For retailers, few strategies hold as much power as coupons and promotional offers. These tools can not only fuel sales and purge aged inventory, but also strengthen relationships with existing customers and win back churned customers. Beyond their sales-boosting ability, these promotions boast a myriad of other benefits: they drive upsell and cross-sell campaigns, gather invaluable data for market research, and lend themselves to seasonal and event-driven promotions. 

• In 2020, more than 90% of shoppers looked for a coupon before buying online.
• Consumers who use coupons online spend 24% more than those who don’t.
• More than 90% of households say they have used at least 1 coupon in the past 12 months.
• In 2022, the average American shopper belonged to over 16 loyalty programs specifically to save money and get discounts on future purchases.

At the core of most marketing campaigns lies a universal approach: customer segmentation. In order to drive success, marketers must first build a thoughtful strategy around delivering tailored promotions to a specific portion of their audience. Navigating increasing consumer expectations to ensure relevancy, however, has proven challenging for teams without the right tools. 

In the era of big data, valuable insights are now readily available across various business functions. To target relevant segments effectively, marketing teams must invest in the proper tools to not only manage and analyze this data, but to activate it across a growing number of channels. This article explores various customer segmentation strategies, examines pitfalls in retail approaches to incentives, emphasizes the significance of a data-centric approach, and offers best practices to drive growth through successful retail promotions.

Common retail strategies, tools, and potential pitfalls

Retailers employ diverse coupon targeting strategies, with some choosing to associate new campaigns with customers' past purchases or behaviors using loyalty programs or point systems. These tactics aim to incentivize customers to make repeat purchases. However, the effectiveness of these campaigns varies significantly, leading to the question of why certain approaches fall short or, in some cases, lead to losses for retailers. 

A marketing team may enlist the help of one (or several) popular marketing tools on the market to power coupon-based campaigns. However, it's crucial to recognize that not all marketing tools are equally effective, and understanding their short and long-term implications is essential. Customer Data Platforms (CDPs) have been a popular choice due to their data collection and storage capabilities. A tool marketed to marketers, CDPs provide event collection and data integrations to marketing tools like ESPs and ad networks. Many organizations have found, however, that as the volume of their data grows, so do the costs associated with maintaining the CDP. In addition, a CDP’s key functionality poses a potential threat to marketing campaign success. CDPs work on a subset of customer data collected based on web or in-app visits, rather than from an organization’s source of truth data in a cloud data warehouse. Similarly, Marketing Clouds and CRMs offer automation capabilities across a few channels–but also function based on a set of data transferred from another source. When building audiences for campaigns based on only a portion of their data, marketing teams might be missing the complete and up-to-date picture–and with it, valuable opportunities for personalization.

While fragmented or incomplete customer data can impact marketing’s ability to properly segment audiences for coupon distribution or promotion planning, there are several other factors that can end in less than optimal campaign performance when launching coupons:

