Forrester Report - The Impact of Online Voucher Codes

A Forrester Consulting Thought Leadership Paper Commissioned By VoucherCodes.co.uk

The Impact Of Online Voucher Codes
Forrester Explores The Direct And Indirect Value That Online Voucher Codes Deliver To Advertisers

March 2012

Forrester Consulting

Table Of Contents

Executive Summary .....................................................................................................................................................................................................2

Key Trends In The Use Of Online Voucher Codes ........................................................................................................................................2

Online Voucher Codes Improve Conversion Rates .....................................................................................................................................5

Online Voucher Codes Positively Influence The Purchase Cycle, With One Caveat ...................................................................7

Online Voucher Codes Drive Higher Spending ........................................................................................................................................... 10

Online Voucher Codes Generate Incremental Business ........................................................................................................................ 11

Key Recommendations ........................................................................................................................................................................................... 12

Appendix A: Methodology ..................................................................................................................................................................................... 13

Appendix B: Demographics/Data ..................................................................................................................................................................... 13

© 2012, Forrester Research, Inc. All rights reserved. Unauthorized reproduction is strictly prohibited. Information is based on best available
resources. Opinions reflect judgment at the time and are subject to change. Forrester®, Technographics®, Forrester Wave, RoleView,
TechRadar, and Total Economic Impact are trademarks of Forrester Research, Inc. All other trademarks are the property of their respective
companies. For additional information, go to www.forrester.com. [1-JIP0OJ]

About Forrester Consulting
Forrester Consulting provides independent and objective research-based consulting to help leaders succeed in their organisations. Ranging in
scope from a short strategy session to custom projects, Forrester’s Consulting services connect you directly with research analysts who apply
expert insight to your specific business challenges. For more information, visit www.forrester.com/consulting.

Page 1


Executive Summary
In December 2011, VoucherCodes.co.uk asked Forrester to analyse the impact that online voucher code sites
have for advertisers. To create a full picture of the online voucher code market and its unique dynamics,
Forrester surveyed 508 UK-based voucher code users and conducted five in-depth interviews with eCommerce
executives responsible for online vouchering at large UK companies. Forrester’s line of questioning explored to
what extent online voucher code sites impacted incremental revenue, customer conversions, shopping basket
behaviour, customer loyalty, and a company’s brand reputation. In the end, we found that online voucher code
sites indeed drive quantitatively and qualitatively measurable incremental business for advertisers.

Key Findings
Forrester’s study yielded three key findings:

 Online voucher codes improve conversion rates (voucher code use drives new trial and switch, reduces
shopping basket abandonment, and often finalises the deal for undecided shoppers).

 Online voucher codes positively influence the purchase cycle (by improving brand loyalty and reputation,
driving customer referrals, and increasing the likelihood that customers will buy again later at full price).

 Online voucher codes drive incremental business (in terms of both generating new users and driving
higher overall spending).

Key Trends In The Use Of Online Voucher Codes
In our in-depth interviews with eCommerce executives who manage online voucher codes within their
organisations, we heard a familiar refrain. Interviewees said that online vouchering is on the rise and will
continue to increase.

“We’re up 23% against last year on our affiliate program spending. Voucher code use was massive for
us last year, and it’s going to be even bigger this year.” (Digital marketing manager, multichannel
retailer)

“Our use of voucher codes has grown tremendously in the past year or two, and we expect it to continue
growing for the foreseeable future.” (Affiliate marketing manager, multichannel retailer)

In addition, the data from our large-scale consumer survey of online voucher users very clearly points out that
online voucher code use, spending, and savings are all increasing.

 Frequency of use of online voucher codes is increasing. Overall, 66% of UK online voucher code users
indicated that they were likely to use more voucher codes in the next year versus only 8% who said that
they would be unlikely to do so. In addition, 41% of all online voucher code users and 50% of those under
the age of 32 said that they expected to use voucher codes on 25% or more of all of their online purchases
in 2012.

Page 2


Figure 1-1
Frequency Of Online Voucher Code Use Is Increasing

“How likely are you to use more online voucher codes in the
next 12 months?”

