Many affiliate programs give coupon and voucher codes to their affiliates, but they often fail to achieve any valuable business objective using this strategy. Instead, these coupons often cannibalize sales that the merchant would obtain anyways. This reduces profit margins unnecessarily.

Consider the typical scenario engendered by most of these “coupons for coupons’ sake,” as described by Richard Kershaw in “Why Discount Vouchers Will Destroy Affiliate Marketing.”

People search for vouchers or cashback deals at the point of sale. Not while researching retailers, but while they are a heartbeat away from entering their credit card details.

Question: Why discount goods that consumers are about to pay full whack for?

Voucher codes mean slashing margins to appease fickle, unfaithful consumers. The same shoppers who’ll likely buy elsewhere in future. Or return voucher-in-hand if they do come back.

‘I cut prices harder and for longer!’ sounds like a rather desperate customer acquisition strategy.

Richard concludes:

Discounting is a race to the bottom, just like cashback sites. Sell at the market price and be done with it.

While I agree with the rest of the scenario, having been-there-done-that-myself, I disagree that discounting is a race to the bottom and that you should always sell at the market price. There are reasons and ways to discount that help a merchant race to the top, just like SEO sites :D. You can shoot a free kick and miss the net entirely, or you can make it hit like Beckham. Here’s how to get the coupon strategy right.

As with any marketing program, you need to establish the right goals with your affiliate coupon campaign. This often means:

  1. Gaining new customers when you’re the new kid on the block, (hattip: Affiliate Future)
  2. Selling surplus inventory that you want to liquidate, (hattip: Affiliate Future)
  3. Driving incremental sales beyond those your other marketing programs deliver,
  4. Driving higher average order values than your current marketing programs generate,
  5. Growing your own inhouse optin email list.

The solution, therefore, is to structure your coupons in such a way that will help achieve these goals. Let’s consider ways to achieve these goals.

  1. To gain new customers, you can make define the conversion as being valid when they customer has the item shipped to an address not already in your system. (Again, James of Affiliate Future’s idea.)
  2. To sell surplus inventory, offer a discount on the particular SKU or product line you want to liquidate. This should also help boost conversion rates as affiliates can deeplink to specific products or categories, rather than dropping folks at your homepage. For example, HMV offered DVDs at a discount last Christmas.
  3. To make incremental sales, encourage your coupon affiliates to rank for generic keywords, like “buy an mp3 player,” by offering higher commissions for traffic that comes via pages that rank well organically.Or make some codes open to email promotion only, so that affiliates will promote you to their ‘deal newsletter’ lists.
    You can also boost payouts for coupon affiliates buying traffic with banner campaigns, but it’s hard to verify that they’re not also targeting your brand keywords on the content network (because they can block your IP in their campaign).
    Finally, to make incremental sales, DO NOT offer ‘$10 off anything” type codes, where the discount is available independent of your goals as a merchant. The correlative is that we should…
  4. To boost average order value (AOV), offer “10$ or 10% off any purchase over $100″ type codes. You can probably do even better offering free shipping to high AOV purchases. That’s what these Apple.com coupons do.In a similar vein, to boost average profit margins, structure the codes such that buyers get a discount if their purchase generates over X$ in profit.

    To do this, encourage people to (i) buy “packages” of items that often go together (e.g. bundling 3 books on usability) or (ii) buy items in high-margin categories. The Boots voucher codes here include a coupon to triple your normal loyalty points on purchases over $40 (20 UK pounds) - on Mom and baby products. Presumably those have higher-than-average margins.

  5. To grow your opt-in email list, offer affiliates a bonus if their visitor subscribes to your newsletter and stays subscribed for at least 3 months. So, suppose that an affiliate is promoting your site, they’ll pre-sell their traffic on subscribing to your newsletter after they’ve checked out.But to avoid having affiliates incentivize people to subscribe, require people to subscribe for 3 months at a minimum.That way, people can’t sign up to get an additional $1 off [from the affiliate, who is getting $2 per email], and then unsubscribe immediately. If they sign up just for the incentive offered by your affiliate, they’ll still need to receive (and thus potentially open) the emails you send over the course of 3 months.

What has your experience been like with affiliate coupon codes?

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How To Do Affiliate Promotional Coupons Like Beckham Shoots Free Kicks