The effect of Discount Codes on affiliates - Testing the theory

[Maxafi]

Firstly, I'll point out that I run a discount code site, so this thread isn't a grievance against them.

As there has been much talk recently about discount codes, and I've noticed a significant increase in the number of retailers offering them, I wanted to test the theory about their effectiveness as a tool for affiliates that don't focus on just that area.

I run a number of reasonably sizable websites that don't publicise discount codes (mainly because I found it causes more leakage by confusing users that don't understand how they work).

To test the theory, I created 2 extremely targeted campaigns. The first sends a user to search results within my comparison site (the results of which all contained retailers with open keyword policies, for the benefit of stage 2 of the test). The results targeted a specific product, and ordinarily you would expect the user to click the result offering the lowest overall price and make their purchase.

Stage 2 of the test was to create a second campaign aimed at discount codes applicable to the retailers listed in the search results detailed about. For example, if one of the retailers was 'widgets ltd', I created a campaign targeting people looking for 'widgets discount codes', and variations thereof.

For both campaigns, I ensured I was at the top spot for all terms.

I added my own tracking code on both sites in order to track which users had visited both sites (there are no links between each site incidentally). The results were as follows;

Campaign A generated 4,328 clicks.
192 people made an immediate purchase without looking elsewhere (approx 4% conversion rate).
271 people immediately searched for a discount code and clicked my PPC ad for the discount code campaign (approx 6%). Of these, 143 people made a purchase (for which the discount code site was awarded commission).

From this, I can see that of the 4,328 people that initially searched for this product, 463 of them were 'ready to buy'. However, the site that did the 'legwork' so to speak was only rewarded for 192 of them. So, instead of achieving a conversion rate of over 10%, it actually only achieved 4%.

In this instance I still achieved 10% overall, however I obviously had to pay twice for the same user (and by ensuring I captured as many of them as possible for the purpose of this test, I made a loss overall). Some users will naturally have their favorite haunts for codes etc, so the actual 'ready to buy' figure could be higher.

Finally, whilst all the retailers appearing in the results had discount codes available, the overall cost of the product when using a code was cheapest from the retailer listed in 5th place within the results - yet only 3 people purchased from them.

So, on the one hand it is obvious a merchant benefits from the use of discount codes (by virtue of the fact that the most popular in this instance wasn't the overall cheapest), some merchants also lose out in so much as had they simply offered the product cheaper overall, they would have seen more sales for this particular product. On the other hand, 4% of people simply didn't look at all - hence the merchant didn't have to offer the product at a discounted rate.

The leakage issue is what concerns me above anything else however. Whilst I have the luxury of having sites that can theoretically capture the user twice, there are very few products for which it is profitable to do so. Additionally, it adds to the burden of twice the work in order to retain the sale.

Given the amount of recent discussion around codes recently, I thought I'd throw the results of this out there anyway...

[Bud]

Maxafi

Very interesting reading. Thanks for sharing your findings with us.

[befuddle]

My suggestion would be to enhance your existing content by adding code content alongside it. Yes, it's time consuming but you may see improved conversions or even organic search traffic.

[Maxafi]

My suggestion would be to enhance your existing content by adding code content alongside it. Yes, it's time consuming but you may see improved conversions or even organic search traffic.

I do and have done that with some smaller, niche sites, however I found that sometimes it's counter-productive. With large sites you can't always be sure of getting it right - for example, Comet have 'product/range' specific codes, so you can't include those without isolating the products that qualify.

It also has the effect of dramatically increasing the number of support emails you get from people that don't understand how they work. Overall, unless you have a niche site, conversions can actually drop in my experience because you're bombarding the user with too much information when they simply wanted to know how much something costs.

[Barry]

Yep I do agree, I know that if I am given too much information my brain can't handle it.

If I go shopping I never like to think about who's af link I have pressed last or what discount are available because I forget what I am looking for and then abandon the mission.

Most people IMO 'impulse buy' and are not intersted in discounts or costs - though I am trying hard to educate people the power of the voucher!

Ta

[hpops]

Fascinating stuff Maxafi, many thanks for sharing. The state of the vouchers side of the market is becoming impossible to ignore to the point where it is undoubtadley squeezing other sectors. Is managing vouchers managing affiliates?

(contact me for exclusive vouchers for all our merchants etc etc!):-)

[tbp]

I`ve been promoting discount codes the last 4 weeks, and have had really high conversion rates.

I put the price of the product once the best discount has been taken off in the adword body, so that people can do a comparison without leaving the google page (as most other ad's have the price of the product in as well, but they had prices without discount codes).

On the site I listed the product with a maximum of 3 merchants, arranged with the best discount as the first in the table.

I also provided a line detailing what to do with the discount code on the merchants site (ie whether to enter it in the checkout or basket page).

I`ve found most people click on the first row of the table (with the best discount) and then gone on to buy.

Getting conversion rates of over 60%, and up to 20 times ROI. A high ad CTR has meant that my price has plummeted in google, for a position in the top 3, down from over 30p to round about 8p now for the same position

I`ve tried to make it as simple as possible for people, so they don't have to think for themselves, and it's definately paid off. Also been as specific as possible, adword for a specific product, and then a page about the product, so most people have decided to buy before they search in google and come to me.

[Maxafi]

tbp - thats a good way of doing it, and I can see how that would work well. However, I imagine there will always be a limit to how far you could take it (from a maintenance point of view).

[tbp]

Yes thats true, it hasn't been difficult though, as the merchants have been really good keeping the vouchers running, and not pulling them after just a week.

Only had to remove 1 in the last month, so the sites haven't needed any work doing to them.

I am working on niche products though, with a site dedicated to that product, so it a lot easier than listing a large number of different codes for many merchants and products.

The downside is theres less traffic than to a full site, but then the conversions are much better, so its swings and roundabouts really. I try and promote high value products, so the commissions quite good.

[fizzbird]

its swings and roundabouts

I don't think it's a good idea to tell people what you are promoting?

[fizzbird]

Most people IMO 'impulse buy' and are not intersted in discounts or costs

I agree to a point, but there does seem to be a trend developing. On womens chat forums voucher codes are common currency now, whereas a year ago you hardly saw them mentioned?

it's a bit frustrating when you see stuff like here's a code for 20% off 'xyz' when you can only offer 10% of even nothing yourself

Maybe one day all sites will be discount sites - I wonder what the merchants will do then?

[Mogga]

Maybe one day all sites will be discount sites - I wonder what the merchants will do then?

Vouchers exist to drive sales to merchants. Those who use them successfully in a properly managed way will continue to do so. Those who don't won't.

Even if merchants don't let you publish codes then adsense will let you make money - until that changes there will continue to be dodgy codes out there making money.

[mainlime]

I'd be interested to see a comparison of how much commission can "leak" to sites which claim to have discount codes but which don't have any and only tell you they don't have any after you've clicked their link and received the cookie.

[fizzbird]

I'd be interested to see a comparison of how much commission can "leak" to sites which claim to have discount codes but which don't have any and only tell you they don't have any after you've clicked their link and received the cookie.

Would that be a breach of terms if it was worded correctly?

(bearing in mind that terms go out of the window if you do enough business!)

[mainlime]

Would that be a breach of terms if it was worded correctly?

You'd think so wouldn't you? Still seen it plenty of times.