also important to test them out and see what works and what doesn’t for you.

We can help e-commerce merchants incorporate promo codes into a marketing strategy that’s designed for conversion. Give us a shout.