AI is About to Change the Way You See Your Coupon Strategy

AI is About to Change the Way You See Your Coupon Strategy

The rise in digital coupon usage means businesses should be considering this important strategy for attracting and retaining customers.


With digital coupon redemptions projected to reach $91 billion by 2022, it is important to optimize strategies for leveraging this marketing channel. One important key to better coupons is artificial intelligence (AI), which can help you realize better segmentation, improve up and cross-selling, reduce churn, and increase the lifetime value of customers.


Coupons have evolved from one-size-fits-all, bulk-distributed paper offerings to finely tuned and personalized digital products. Ways to use coupons are evolving as well — with AI improving the effectiveness of digital coupon strategies. Here are four key ways AI is changing the way coupons are changing the marketing landscape:


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Improved Segmentation

In the past, businesses could choose from options such as broad distribution using newspapers or direct mailing campaigns targeting broad market segments. These techniques were effective, with the use of physical coupons peaking in 1992 with 7.9 billion redemptions.


But today, machine learning can help segment markets for improved targeting. In fact, many AI tools are designed so that that marketers can use them without needing programming skills.


Modern segmenting algorithms work well even with large datasets so businesses can move beyond focusing on a small handful of segments to hundreds or even thousands of detailed target markets. Combine these algorithms with the ability to deliver offers digitally and it becomes clear why mobile is expected to account for 80 percent of coupons redemption by 2022.

Drive Up-Selling and Cross-Selling

Coupons can drive up-selling and cross-selling by identifying products that are most likely to be of interest to a customer. Machine learning algorithms are exceptionally good at finding patterns, such as groups of items that customers frequently buy together. This sales strategy can be used for all of your segments because coupons are used across the income spectrum. The average use of coupons is 86% for households with annual incomes ranging from $20,000 to over $200,000.


AI can also automate the process of spotting particularly promising segments. For example, if there is a clear pattern of customers in one segment frequently buying two products together, then there is an opportunity to offer online shoppers a coupon for one of those products when they add the other product to their basket, but not the other.


Moreover, AI can identify customers in a particular segment who tend to buy higher-end items. This, for example, will allow your marketing team to target those customers and generate custom offers on a similar, but higher margin product.

Cut Down Customer Churn Rates

Finding and engaging customers is expensive — known as acquisition cost, it's estimated at more than $300 per customer in banking, insurance, and telecom industries. Historically, businesses have had to depend on targeting broad segments. This approach can lead to low conversion rates because too many individuals in the segment are not really good prospects. But, leveraging AI, a business can pinpoint detailed demographics, purchasing history, and other data to identify new prospects.


The result is the ability to target the delivery of coupons at the optimal time in a customer's journey, which increases the likelihood that prospect will redeem your coupon. Determining what that coupon should be and when it should be sent is exactly the kind of insights a prescriptive analytics engine can help you determine.

Boosting Lifetime Value of Customers

Marketers can also use AI software to increase the lifetime value of a customer. In this use case, a business could optimize the offer and timing of delivery to increase repeat sales from existing customers. This strategy complements up-selling, which is seeks to increase the value of a single purchase, whereas this strategy seeks to lead customers to spend more often.


In fact, 83 percent of consumers said that coupons influence their shopping behavior. What's more, 94 percent of Americans say they would take advantage of an exclusive offer tailored to them — and not generally available. This underscores the importance of developing a personalized coupon strategy as a way to improve the lifetime value of a customer.


AI gives you new tools to personalize the content and timing of your coupon offers. While the thought of implementing a full scale machine learning initiative may sound intimidating, you don't need machine learning experts and data scientists on the payroll to successfully harness the power of AI.


Keyence is available to help companies jump start their AI-driven coupon strategies with Ki, an AI powered automated analytics software. With Ki, marketers and analysts derive actionable insights into their data, not just statistics and difficult to interpret results. Request a one-on-one demo to learn more and see Ki in action!



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