Coupons seem to be the most criticized methods used by Indian ecommerce stores for marketing. Most people tend to think that the numerous coupons available on the internet represent everything that is wrong with eCommerce in India. Is that really so? Is there some sound business logic to consider providing coupons today or is it only about getting transactions and increasing the valuation? This post takes a look at why couponing is not as bad as it is made out to be.
Indians love Coupons
Indians by nature are bargain buyers. Be it the typical housewife haggling with multiple vegetable vendors to get a good deal on carrots and potatoes or the common man who travels that extra distance to get a discount haircut, Deals and Coupons are in our blood.
A look at our Facebook page will show the sheer amount of attention coupons seem to be receiving from users. We were pleasantly surprised when our posts about deals and coupons got more than 300 likes from our community. To put that in perspective, our last best performance was 100 likes on a post about Sachin’s 100th 100.
Getting early brand advocates
So you have come up with the best damn ecommerce website in the world. Your service is amazing, may be better than the market leaders. But how do you communicate that to the world? Who will vouch for you when someone wonders if it is safe to buy from you?
As a user I know that if I buy a particular phone from a well-known company X, I will get it in 2-3 days flat, in perfectly good condition and with warranty. I may not buy from the new company Y because I am unclear as to their credentials, not sure when or if they will deliver and in what condition my product will reach me.
But when the same mobile is available at almost 20% less price, I may still risk my neck to try the new site. The early customers are definitely taking a risk by buying from an unknown site. Coupons give the users a return for this added risk of uncertainty.
Coupon as an advertising medium
No one frowns upon sites that are getting sales through TV advertisement. It is a well known fact that the cost of customer acquisition lies upwards of Rs. 1,000. Then what is wrong with passing on a fraction of that cost to the customer in the form of a coupon,may be double the discount if he gets a friend in.
The problem starts when the stores’ only value proposition is the discounted price alone. In that case all the buyers would be gone the day you stop providing the coupon. Instead it will be smart to treat the discount as any other marketing channel, something that will make the customer give you one chance to prove how awesome you are. The next time he should buy from you because of your service and not because of a discount.
Priming the supply chain
New ecommerce stores face a massive problem because of lack of scale. Whether it is the suppliers, payment gateway company or the courier company, everyone charges you significantly more unless you are able to commit a minimum number of transactions a day. Providing an attractive coupon is a great to get those early orders in which will help you get your supply chain started. That is why we see some of the most attractive coupons on MySmartPrice from the newer set of stores.
That is just my observation from the sideline as someone who gets a close glimpse into customer behavior. It may very well be biased since sites like MySmartPrice gain a significant traction by distributing coupons.
Still it makes sense to analyze the opportunities offered by coupons logically and see if it fits into your overall strategy or not.