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Online Promotions Are A Hit With Consumers

Promotions are popular with Web buyers -- 58% of them have taken advantage of one while shopping. These experienced Web buyers value discounts like flat discounts and free shipping and are most likely to hear about promotions through online channels like email.

Promotion users are experienced web shoppers
Retailers have used a variety of promotions -- like Outpost's offer of free shipping with a $100 purchase -- to get consumers to buy online. To gauge their reaction to such offers, we asked 10,000 online consumers in North America about their use of online promotions and their attitudes about promotions in general. We found that 42% of online consumers -- 58% of Web buyers -- have taken advantage of an online promotion (see Figure 1-1). These users took advantage of an average of 2.4 promotions when shopping online in the past three months. Who are these online promotion users?

• Young, wealthy, and educated buyers. It's not just coupon-clipping housewives who take advantage of online promotions. In fact, gender doesn't play a role at all. Slightly more than half of promotion users and non-promotion users alike are female. What does set promotion users apart is that, on average, they're two years younger and earn $15,000 more annually than other online consumers. They are also 58% more likely to have a college degree.
• Highly connected Web users. Promotion users go online anytime, from anywhere. Thirty-one percent of promotion users access the Web from work, compared with only 17% of other online consumers. They spend about two hours more per week on the Internet and are 33% more likely to be shopping via a broadband connection than other online consumers.
• Experienced online shoppers. Promotion users are enamored with buying on the Web -- they're 29% more likely than consumers who haven't used an online promotion to say they're comfortable with buying online. They've been purchasing online for 2.2 years -- seven months longer than other Web buyers. In addition, they have made two more online purchases and spent $254 more online than other online consumers in the past three months.

The most valued discounts aren't the most often used
Most retailers believe that free merchandise is the most effective online promotion. But when we asked consumers which types of promotions they valued and used the most, we found a different story. Consumers rank free merchandise third on their list of most valuable promotions. Consumers' top three types of promotions are:

1. Flat discounts. Forty-six percent of all online consumers said a flat percentage off the total purchase price was valuable, and 43% find value in a first-time buyer discount. While these discounts are the most popular, they aren't always available. Only 37% of promotion users have used a flat discount, and 38% have taken advantage of a percentage discount for first-time buyers.
2. Free shipping.With or without a minimum purchase, free shipping is a hit with consumers -- 43% find it valuable. Because it has been readily available from retailers ranging from gifts.com to Mondera, more than two-thirds of promotion users have taken advantage of no-cost shipping offers on the Net -- more than twice as many consumers as have used any other type of promotion.
3. Free merchandise. Although not No. 1, the promotion retailers find most effective does appear on consumers' promotion radar. Thirty-six percent of consumers believe that getting free accessories related to their purchase is valuable, while 31% like free merchandise in general. Only one-quarter of promotion users have received free merchandise as a result of a promotion.

Online channels drive the most online promotions
How do consumers hear about the deals they get online? Ninety-one percent of promotion users learned about the promotions they took advantage of through an online channel. Consumers discover these promotions:

• From retailer email alerts. Email from an online retailer is far and away the most popular source for promotions -- 54% learned about a promotion this way. But promotional emails aren't limited to retailers. Twenty-four percent of promotion users learned about a deal from a manufacturer's email.
• When they're shopping or researching. Thirty-six percent of promotion users took advantage of one they found while visiting a retailer's Web site, 17% came across an offer during checkout, and 14% found a promotion at a manufacturer's Web site.
• While surfing coupon sites and clicking on ads. Awareness of promotions extends beyond retailers' and manufacturers' sites. Thirty percent of promotion users found a promotion on a coupon site, while 20% found out about a promotion from a banner ad while surfing the Net.

Offline channels connect with few promotion users
Increasingly, consumers mix channels -- they research through one channel but purchase through another. However, only 31% of online consumers heard about an online promotion from an offline channel. Those who did hear about a promotion offline got the word:

• Reading traditional mail. Eleven percent of promotion users took advantage of a deal they heard about through the mail. Print and television ads are less successful, informing only 6% and 3% of promotion users, respectively.
• Talking with friends. People are talking -- at least when it comes to a deal available online. Eight percent of Web buyers who used a promotion learned about it via word of mouth.
• Perusing catalogs. A few promotion users have taken advantage of retailers' multichannel-integration efforts. Eight percent of promotion users found out about an online promotion from a retailer's offline catalog -- just 3% heard about one in a physical store.

Conclusions
From the survey of 10,000 online consumers, we learned that:

• Online promotion users are experienced with the Net. The 42% of online consumers who have taken advantage of an online promotion are an advanced group of Internet users and online shoppers.
• The promotions consumers have used aren't the ones they value most. While more consumers have taken advantage of free shipping than any other type of discount, more online consumers see value in a percentage off the total price.