STRATEGIC GUIDANCE

6 Keys to Success for Promo Code Mastery

Authored by: David Warren, Principal Director, Zuora Subscribed Institute

Did you know saving money when you shop is good for your health? According to a Claremont University study, taking advantage of discounts can lower stress levels and increase chemicals in the brain, attributed to positive feelings. Discounting is also a healthy way for companies to drive conversion and increase sales velocity. An optimized promotional code strategy can be a powerful lever for accelerating prospects through the purchase funnel and providing insights into marketing effectiveness. We will share examples of the most common types of promo codes and dive into six leading practices on how to launch, manage, and extract value from them.

Hundreds of thousands of promo codes are issued by companies every year. No matter how they are delivered (email, text, QR code, billboard, print), they all fall within one of three categories: public, private, and limited or restricted codes.

Public codes are available for anyone with access to them (barring regulatory restrictions). They are usually discovered through coupons, store displays, traditional advertising, and “batch and blast” emails. While often designed to be “single use,” some companies will allow multiple uses to drive more purchase intensity quickly.

Private codes are issued to a targeted cohort of people based on shared activities or characteristics. This cohort might be a group of prospects attending the opening of a new store. Another might be a group of customers who spend above (or below) a certain amount. Private codes are a great way to get your most desirable prospects to buy from you repeatedly.

Limited or Restricted codes are for the sole use of a single user or account. For example, if a customer refers someone to a website and makes a purchase, a company might offer a one-time discount to the referring customer as a thank you. These codes are often set up to be used once and require some form of validation from the customer that they are the intended recipient.

So which promo code is the most effective? Companies often combine all of them to balance converting prospects and growing lifetime value with current customers. They will use the codes to collect data that will feed new insights about the market. No matter what combination is used, it’s important to keep in mind six leading practices that we’ve seen used by our most successful customers. Let’s take a look at each of them.

1. Optimize for tracking and analysis.

When setting conversion goals for a promotion, it is important to establish clear objectives to build understanding about things like positioning, conversion rates, and overall marketing effectiveness. Sometimes, a product marketer may want to understand something simple like “what is the conversion rate for a 10% discount vs a 15% discount?” In this case, two codes, one for each offer type, would be issued and pushed out. But this marketer might want to go deeper and know how conversion is affected if the code is delivered via text to urban-dwelling customers on Thursday afternoon vs. Monday morning. In that case, the code structure is a bit more complex. One part of the code would need to indicate who the recipient is (“urban dweller” vs. “suburbanite,” for example). Another section of the code would be assigned to when the text is sent (“Thursday afternoon” vs. “Monday morning”). The last part of the code would indicate how the promotion is delivered (“text” vs. “email,” perhaps). The more categories of information you want to collect, the more code sections must be created.

2. Set limits on generic codes.

Not every promotion needs to have robust market research objective behind it. Multi-use generic codes can be great for companies trying to maximize awareness and consideration because prospects can easily find and share them with others. If a product team is happy to sell as many offers as possible at the promotional rate, then the generic route might be the way to go. But suppose a company is concerned about the risk of an offer being oversubscribed due to limited availability or lower profitability. In that case, multi-use may not be the right option. In these instances, it is better to assign expiration dates and set up codes to be “one-time use only.” Generic codes don’t give you much information about who the customer is or how they came across your offer. If collecting data is important, using a private or restricted code may be better.

3. TLC = LTV

Some customers aren’t all that concerned with why a deal is offered to them. They’re excited to get that endorphin rush (see the health benefits mentioned earlier) and feel they’re getting a leg up on everyone else. Other customers appreciate knowing that companies they spend money with recognize their loyalty and acknowledge their experience. When possible, tie personalized messaging to the promo offer that demonstrates a recognition that a customer has been with you for five years or they had a less-than-stellar experience with you recently. And, of course, don’t forget to track and measure how these tender loving care (TLC) demonstrations translate to lifetime value (LTV) over the long haul.

4. Iterate, iterate, iterate.

Every element of a modern business model requires regular and purposeful iteration in order to learn and adapt to market dynamism. Promo code strategies are no exception and should include an ongoing launching, evaluating, and refining process to stay on top of customer preferences. Experimenting with different levels of discounts, delivery channels, geographies, and periods can provide near-real-time feedback and improve business impact over time. Testing should also include the experience of using the promo code via customer surveys to ensure your targets aren’t having any issues taking advantage of the offer. Keeping tabs on customer reviews can also reveal loyalty-damaging experience gaps. And if customers are having trouble, it’s critically important to have a resolution plan in place to prevent losing a sale.

5. Bring Billing Ops to the party.

Billing teams have visibility and deep awareness of a company’s ability to handle the complexities of promotion discounts, credits, and swaps. They might be among the least utilized teams when learning what works and what doesn’t. Every day, the people in Billing Ops spend all their time looking at which products customers are paying for and how they’re paying. Consulting with them early in the process to get their buy-in, feedback, and guidance could prevent launch delays down the road and improve the chances of campaign success.

6. Drive agility through technology.

With all of this tracking, measuring, reporting, and iterating, how do product and marketing teams keep up with the flood of incoming information flow and make adjustments on the fly? Establishing a technical architecture that links your customer portal, CRM, billing and revenue management platform, payment portal, and ERP together through APIs allows teams to programmatically create, validate, and consume codes while keeping data in sync. Within this ecosystem, prioritizing tools that leverage a low-code / no-code UI will allow non-techie types to access data easily, generate reports, and quickly make changes without burdening the IT team with requests to create hard-coded discount SKUs in the ERP system.

Winning promotional code strategies require a mix of customer experience and marketplace data, tools and systems that allow for quick iteration, and a discipline of curiosity around what drives behavior. Bringing these practices into your organization will help fill the top of the funnel, improve prospect conversion rates, and extend customer loyalty.

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David Warren

Principal Director, Zuora Subscribed Institute

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The Subscribed Institute is Zuora’s dedicated think tank that cultivates and serves a community of business leaders through research, content, events, and advisory services. Strategists from the Subscribed Institute are a resource for our customers to help them chart strategic, tailored paths toward recurring revenue business model success, build internal capabilities, and navigate an accelerated Journey to Usership.