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A Forrester Consulting Thought Leadership Paper Commissioned By VoucherCodes.co.uk. The Impact Of .... (Digital marketin
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

The Impact Of Online Voucher Codes

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

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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.

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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.

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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%

All respondents

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

8%

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

41% 50%

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

Will use voucher codes for 50% or more of online purchases Will use voucher codes for 25% to 49% of online purchases

16% 19%

All respondents Under age 32

25% 31%

Base: 508 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

 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).

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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 respondents (current)

All respondents (expected)

Percentage difference between current and expected

Respondents under age 32 (current)

Respondents under age 32 (expected)

Percentage difference between current and expected

Mean: total online spending

£607

£626

3%

£546

£556

2%

Mean: online savings from voucher use

£104

£122

17%

£100

£120

20%

Savings divided by spending

17%

19%

12%

18%

22%

22%

Base: 508 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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 respondents (current)

All respondents (expected)

Percentage difference between current and expected

Respondents ages 56 and older (current)

Respondents ages 56 and older (expected)

Percentage difference between current and expected

Mean: total online spending

£607

£626

3%

£618

£709

15%

Mean: online savings from voucher use

£104

£122

17%

£83

£97

17%

Savings divided by spending

17%

19%

12%

13%

14%

8%

Base: 508 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

 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

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£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)

Base: 496 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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The Impact Of Online Voucher Codes

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 year)

55%

Active voucher code users (six or more per year)

68%

Base: 496 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

 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% 9%

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

Base: 369 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

 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%

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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.”

65% 10%

Agree (4 or 5 on a scale of 1 to 5) Disagree (1 or 2 on a scale of 1 to 5)

Base: 383 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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 fullprice 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.”

66% 9%

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Agree (4 or 5 on a scale of 1 to 5) Disagree (1 or 2 on a scale of 1 to 5)

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Base: 381 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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 (4 or 5 on a scale of 1 to 5)

76%

Disagree (1 or 2 on a scale of 1 to 5)

5%

Base: 411 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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)

Base: 379 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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Figure 8 Offering Online Voucher Codes Drives Customer Referrals “I am likely to tell a friend about a company that uses online voucher codes.”

83%

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

Not likely (1 or 2 on a scale of 1 to 5)

4%

Base: 429 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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

Base: 174 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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

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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 year)

£835

Base: 496 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

Figure 11 Those Who Have Increased Voucher Code Use In The Past 12 Months Spent More Online “About how much money do you think you have spent online in the past 12 months?”

£671

Users who said that they increased voucher use

Users who said that their voucher use stayed the same

Base: 471 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCoes.co.uk, February 2012

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

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

Base: 508 UK online voucher code users Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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)

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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.

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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%

20%

12%

23%

15% 2%

18 to 22

23 to 31

32 to 45

46 to 55

56 to 66

67 and older

Base: 508 UK online voucher code users (percentages do not total 100 because of rounding) Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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

3% 7% 7% 9% 10% 15% 9% 9% 9% 10% 2% 2% 9%

Base: 508 UK online voucher code users (percentages do not total 100 because of rounding) Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

Figure 15 Online Coupon Users: Children In Household “How many children under age 18 live in your household?” 60% 22%

`

None

One

12%

Two

5% Three or more

Base: 508 UK online voucher code users (percentages do not total 100 because of rounding) Source: A commissioned study conducted by Forrester Consulting on behalf of VoucherCodes.co.uk, February 2012

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