And, no, before you ask I have not ready and T&C’s or even looked for any. I do’nt care if your reason is all laid out for everyone to see in full clarity – you just do not NEED to take email addresses from people to make comments.

Anyways, will you be at SMX Advanced? I’d love to meet you in person, as you’ve been on my radar since the 44 ways to contact webmasters article. I’m hoping to attend.

Finally, if you’re looking to buy out a site, I have a small blog I started a while ago on Site Flipping which ranks fairly well and has already been the object of a buy offer in the past.

Ultimately in today’s climate advertisers must protect their margin. The hot topic for 2009 (it was definately on the lips of many marketeers in 2008!) is profitable volume. With established voucher and incentive websites it is easy to quickly drive volume to your company – however, each Marketing Manager must be fully aware of the effect on the bottom line. Both as a cost per order (CPO) or acquisition cost and product margin.

The advertiser knows their own margin levels – then they can work out if selling one product at full price and protecting their margin is “better” than pushing out a £10 off voucher code – where they will need to sell XX amount more (tip – remember the other variable costs too – especially from an operations point of view).

Another book recommendation..

“The undercover economist” Tim Harford. If my memory serves me correctly there is whole chapter on why you ultimately make more money by having sales/discounts than not. The key, as already mentioned, is to be intelligent with your offers to capture both those customers who are only looking for a bargain, without losing the high margins from the price indiscriminate shoppers.

Excellent article which I feel backs up the point that a few of us have been making for a while, namely merchants need to understand where their traffic is coming from more. I completely agree with Kevin and James, that there are numerous ways to utilise this sector intelligently, but in order to do so you have to a) understand how people use codes and b) understand how it effects your sales.

The points you make on discounting are very valid, and merchants need to weigh up their margins. However when they have done that and come up with an idea as to what they are looking for from this sector (eg. increased AOV or sales of a particular product), then they should work closely with the network and a few selected voucher code partners to achieve those aims.

Looking at the US, the “coupon” sector is huge and significant research has gone into showing that it does work. I think the issue in the UK is a combination of naivety by merchants and opportunism by some site owners. I think that when these two issues are addressed the voucher code sector will become a significant part of the online mix.

“…an interesting exercise is to work out what effect increases in price have on profit”

Obviously the extent of this effect depends on price elasticity of the product.

A lot of retailers seem to be obsessed with volume, whereas the thing that keeps you liquid is profit.

Perhaps when everyone has destocked, flirted with liquidation and downsized, we’ll get back to a ‘you get what you pay for’ consumer economy.

Do Aldi do discounts ?

@Kevin – An interesting and considered response. I agree entirely about your ‘mania’ comment. I think a lot of businesses are desperately clutching at ways to cut costs at any cost.

Much of the controversy around voucher codes in recent months appears to have been about the tactics used – ‘click to reveal’ et al – rather than the bigger question of “why discount to win business”. I believe this is the more interesting of the two questions.

I should make clear that my opinions are about the broader merits of voucher codes and not a dig at Mark Pearson or My Voucher Codes. I don’t think any serious affiliate could fail to be impressed with what MVC has achieved in a relatively short period of time.

My take on the tactics we’ve all seen used: they have seen a huge opportunity to do something that was within the rules of the game, gone to town with it and made a lot of money. The fact that the tactics pioneered by one site have spurred the IAB into introducing voucher guidelines shows exactly how well it works.

@James – I agree that it is possible to use vouchers and discounts in an intelligent way. I think your three examples are excellent: vouchers for new customers, product specific and to increase AOV. Alas, all too often it seems to be a case of ‘Save 10% on all our stock for no good reason’.

I had planned to give the example of how Buyagift encourage repeat business: they send first time shoppers a £5 voucher with their order.

Personally I think that the main “problem” with issuing Voucher Codes is that most merchants don’t do them correctly; they have the ability to add incremental sales and other networks should really start explaining to their merchants how to do this.

For example, issuing codes that are valid only for new customers (via address lookup), issuing codes for product level items (where there is surplus stock) of issuing codes based on the spend level (and base the code over the AOV).

You have to remember that discount code sites like MVC get a huge amount of traffic, especially in the current financial state and if merchants use them to their advantage then they are on to a good thing!

J

I don’t necessarily buy all the points as explained above but I think there are elements of truth here that are worrying for all concerned.

I agree discounting continuously via codes or cashback or a combination of is a risky strategy. It dilutes your offering, potentially damages brand equity and possibly upsets your customers who start to question whether you’ve just been ripping them off all these years.

I also think there’s a degree of mania surrounding incentivised traffic at the moment, with merchants jumping on the bandwagon before carrying out due diligence about cannibalisation and new customer acquisition. I find it slightly surprising that a merchant is happy to part with bigger parts of their margins without working out whether all they’re doing is passing this margin onto an existing customer.

Finally Money Saving Expert is a significant worry for any large merchant or brand. Any casual look at their forums demonstrates how savvy online consumers know there are savings to be made and therefore now expect them. If they don’t get them or have a tracking issue with a cashback site they don’t hesitate in demonstrating their irate views with fellow users.

Having painted that seemingly doom and gloom picture for those merchants who have their wits about them there are elements of all points mentioned above that can be used to their advantage.

Targeting key product pushes, working closely with ethical voucher code sites to bulk up online content and coverage as well as setting your commission or cashback rates accordingly to match the quality of this traffic are three things all merchants working these affiliates should do.

Good quality affiliates who you value and are interested in working with you will always be on hand to speak to you and offer consultation. This is a useful benchmark all merchants should bear in mind.

I also think networks are now making inroads into properly understanding voucher codes. This will be critical in 2009. Those that fail to do so are simply holding back the tide. Failure to understand and advise in the best interests of all concerned will only lead to rash decisions and backlash.

So a mixed picture all in all but there are ways through the murk and confusion. Merchants with the time, advice and resource to work intelligently with the right affiliates are best placed to reap the benefits.