• Inconsistent cross-channel messaging: For enterprise retailers, there are often several teams or marketing team members responsible for launching campaigns on specific channels. As a result, an excess of messages may be sent out, leading to a lack of coordination among the various campaigns.
• Tools that don’t play well with others: With siloed marketing tools, marketing’s ability to measure the effectiveness of promotional campaigns can often suffer. When a team is unable to evaluate performance of one campaign–or when they experience delays in evaluating the results–future campaigns can suffer. Additionally, customer engagement metrics may not be reported the same across channels, which can lead to additional spend on customers who are no longer engaged or too many (or too few) touchpoints for other areas of the campaigns.
• Improper or incorrect segmentation: Especially for teams operating on a limited set of data, one common targeting misstep is incorrect segmentation–or dividing your audience based on either the wrong set of characteristics, too few characteristics, or too many. In other cases, this may simply result from human error. For example, you may want to send a coupon for your new winter coat campaign and neglect to segment by geographic location–sending a coupon to customers of yours who live in warmer climates who aren’t interested in purchasing a parka or whose stores don’t carry those items.
• Lack of data maintenance or updates: As expectations around personalization continue to rise, and as consumers receive a growing number of communications from various brands, retailers must keep customer data up-to-date in order to avoid missing out on consumer preferences or customer information that has changed. This becomes an impossible task with copies of data stored in siloed marketing tools.
• Audience permission controls: Permission controls are not universally available in all marketing tools, preventing teams from implementing permissions-based features such as audience and campaign evaluations that necessitate approval before launch. The absence of such controls can result in inaccuracies in audience segmentation or sizing, potentially leading to significant costs for retailers.
• Lack of traceability: Similarly to permission controls, some marketing tools do not provide reports on when and how various team members accessed specific customer data or activated it. This lack of transparency can become problematic during an audit, as it may hinder the ability to track data usage and ensure compliance with regulations or internal policies.
• “Batch and blast” campaigns: These campaigns are marketing initiatives that are aimed at a significant number of customers all at once, typically through mass email or other communication channels. However, these campaigns often lack the proper personalization tactics that are crucial for achieving success in today's competitive market.
• Targeting too many customers: The most valuable application of coupons lies in their strategic targeting towards potential buyers who are not yet loyal but exhibit a high likelihood of becoming loyal customers. The less successful campaigns focus deals on potential buyers who are only interested in shopping with a brand when they are offered a deal or to buyers who are already loyal to a brand.
• Targeting the wrong customers: Coupons can sometimes fall short for customers who have developed strong brand loyalty. When retailers target these loyal customers with coupons, it may result in lost revenue since these customers are already highly inclined to return and make additional purchases without the need for additional incentives.

Retail marketing teams encounter numerous challenges when launching coupon campaigns. However, certain top retailers have managed to overcome these hurdles by adopting strategies that prioritize campaign relevance, timeliness, and effectiveness in driving sales.

Applying comprehensive customer data to a retail coupon marketing strategy

Amid the challenges and common errors often encountered in coupon strategies, retail teams can enhance the likelihood of success and growth in these initiatives. At the beginning of this article, we touched on the core component of successful promotional campaigns: audience segmentation and targeting. The success of these campaigns directly rely upon the quality of the data and the tools and strategies used to segment it.

First and foremost, organizations should prioritize and invest in building a comprehensive strategy centered around first-party customer data. First-party data refers to the information collected directly from customers through interactions with the company's owned channels, such as websites, mobile apps, email subscriptions, and in-store purchases. This data is highly valuable and can provide deep insights into customer behaviors, preferences, and interests.

Building a first-party data strategy involves several key components:

• Data Collection: Retailers should implement robust (but not overly intrusive) data collection mechanisms across their digital and physical touchpoints. This may include setting up website analytics, tracking user interactions, capturing email subscriptions, and integrating point-of-sale systems to gather information from in-store purchases. 

• Data Integration: Organizations should focus on integrating data from various sources to create a unified customer profile. This entails aggregating data from different channels and systems to form a cohesive view of each customer's journey and engagement with the brand.

• Data Privacy and Compliance: While collecting and utilizing customer data, companies must prioritize data privacy and compliance with relevant regulations. Ensuring proper consent, data security measures, and transparent data usage practices build trust with customers and protect the organization from legal implications.
  
  
• Data Analysis and Segmentation: Once the first-party data is collected and integrated, organizations can use advanced analytics and segmentation techniques to derive meaningful insights. By understanding customer behaviors and preferences, companies can tailor their coupon campaigns to target specific segments effectively.

• Personalization and Targeting: Leveraging first-party data allows organizations to personalize marketing efforts, including coupon campaigns, to meet individual customer needs. Personalized offers based on past purchases, browsing history, or preferences increase the likelihood of engagement and conversion.

• Customer Retention and Loyalty: First-party data insights enable organizations to identify opportunities to retain and cultivate loyal customers. By understanding what drives loyalty and repeat purchases, retailers can craft coupons that cater to their existing customer base, fostering stronger relationships.

