What are digital coupons?

Digital coupons are discounts, offers and promotions offered by an online store to current or prospective customers. Similar to their tangible counterparts, coupons are aimed at enticing a consumer to make a purchase at an online marketplace.

What types of digital coupons are there?

There are a number of coupons available to consumers. They include:

• Downloadable coupons: These types of coupons are accessible to consumers from a number of different locations. Customers download coupons from a company's website, directly from an email or via, social media. Most of the time, these coupons are accessible from mobile devices as well.

• Mobile coupons: Ecommerce platforms that have integrated mobile applications into their operations offer mobile-only coupons to drive further sales in this channel.

• Coupon codes: The growing popularity of ecommerce has greatly contributed to the rise of coupon codes. This form of discount is faster than downloading a coupon and is easier for the customer to complete at the point of sale. These codes consist of a combination of brand-unique numbers and letters.

• Automatic discounts: Discounts that are automatically applied at checkout are increasing in popularity because the consumer doesn't have to do anything to receive a discount. These work well for ecommerce companies because online retailers are enticing customers with an offer for a discount, therefore reducing shopping cart abandonment and churn rate.

How do coupons benefit online businesses?

Digital coupons are a growing trend in the online retail world. A recent eMarketer study found that 52 percent of U.S. adult Internet users, or 102.5 million people, redeemed a digital coupon of some sort in 2013 (1). That figure is projected to increase to nearly 111 million, or 55 percent of the population, by the end of 2014.

Digital coupons exist because they help drive revenue for ecommerce businesses. They are beneficial for online retailers for a number of reasons:

• Coupons are easy to implement

• Businesses track their progress and return on investment with online metrics

• They help increase conversions and reduce cart abandonment

• Coupons entice buyers to become recurring shoppers

• Businesses connect with a younger customer base in different channels online

• Reimbursements from manufacturers come at a faster rate

• Technology ensures coupons are used only once, therefore reducing denials and misredemptions

• Digital coupons are more convenient from a customer standpoint

• They're cost-effective and efficient since they're delivered digitally

• Businesses demonstrate they value their customers be rewarding them with a coupon

• Auditing processes are external, so reporting well-documented

• Ecommerce companies control which conduits they want to use to distribute coupons

Critics of coupons say they reduce average order value as well. For example, businesses often provide coupons for slow-selling inventory to entice further sales. New lines of revenue generate from coupons, regardless of their form. Online stores use coupons to drive bottom-line capital gains and improve customer retention rates while reducing shopping cart abandonment in the process.

1. "Majority of US Internet users will redeem digital coupons in 2013"