66% Likely
(4 or 5 on scale of 1 to 5)
All respondents
Not likely
8% (1 or 2 on scale of 1 to 5)

Base: 375 UK online voucher code users
Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

Figure 1-2
Frequency Of Online Voucher Code Use Is Increasing

Will use voucher codes for 25% 41%
or more of online purchases 50%

Will use voucher codes for 50% 16% All respondents
or more of online purchases 19% Under age 32

Will use voucher codes for 25% 25%
to 49% of online purchases 31%


 Spending by those who use online voucher codes is expected to increase only modestly overall, with
accelerated growth among shoppers ages 56 and older. Online spending among all UK online voucher code
users is expected to increase 3% in the next year (from £607 to £626), with some key demographic
segments spending significantly more (e.g., 15% more among those aged 56 and older) and only one
segment spending just marginally less (1% less among those aged 46 to 55).

Page 3


Figure 2-1
Spending Is Expected To Increase Marginally, But Savings Is Expected To Increase Substantially

All respondents versus those under 32 years of age

All All respondents Percentage Respondents Respondents Percentage
respondents (expected) difference under age 32 under age 32 difference
(current) between (current) (expected) between
current and current and
expected expected
Mean: total £607 £626 3% £546 £556 2%
online
spending
Mean: online £104 £122 17% £100 £120 20%
savings from
voucher use
Savings 17% 19% 12% 18% 22% 22%
divided by
spending


Figure 2-2
Spending Is Expected To Increase Marginally, But Savings Is Expected To Increase Substantially

All respondents versus those aged 56 and higher

All All Percentage Respondents Respondents Percentage
respondents respondents difference ages 56 and ages 56 and difference
(current) (expected) between older older between current
current and (current) (expected) and expected
expected
Mean: total £607 £626 3% £618 £709 15%
online
spending
Mean: online £104 £122 17% £83 £97 17%
savings from
voucher use
Savings 17% 19% 12% 13% 14% 8%
divided by
spending


 Online voucher code users expect to save substantially more online next year. UK online voucher code users
expect a 17% increase in how much they save in the next year using online voucher codes (going from

Page 4


£104 to £122), even though they only anticipate increasing their total online spending by 3%. Similarly,
those under age 32 who use online voucher codes anticipate a 20% increase in how much they will save in
the next year using online voucher codes (going from £100 to £120), even though they only expect to
increase their online spending by 2%. Likewise, those aged 56 and older expect to increase spending and
savings by roughly the same amount in 2012 (15% and 17%, respectively).

In short, with the exception of the 46 to 55 age demographic, all age demographics surveyed anticipate spending
more and saving more in 2012. Most revealing, however, is that all demographics under age 46 (and the UK
population overall) expect to spend just 2% to 4% more online in the next 12 months, but they anticipate saving
15% to 25% more. Thus, in this challenging economic environment, the vast majority of online shoppers are
now counting on online voucher codes to deliver a disproportionately greater return going forward than online
voucher codes have delivered in the past.

Online Voucher Codes Improve Conversion Rates
Fundamentally, advertisers use promotional tactics to influence shoppers to choose their products. The
research shows that online voucher codes are particularly effective at driving online shoppers to try new
products, reconsider abandoning a recently abandoned shopping basket, and finalise a purchase decision.
Online voucher codes:

 Drive new trial and brand switch. Active voucher code users are more likely than light voucher code users
to try a new brand and/or switch brands — 76% to 64% and 68% to 55%, respectively (see Figure 3).
This implies that the more shoppers use voucher codes, the more open they are to trial.

Figure 3-1
Active Voucher Code Users Are More Likely To Try A New Brand And More Likely To Switch Brands

“How likely are you to try a new brand if you receive an online voucher code?”
(4 or 5 on a scale of 1 [not likely] to 5 [very likely])

Light voucher code users (fewer than six per year) 64%

Active voucher code users (six or more per year) 76%


Page 5


Figure 3-2
Active Voucher Code Users Are More Likely To Try A New Brand And More Likely To Switch Brands

“How likely are you to switch brands if you receive an online voucher code?”
(4 or 5 on a scale of 1 [not likely] to 5 [very likely])

Light voucher code users (fewer than six per
55%
year)

Active voucher code users (six or more per year) 68%


 Reduce shopping basket abandonment. Among the total UK online population, shopping basket
abandonment is likely to decrease when users are offered voucher codes (see Figure 4). This is of
particular importance to advertisers who do not offer discounted shipping, for example, and see relatively
high bounce rates at the end of the shopping process. These advertisers could use online voucher codes to
recapture a likely lost sale.

