What the Data Says: How Promo Codes Impact Customer Retention

Promo codes are often sought out by first-time buyers before purchasing new products, and brands must determine how and when to use promo codes in a manner that is most effective for their consumer marketing strategies.

While this may be a challenge for brands looking to protect their pricing strategy, many can use such promotions to their benefit.

Discounts and Coupons Encourage Consumer Spending

Offering discounts and coupons for your products is a great way to enhance already existing advertising spend and increase visitors to your brand and marketplace listings. When paired with an external marketing campaign, promo codes can not only give an immediate boost to online sales but also help organically optimize the listings within Amazon and other marketplaces.

The Impact of Promotions on Consumer Retention

Here at WBX Commerce, we performed an analysis on the impact of promo codes on customer retention in the weeks following a promotion. Here are our findings:

For any given month during which the promotion was active, we saw total customers for the month rise to an average of 25 percent higher than any previous month.

Promo codes drove a much higher total first purchase for new customers, allowing the average total number of customers retained to be higher than 88 percent of the prior months that the campaign was benchmarked against.

• On average, during the week following a promo code discount, search frequency increased approximately 15-20 percent over the previous weeks – showing a clear lift in brand awareness.
• Additionally, though the subsequent month’s retention eventually returned to pre-promo code numbers, there was a clear increase in total purchasers

Promotions in Action on Social Media

Recently WBX Commerce ran a promo code that listed on a client’s Facebook page that had 21,000 likes.

Orders increased twenty times over previous average sales the day the promo launched. 89% of the initial sales were driven from the promo code, increasing the client’s Amazon category rank from approximately 100,000 to nearly 8,000.

Most importantly, the promo code had longer-term effects weeks after the initial promo code surge: it increased organic search and advertising sales by 210 percent

Check out the chart to see just how much it changed sales.

The Take-Aways

What does this mean for brands contemplating promo codes?

• Find Your Balance. There is a balance between retention rate and promotions, while you may see a temporary decrease in margins and profitability, you will also introduce new customers to your products
• Focused Use. For brands looking to quickly sell product, promo codes offer a great vehicle for quick sales
• Reengage. Promo codes are a proven way to re-engage and build loyalty for customers you haven’t seen in a while. The key is to keep them limited enough that promo codes become the only path to purchase.
• Look at the Bigger Picture. Understand the impact your promotion has on customers across channels – not just a siloed view into the purchasing platform. For example, a large CPG client may see that a customer acquired through an Amazon promo code makes subsequent purchases on a branded website.