• by Sarah Mahoney  @mahoney_sarah, August 24, 2009

One of the most ballyhooed effects of the recession has been the way consumers are scampering for coupons -- not just the ones that show up in the Sunday newspapers and store circulars, but those that can be found online. In fact, couponing Web sites are among the fastest-gaining Internet categories, reports comScore -- including such popular sites as Coupons.com, Eversave.com, and RetailMeNot.com. So it's no surprise that marketers are cranking out the coupons as fast as they can, looking to boost business.

The trouble is, says Alex Rampell, CEO of TrialPay, an e-commerce solutions company based in Mountain View, Calif., most marketers are playing the online coupon game all wrong, offering discounts to people who were on the verge of clicking through at full price.

Q: So what, exactly, is it that marketers do that is so dumb?

A: Maybe "sub-optimal" is a better word. But let's say you are looking to buy a Dell computer online, and are almost done with your order. On the final page, you'll probably see something like "Enter your coupon code." Well, you didn't know there were coupons out there. But you leave the order, unfinished, to type "Dell coupon" into a search engine -- and get something like 4.3 million hits.

You sort through them, get a coupon code and go back and complete the order. This creates a double whammy -- not only is Dell not getting a full price, they'll likely have to pay the affiliates who distribute the coupon 3%, too. But in this case, the affiliate didn't send them an order -- they are just resending someone who was going to buy, anyway. It means lower margins for the marketer.

Q: So do how companies avoid that?

A: Sometimes, even using the word "coupon" is tricky. "Coupon" says to the consumer, 'Hey -- lots of people are getting a great deal today -- but not you!' No one likes that feeling. Let's say the order form said "Gift certificate code." That wouldn't necessarily offend people -- they'd just think, 'I don't have a gift certificate.'

Q: Is the very word problematic?

A: No. Coupons are a fantastic tool, and they can completely change human behavior. If I were to give you a coupon for 90% off lunch at a new restaurant, wouldn't you try it? But the whole point is to change people's behavior, not just to give them a discount for what they are doing anyway.

Q: What should marketers do?

A: Look for smarter ways to link coupons to behavior. Take a company like the Gap -- anyone can shop at the Gap online, then do a search for coupons and pay less. Wouldn't it be better for the Gap to target people who are non-Gap shoppers? Instead of making coupons available to Joe Public on the Internet, it might be better -- just as a for instance -- to offer Gap coupons to consumers when they sign up for Weight Watchers, or when they buy a baby book at Amazon.

Q: Why is this important now?

A: If you look at the history of e-commerce, the rising tide floated all boats -- you didn't have to do anything right for sales to go up. That's less true, and now, e-commerce companies are more focused on raising margins. They have to be smarter.

Let's say I do a search for Gap through Google and Yahoo and some coupon sites, and then buy at Gap.com. It looks like the money paid to these affiliates are all ROI positive, but they're not -- they are never forced to choose which one actually made the sale. So e-commerce companies are trying to make their attribution more single-source -- right now, there are online retailers paying nine times for the same customer.