Figure 4
Targeted Online Voucher Codes Reduce Shopping Basket Abandonment

“How likely would you be to reconsider purchasing a product you put in your online
shopping basket, but did not buy, if you received an online voucher code”

63% Likely
(4 or 5 on a scale of 1 to 5)

9% Not likely


 Often finalise the deal. UK online voucher code users agreed overwhelmingly with the statement that
“online voucher codes often finalise the decision for me if I’m undecided on a purchase.” In fact, 65%

Page 6


indicated that they agree with the statement versus just 10% who disagreed with the statement.
Advertisers would be wise to consider that, in a hypercompetitive world, offering an online voucher code
to undecided or marginally interested shoppers can make the critical difference between gaining and
losing that sale.

Figure 5
Offering Online Voucher Codes Often Finalises The Deal For Online Shoppers

“Online voucher codes often finalise the decision for me if I’m undecided on a purchase.”

Agree
65%
Disagree
10%


Online Voucher Codes Positively Influence The Purchase Cycle, With One
Caveat
Overall, we found that online voucher codes had a clear and positive influence on the qualitative side of the
purchase cycle. Specifically, the data demonstrates that online voucher codes reinforce brand image and
reputation, bolster brand loyalty, drive customer referrals via positive word of mouth, and engender future full-
price purchases among the most active voucher code user population.

Figure 6-1
Offering Online Voucher Codes Reinforces A Brand Image And Reputation

“Offering online voucher codes improves a company’s brand image.”

Agree
66%
Disagree
9%

Page 7



Figure 6-2
Offering Online Voucher Codes Reinforces A Brand Image And Reputation

“I have a positive feeling toward a company that offers online voucher codes.”

Agree
76% (4 or 5 on a scale of 1 to 5)

5% Disagree


Figure 7
Online Voucher Codes Bolster Brand Loyalty

“I am more likely to be loyal to a brand that offers online voucher codes.”

71%
Likely (4 or 5 on a scale of 1 to 5)
2% Not likely (1 or 2 on a scale of 1 to 5)


Page 8


Figure 8
Offering Online Voucher Codes Drives Customer Referrals

“I am likely to tell a friend about a company that uses online voucher codes.”

Likely (4 or 5 on a scale of 1 to
83%
5)
Not likely (1 or 2 on a scale of
4%
1 to 5)


Figure 9
Offering Online Voucher Codes Encourages Future Full-Price Purchases


However, there is one caveat, the research also shows that overvouchering and/or offering stale vouchers can
have the effect of tarnishing a company’s brand image. As many interviewees indicated in our discussions,
products and services that are perceived to be on sale perpetually risk becoming commoditised and devalued in
the marketplace.

“You can’t buy your customers every time. At some point, you need them to be loyal to your brand and
not just the discount.” (Director of eCommerce, large video games retailer)

“Be careful not to create a ‘sugar high” situation whereby online voucher codes have the effect of
stimulating very-short-term customer acquisition but then the selling falls off proportionally following
the run of the campaign.” (Head of eCommerce, large clothing retailer)

Advertisers need to find that proper balance between aggressively reaching out to new customers and setting
an effectively irreversible expectation that everything will be on sale all of the time. The appropriate quantity

Page 9


and quality of vouchering depends on customer acquisition goals, lifetime value objectives, and the specific
behaviour of well-defined customer segments and subsegments.

Online Voucher Codes Drive Higher Spending
In the case of those who redeemed at least the average of six voucher codes or more in the past 12 months, their
average reported online spending was £347 more, or 71% higher, than light users (£835 versus £488) and £228
more than the mean spending of all UK voucher code users (£607). In addition, those who said that they
“increased” their voucher code use in the past 12 months spent more on average (£671) than those who
indicated that their use of voucher codes “stayed the same” in the past 12 months (£542).

Figure 10
Active Voucher Code Users Spend More Online

“About how much money do you think you have spent online in the past 12 months?”

Light voucher code users (fewer than six
per year)
£488

Active voucher code users (six or more per
£835
year)


Figure 11
Those Who Have Increased Voucher Code Use In The Past 12 Months Spent More Online


Users who said that they increased voucher use £671

Users who said that their voucher use stayed the same £542

Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCoes.co.uk, February 2012

Page 10


The data also shows that those who are likely to use more online voucher codes in the next 12 months will
spend 45% more online than those who are not likely to use more online voucher codes in the next 12 months
(£675 versus £467). Similarly, those likely to use more online voucher codes in the next 12 months expect to
spend £49 more than the average UK online voucher code user expects to spend in the next 12 months (£626).

