In our last webinar on email marketing, an attendee asked how email marketers can avoid cannibalization of sales from customers or even affiliates who pass on the promos to the public. Jason recommended that coupons should have a set limit on them, whether it be a time limit or a certain number of redemptions. If your affiliates are the ones causing the trouble, you should revisit your affiliate relations strategy. (Shameless plug: we're having affiliate guru Shawn Collins join us for our next webinar to discuss affiliate marketing, affiliate relations, etc. so be sure to sign up.)
That's good advice for future promotions, but what about damage control on past campaigns?
Littlewoods Strikes Back
When its promo codes were leaked to the public, UK retailer Littlewoods decided to take action against its customers by requiring repayment from those who obtained £25 vouchers from chat rooms and forums.
The vouchers were meant for only a certain group of customers, but 3,000 customers cashed in on the deal to the tune of £75,000 or $153,825.11 US in discounts.
"In accordance with clause 2.3 of our online terms and conditions we have re-charged this discount back to their accounts and have written to them individually to explain," told a Littlewoods spokesman to BBC News.
It's possible that 3,000 additional sales that may not have happened without the free advertising resulting from the promo leak would have been a bonus for Littlewoods, provided the average order value was large enough to offset the discount. Former Group eCommerce Director for Littlewoods Shop Direct, Ian Jindal speculates that the retailer's reaction suggests this was not the case.
In my opinion, the hasty reaction of Littlewoods was a customer relationship and trust disaster. I can't blame customers for cashing in the coupons, as they were most likely unaware that they weren't eligible. The discount gave 3,000 people a motivation to buy and begin or continue a positive relationship with the retailer. Demanding repayment is not only insulting, but how many of those customers would ever shop with Littlewoods again?
Littlewoods Gives In
It was announced today that Littlewoods will refund what it reclaimed and drop the issue, but it stands behind its policy: "Customers have the responsibility to ensure they are using a discount for which they are eligible. Our terms and conditions make it clear that promotional codes must only be used for customers who qualify for them...Clause 2.3 states that a promotion can only be accepted if used by the person to whom it has been directly issued."
Oh yeah, everybody reads the terms and conditions of a website thoroughly before buying. Uh-huh...
Littlewoods' Lessons Learned
To prevent history from repeating itself, Littlewoods will use either a "tear off" approach (issuing unique codes that can only be used once) or front-end validation that checks a customer's details to confirm eligibility for the code upon check out.
The popularity of deal and coupon sharing sites leaves every online marketer vulnerable to a similar situation. Unless you are prepared to honor your promotional codes to anyone who tries to use them, make sure you have safeguards in place to protect your revenue and your reputation.