How to Estimate Value of an Online Coupon Program?

Online coupons are often used to boost Facebook fan base. But they come at a cost to the company. Brands looking to throw a coupon out there need to have a good estimate of redemption rates for their category and the value of actual purchases couponing fans will generate. Consider this:

CPG brands can expect 17% online coupon redemption: The U.S. Mid-Year 2011 CPG Coupon Industry Facts report by NCH Marketing Services shows Internet home-printed coupons’ redemption rate in second place with 17%, right after instant on-pack coupons (23%). (Source: In other words, online coupons have become the next best option for deal seekers after finding the coupon on the package. 

Online coupons bring in new customers: Another important finding comes from Knowledge Networks, which found that nearly half (46%) of CPG digital coupon redeemers from 2008 to 2010 had not previously bought that product. (Source: 

This is terrific news so far, but we need to add a few more variable to the equation to make sure that the online coupon will be worth your efforts:

Organizational cost based on:

  • Cost of product * expected number of redeemed coupons
  • Cost of fulfillment

Agency cost based on:

  • Cost of designing/programming the coupon
  • Team hours to promote the deal
  • Team hours to manage the process before and after posting coupon

If the coupon is on a Facebook fan page, adding all costs and dividing them by the number of new fans will give us the cost of acquisition for a new fan

Will each fan be worth the same? Probably not, considering some will never come back to visit the page while others will recruit friends. Let’s think of a scenario where

  • 50 percent of new fans never visit the page again, nor do they purchase the product at full price
  • 20 percent visit the page again, but do not purchase again at full price
  • 30 percent become loyal fans who visit again and purchase at full price

The real value of the coupon effort will come from those who become loyal fans and customers. In this case, we’d need to take 30% of those new fans and multiply their number by the average profit they bring to the brand.

Gain from new fans:

(Total number of new couponing fans * % who become customers) * Average profit from new customer

Take the cost of acquiring new fans through a coupon out of this gain and you’ll find the real value provided to the organization. 

Coupon Program Value = Gain from fans who became customers – Cost of acquiring all fans

In a low or negative value scenario, you may find that you spent too much to acquire the few fans who became customers. In a positive value scenario, you’d find that enough fans converted to customers, covering the cost of the program and bringing profits. 



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Re-thinking Influencer Reach

Grouping my contacts in Google+ Circles is making me re-think about the way we’ve been defining reach in social media. The value of your network shouldn’t just be based on how many people you know, but also account for ‘who’ you know. As the recent Harvard Business Review article, A Smarter Way to Network, indicates, successful leaders capitalize on diversified networks. They not only solicit feedback and insights from their contacts, but they know people from different circles. This adds to the richness of information they get and the variety of networks they reach. 

While we study influencers, it’s important to know the number of their followers, blog readers, Facebook friends, etc. But it’s also key to know how many different types of circles they tap and which ones they will choose to send your messages. Years ago, when I was working on the e-fluentials surveys at Burson-Marsteller, a journalist had asked to interview someone who qualified as an online influencer. The selected e-fluential told the journalist how he had separate lists of people he emailed, for politics, jokes, national news and general updates. He explained that he was very careful not to push information out to people who would not want it or not engage with the content. 

Perhaps this e-fluencer was ahead of his time or a bit conscientious, but today we have Twitter lists, LinkedIn groups and now Google+ Circles. We need to ask influencers how many people they are spreading news for every different type of message, product or service. Next, we need to understand which channels when they disseminate that particular info byte. Then, we can talk about influencer reach and network value. 

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