Figure 12
Those Who Expect To Use More Voucher Codes In The Next 12 Months Will Spend More Online


Users who said that they were likely to use more
online voucher codes in the next 12 months
£467

Users who said that they were not likely to use
more online voucher codes in the next 12 months
£675


Online Voucher Codes Generate Incremental Business
In our in-depth interviews with eCommerce executives currently responsible for online vouchering, there was a
strong consensus that online voucher code sites drive significant incremental business to their websites:

“When we run voucher code campaigns, we consistently see that two-thirds of the revenue generated
from those campaigns is incremental revenue.” (Director of eCommerce, large video games retailer)

“Thirty percent to forty percent of our incremental online sales come from voucher codes.” (Affiliate
marketing manager, multichannel retailer)

One interviewee made the further point that affiliate channel-acquired online voucher and voucher code
customers converted at a much higher rate than customers acquired via other methods:

“In a highly promotional period, we’ve seen conversion rates on voucher code leads as high as 14%. Our
standard online conversion rate is 3%, and we usually average 6% conversion rates with affiliate leads
in general.” (Digital marketing manager, multichannel retailer)

Page 11


KEY RECOMMENDATIONS
Forrester’s survey data shows that the more online voucher codes UK shoppers use, the more money they spend online. In
addition, active online voucher code users are more likely than the mean UK voucher code user to try new brands and to
switch brands.

 Key online voucher code trends are demonstrably positive. Online voucher code usage, spending, and savings are
all increasing. In fact, 41% of all UK online voucher code users and 50% of those under the age of 32 expect to use
online voucher codes on 25% or more of their online purchases in 2012.

 Online voucher codes drive incremental business. Evidence shows that campaigns using online voucher codes
generate new users. Advertisers who closely analyse traffic across marketing channels indicated that within their
larger acquisition portfolio, the affiliate channel was disproportionately responsible for new online sales.

 Online voucher codes drive higher spending. Those who redeemed more than an average of six online voucher
codes in the past 12 months, or active users, spent 38% more than the mean UK voucher code user and 71% more
than light users (or those who redeemed six online voucher codes or fewer in the past 12 months).

 Online voucher codes positively influence the purchase cycle, with one caveat. The research shows that offering
online voucher codes increases conversions, reduces shopping basket abandonment, drives customer referrals, and
improves brand loyalty. However, advertisers need to be careful not to overuse online voucher codes. Products that
are perceived to be perpetually on sale risk becoming commoditised and devalued in the marketplace.

 Offering online voucher codes represents a new normal. Advertisers now operate in a new online shopping
paradigm wherein purchase decisions are increasingly being made at the margin and often at the very end of the
shopping process. Offering online voucher codes is quickly becoming necessary for many advertisers engaged in
hand-to-hand combat for undecided or deal-insistent shoppers.

Page 12


Appendix A: Methodology
In this study, Forrester surveyed 508 UK-based online voucher users and interviewed five eCommerce
executives from large companies across various industries that are currently responsible for online vouchering
to evaluate their perceptions and understandings of the online voucher code market. Questions provided to the
survey participants asked about voucher code use, attitudes, and decision-making. Questions in the executive
interviews focused on the current and future state of online voucher code usage, how and whether online
voucher codes drive incremental value, and what impact online voucher code usage has on a company’s brand
reputation. The study began in November 2011 and was completed in December 2011.

Appendix B: Demographics/Data

Figure 13
Online Coupon Users: Age

“What is your age?”

27% 23%
20%
12% 15%
2%

18 to 22 23 to 31 32 to 45 46 to 55 56 to 66 67 and older

(percentages do not total 100 because of rounding)


Page 13


Figure 14
Online Coupon Users: Income

“Which range best describes the total combined annual income of all members of
your household?”

Less than £5,000 3%
£5,000 to £9,999 7%
£10,000 to £14,999 7%
£15,000 to £19,999 9%
£20,000 to £24,999 10%
£25,000 to £29,999 15%
£30,000 to £34,999 9%
£35,000 to £39,999 9%
£40,000 to £49,999 9%
£50,000 to £74,999 10%
£75,000 to 99,999 2%
£100,000 or more 2%
Prefer not to answer 9%



Figure 15
Online Coupon Users: Children In Household

“How many children under age 18 live in your household?”

60%

22%
12%
5%

` None One Two Three or more



Page 14

Forrester Report - The Impact of Online Voucher Codes

Recomendados

Recomendados

Más contenido relacionado

Último

Último (20)

Destacado

Destacado (20)

Forrester Report - The Impact of Online Voucher Codes