Which digital channel provides the highest margin?

Did you see any of the commercials that ran during the most expensive ad slot on earth, the Super Bowl?  At USD$3.5M for 30 seconds we always wonder what the ROAS is for these commercials and how do you measure it?

One that caught my eye this year – and  is related to a topic very dear to my heart – was  this one for Teleflora.

 

What caught the eye specifically was not the beautiful lady but the “unique” coupon call to action, seen in the screen snapshot.

Teleflora1

Let me tell you why this coupon promotion is an #Epic Fail.

Firstly, this is not a margin play but a simple discount to all users. Well, at least the coupon is unique to the Super Bowl right? Perhaps this coupon code could be measured at the back end to look at direct sales metrics by counting the coupon redemptions?

Wrong.

This Super Bowl ad is far from measurable because the coupon is not unique to the Super Bowl. Here it is splashed all over the top of Teleflora’s home page.

Teleflora2

Surely the coupon code for the Super Bowl could have been “SuperBowl”, making the commercial measureable. A different code on the homepage could still be used and the results of their stratospherically expensive commercial therefore would not have been contaminated.

For the past three years at dgm, we have reported on the phenomenal increase in the number of coupon related searches within Australia, and the world for that matter. 

Since 2009, dgm predicted 100% increase in searches year on year and the statistics substantiate our predictions. 

While these stats are impressive, what has it meant to our clients, who use our “7 habits of a successful coupon strategy”, is far more sophisticated than a discount strategy. Perhaps Teleflora and their ad agency would have benefitted from these simple rules.

  1. Use coupons on high margin products
  2. Use “X% off when you spend $Y” where $Y is 50% greater than your average transaction value
  3. Use coupons for up selling
  4. Plan for your coupons to go viral
  5. Ensure your online checkout can reject inactive coupons
  6. Set expiry dates and unique identification to measure redemption
  7. Always include Terms & Conditions for coupon use

 

Insights3

http://www.powerretail.com.au/insights/retailers-beware-of-the-e-coupon-bandwagon/

We implemented these rules to counter the many cries from unenlightened advertisers who rejected coupons as a discount strategy. I will say again that coupons are NOT a discount strategy (take note Teleflora.com).  Stick to these rules and we can guarantee that coupon sites will deliver you higher margin products, and higher average transaction value shopping carts than all other channels including CRM, Display and Search.

We measured over $65M worth of electrical retail sales over a quarter for three consecutive years and found the following results

Online Segment

Average of ATV 2009

Average
of ATV 2010 

Average of ATV 2011 

Coupons

$1,065

 $                    1,153.93

 $                    1,087.49

Display Banners

$940

 $                       789.00

 $                       853.33

Email CRM

$882

 $                       727.00

 $                       706.40

PPC Search

$816

 $                       720.00

 $                       676.21

Graph4

When these ATVs (average transaction values) are reviewed as percentage change between coupons and the other digital channels, we can see coupons are delivering a significantly higher ATV.

 

Further, if we extend this to additional channels including Shopping Comparison Engines and Social Media, we see the same conclusions easily hold water. 

Graph6

Coupled with this, dgm managed coupon siteswere delivering 8% of the total online sales volume and a significant higher net margin than all other channels above.

Quickly, lest we forget, let us not confuse coupons sites with group buying.

Coupon Sites

Find and share coupon codes and promo codes for great discounts at thousands of online stores.

Coupons site www.retailmenot.com or tjoos.com.au

 

Group buying sites

Group buying, also known as collective buying, offers products and services at significantly reduced prices on the condition that a minimum number of buyers would make the purchase. 

Group Buying site www.scoopon.com or www.groupon.com

So how do we at dgm take advantage of this massive consumer trend in both search and conversion for our customers?

No matter what your products, high margin coupons will kick start your revenue generated.

Take for example another of our advertisers, a well known international fast food chain. Via a coupon site, this advertiser is benefitting from many tens of thousands of sales per month on products where margin is key with a ROAS of over $20.

Coupon sites without fail deliver constantly higher order transaction value and margin than all other digital channels.

Chris Garner – Account Director – dgm

http://chrisgarner.posterous.com/

 

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