• Continuous Improvement: Building a first-party data strategy is an ongoing process. Companies should regularly analyze data, assess campaign performance, and fine-tune their approach to optimize results continually.

By prioritizing the establishment of a robust first-party data strategy, organizations can gain a competitive advantage in the market. Retail audiences are composed of many personas–all with a varying level of loyalty, readiness to purchase, and available money to spend. Proper audience targeting begins with ensuring all capturable data is available in a single place to build a comprehensive customer profile. This strategy allows them to deliver more relevant and targeted coupon campaigns, leading to increased customer satisfaction, engagement, and ultimately, business growth.

Best practices for applying data to coupons and promotions

A well-defined strategy and execution of first-party data collection, organization, storage, and segmentation lay the crucial foundation for any successful campaign. Armed with this strong footing, retailers can then fully harness the power of the following best practices:

Control the Frequency of Messages

No one enjoys being inundated with offers. Finding the right balance in the frequency of offers holds just as much significance as precise targeting. This process begins with a well-coordinated cross-channel strategy, where marketing teams collaborate to choreograph a tempo of communications like SMS messages, advertisements, and emails.

Allow your Audience to Opt-Out of Communications

Granting customers the freedom to opt-out of communications not only respects their preferences but also cultivates a more trusting and positive brand relationship, leading to enhanced customer satisfaction and loyalty. This practice empowers individuals to tailor their interaction with the brand, fostering a more personalized and respectful engagement. With proper personalization and frequency, the hope is that they won’t want to.

Run A/B Tests

Coupon targeting success doesn’t end with accurate segmentation on all of the right data. Once an audience has been identified, marketers can (and should) run experiments across campaigns. Many marketing tools offer effortless A/B testing capabilities for email subject lines, ad copy, and more.

Diversify Your Channels

In the same vein as a cross-channel strategy, retailers should take advantage of the growing number of channels their customer base engages with. This approach of diversifying channels empowers marketers to optimize campaign outreach, consequently amplifying both campaign reach and target market awareness.

Ensure Value-Driven Communication

Every communication a retailer sends should offer relevant value to the recipient. When crafting coupon campaigns, consider audience traits such as age, gender, past purchase history, and location.

Create Tiered Rewards

Gamification through tiered rewards associated with loyalty programs (which can be successful all on their own) has gained massive popularity in recent years. These tiered rewards have the potential to be finely tuned according to a shopper's buying history, adding an extra layer of personalization to the experience.

Create a Feedback Loop

While customer feedback is valuable for retailers, each coupon campaign provides a vast amount of data to bring back to the table and evaluate–without any additional work from consumers. Retailers should consider building a rapid feedback loop that reports on the success of each campaign; reviewing which discounts were redeemed, the results of A/B tests, and which audience segments responded most effectively to campaigns can be an excellent way to predict success in future campaigns.

Take Advantage of Advanced Technologies

As access to Marketing Technology grows, retailers have more opportunities to easily harness the power of predictive models to build audiences most likely to take advantage of coupons and generative AI to create more tailored messaging and creatives.

Equipped with a unified and accurate customer profile database and incorporating the aforementioned best practices, retailers can embark on executing coupon campaigns with heightened efficacy, fostering amplified customer loyalty and driving increased sales.

What if your tech stack limits your ability to put these into practice?

If your current tools are struggling to meet your marketing team's demands, you may need to invest in a tool that can bridge the gap between your customer insights and your various marketing tools.

If you need something cost-effective: Consider solution providers who offer usage-based payment tiers, rather than hourly, which can significantly raise costs during implementation.

If you need to spin up a solution quickly: Ensure a new solution will work in harmony with your existing architecture. Bonus points if the provider can offer implementation and integration support.

If you need help ingesting or organizing your customer data from several sources: Enlist the help of a provider that offers ingestion, but be mindful of vendor lock-in when considering scalability and future needs.

‍If you need all of the above, consider GrowthLoop. Get in touch with our team to learn more.