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Analyzing coupon usage

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Ever wonder how offering coupons affects your business? Want to know which coupons are helping or hurting performance? In this article, we’ll explore analyses that’ll give you a good picture of your customers’ coupon usage by answering these questions:

  • How many customers are using coupons?
  • How many coupons are being used?
  • What is your revenue before and after coupons are applied?
  • What is the average order value before and after coupons are applied?
  • What kind of customers are you attracting with coupons?

Lets get started!

Recommended metrics

When analyzing coupon usage, consider using (or building) these metrics:

Number of orders

This metric shows you the number of orders with and without coupons over time. This shows if and how often customers are using your coupons, and how this changes over time.

Gross revenue

This metric reveals the gross revenue you earn from orders that include a particular coupon. The gross revenue is a calculation of the full price of the items sold, before any discounts are applied. This can help determine which coupons are associated with the highest and lowest gross revenue.

Discounts from coupons

This metric can show you the total discount amount applied from the coupons. It’s important to note that these orders may not have occurred without the coupons.

Net revenue

This metric shows the net revenue you earn from orders that include a particular coupon. The net revenue is a calculation of the price of the items sold after all discounts are applied. This can help determine which coupons are associated with the highest and lowest net revenue.

Percent discounted

This shows the share of gross revenue that’s offset by discounts. For coupons that offer a percentage discount, this value is already known (ex: 10% off). Despite this, this measure provides insight and a method of comparison for coupons that are a fixed dollar discount.

Average net order value

This measure shows the average order value when a coupon is applied. You can analyze if orders with coupons consistently have a lower order value than orders without coupons.

Average order discount

This shows the average dollar value discounted from each order where coupons are applied. This displays the difference between the average net order value and average gross order value.

Distinct buyers

This metric displays the number of distinct buyers that use a certain coupon.

Average lifetime revenue

This metric helps evaluate the loyalty and average revenue generated by customers who use a certain coupon. When evaluating whether customers who use coupons are higher value than others, be sure to take into account the number of distinct buyers in each category to ensure that you have a significant sample size.

Example

Now that we know what metrics to look at, lets take a look at an example involving three different coupons -- 10% off, $20 off $100 or more, and $10 off.

Coupon # of orders Gross revenue Gross discounts from coupons Net revenue Percent discounted
10% off 79 $19,757.02 $1,975.70 $17,781.32 10.00%
$20 off $100+ 101 $13,928.91 $2,020.00 $11,908.91 14.50%
$10 off 201 $14,542.35 $2,010.00 $12,532.35 13.82%

 

Coupon Avg. net order value Avg. order discount Distinct buyers Avg. lifetime revenue
10% off $225.08 $25.01 79 $361.50
$20 off $100+ $117.91 $20.00 95 $218.76
$10 off $62.35 $10.00 199 $84.27

What can we take away from this?

About 80 orders were placed with the “10% off” coupon, 100 orders with the “$20 off $100 or more” coupon, and 200 orders with the “$10 off” coupon. The number of orders associated with each coupon could vary based on several factors, including:

  • the length of time for which the coupons were offered.
  • the time of day/week/month/year the coupons were offered.
  • the season the coupons were offered, depending on the business. For example:
    • The “10% off” coupon was offered during the summer months, but the business sells winter clothing.
  • the restrictions on the coupons. For example:
    • The “$10 off” coupon is only offered to new customers.
    • The “10% off” coupon is only offered to customers who purchase a winter coat in the same order.
  • the typical customer’s purchasing behavior.

While the gross discounts for all three coupons are very similar (around $2,000), the number of orders for each coupon are significantly different. Analyzing discounts on a per order basis helps explain the reasons for these contrasting numbers. The “10% off” coupon has the least number of orders, but an average order discount of about $25. Even though this coupon has a low number of orders, its high average discount value causes its gross discount amount to approach $2,000.

Gross and net revenue provide an overall idea of the full value of the orders associated with each coupon. However, this overall picture does not provide an understanding of the different behaviors related to each coupon. Once you look at a per order basis, you can see that the “10% off” coupon has a very high average net order value, which in turn leads to its high net revenue.

On the other hand, the “10% off” coupon has a very high average discount value ($25.01), but the lowest percent discounted. This makes sense when you take into account its average net order value of $225.08. The “10% off” coupon has a small percent discount of a large average net order value, so the average order discount is a large amount.

Let's take a look at the distinct buyers and average lifetime revenue for each coupon. The “10% off” coupon has the same number of orders as distinct buyers. This could be a result of each customer being limited to one coupon. On the other hand, the “$20 off $100 or more” and “$10 off” coupons have fewer distinct buyers than number of orders, which implies that some customers used these coupons multiple times.

For average lifetime revenue, you can see that the average lifetime revenue for each coupon is greater than the respective average net order value. This implies that either customers made repeat purchases, and/or their order value was much higher than the average net order value.

What else can I analyze?

The analyses we touched on in this article can give you valuable insight into how your customers use your coupons, but there are a multitude of other analyses that allow you to dig a little deeper.

You could analyze your customer acquisitions from coupons.

Which coupons are encouraging customers to place orders? Are these coupons attracting one-time buyers or do they encourage customer loyalty (i.e. customer who make repeat purchases)?

You could analyze the time it takes for your customers to use your coupons.

Are your coupons used the day they are released or does a week or two elapse before the majority of your customers use them?

You could uncover the optimal discount amount that increases customer loyalty and overall value.

What discount amount will encourage repeat buyers, higher average order value, and higher lifetime revenue?

Answering these questions will give you insights into your customers, their behavior, and the coupons that provide the most value to your business. 

 

This best practice is provided by Magento BI Data Analysis Services (DAS). We’d love to help you answer any of your specific business questions! Contact support for more info.

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