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Five Steps Towards Achieving Incremental Lift on Coupon Promotions Using Analytics

Mihir Kittur, Co-founder and Chief Innovation Officer, Ugam,


Coupon-based promotions are one of the most widely-adopted methods of acquiring customers. In the recent years, marketers have adopted digital coupons to be able to measure the actual return on investment of their efforts and resources. Now, the challenge is: how do we maximize the return on investment of coupon campaigns?

With all the additional data available today, marketers can be smarter in how they design coupon-based promotions to produce better results. Analyzing data from past campaigns can reveal customers’ expectations, buying habits, and motivations that can help marketers create better-targeted and fact-based coupons to achieve better incrementality. However, in most companies, this data exists in silos, which often comes in the way of effectively collecting, analyzing and utilizing this rich data.

Through analytical expertise, marketers have found a way to access the right customer data, apply predictive analytics, and gain the intelligence required for maximizing their coupon effectiveness. Here are the key steps involved in establishing these outcomes.
 

  1. Define the objective: You might decide to have a coupon promotion for various reasons: acquire new customers, reactivate inactive customers, create awareness, reward loyal customers and so on. Defining a clear objective at the start of the campaign will dictate what data to use to perform analysis.
     
  2.  Apply predictive analytics using past campaign data: Apply predictive analytics using the data from campaigns designed with a similar objective in the past. The insights from this analysis can help in understanding customer behavior to different kinds of offers and predicting which customers are likely to provide the desired response rates and future sales. 
     
  3. Choose a scenario that will provide the best ROI:  Next, you’ll want to narrow down your target customers, the offer, and the channel you’d want to use for the coupon (i.e. email, text message, online coupon etc.) based on the insights you get from step 2. Create a control group within the selected segment for performing an A/B test.
     
  4. Monitor and measure: Once you’ve selected your target audience and decided what the offer should be, it’s time to put your coupon into action. Monitor its performance closely to see if you need to increase or stop the promotion depending on how the campaign is running. To measure the effectiveness, compare the sales and engagement rates of the customers that received the coupon with those that didn’t by performing an A/B test. 
     
  5. Apply learnings to future campaigns: As with any good marketing campaign it’s important to review the results and see how you can optimize your campaigns in the future.
Here’s a tip: Make sure that the data you need is always stored in one place. It goes a long way in gaining insights faster and more efficiently.

Using this approach, one of the largest mass merchandisers in the US achieved 25% higher incremental sales compared to forecasted projections. Read the full case study to learn more



The Author:
Mihir Kittur is a Co-founder and Chief Innovation Officer at Ugam. He oversees sales, marketing and innovation and works with leading retailers and brands with insights and analytics solutions around their category decisions to improve business performance.
 


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