Gongcha is a brand with over 300 stores that sells tea to its customers in Korea and abroad. In a coffee saturated market with many brands such as Starbucks, Coffee Bean etc, they have created and addressed a market for a substitute for coffee. Their strategy has been clearly working as they have been growing rapidly and capturing the market for the casual tea drinkers that do not necessarily want coffee all the time. Although much of their success is due to filling a void in the market, they have also utilized mobile and digital data to attract more customers to their stores. They have successfully executed a series of digital mobile coupons to increase the number of redemptions exponentially compared to paper coupons. After analyzing the data through the number of redemptions and redemption rates, they have focused their marketing efforts on the mobile platforms. Through the data that they were able to collect, they have also been able to find out what time to push the coupons and what to offer to whom to maximize results.
Coupons have always been a great marketing tool to bring in foot traffic to brick-and-mortar stores. We all know the buy-one-get-one-free coupon will make us think twice about going in to the store and taking advantage of the deal. We also know that we end up spending a lot more than the actual value of the coupon, especially in grocery stores. These coupons are made for the most part to capture value through getting people through those doors and making them spend. Depending on the attractiveness of the offer of the coupon and the perceived value the customer feels, customers come in to the store and redeem the coupon. Traditionally the redemption rate for paper coupons have been around 2-5% of how many coupons were distributed. This means that only 2 out of 100 people that got the coupon come to the store and use it.
Enter the digital mobile age. Gongcha has been able to utilize third party mobile service companies to push coupons to customers’ mobile devices and achieve up to 40% redemption rate on some campaigns. As one would expect, rather than carry a paper coupon in a wallet, people were more likely to use the coupons while it was stored in their smart phones. Gongcha analyzed the total impressions, cost per redemption, total cost, redemption rate, and total redemptions to realize that while, the digital mobile coupons did not result in more people visiting the store as printing paper coupons and distributing them on traditional media, it was far more effective in cost where the higher percentage of redemptions made up for the smaller reach in digital coupons. However, the same number of people visiting was due to the relatively small experimental run to test the effectiveness of digital coupons. After they transferred their marketing budget to focus on mobile coupons, they were able to not only able to save cost for each acquire, but also increase the number of visitors to the stores significantly.
Not only have they increased their redemption rates by focusing on mobile campaigns, they have also utilized the rich data that has followed as a result of the digitalization of coupons. The beauty of mobile marketing is that it is able to track the time at which it was redeemed as well as where it was redeemed in real time. Geo-targeting, time-specificity, and semi-personalization has been possible through the analysis of the data. For example, they have been able to analyze when people are most likely to redeem coupons in what area and push messages and coupons during that time frame near the area. They can also find out if a customer is more likely to redeem certain types of offers and thus tailor their offers to personal preference. They are able to capture more value through analyzing data and implementing learnings by pulling levers to increase redemption.
As more people become accustomed to digital mobile coupons, the future would suggest that it will become an essential marketing tool for Gongcha and other brick-and-mortar industries. However, there are some concerns going forward. First is the type of customers that digital coupons attract. Because they are likely to be younger, they may be unattractive customers to Gongcha. They may be attracting deal chasers and customers with low lifetime value. Furthermore, they may be losing value by making regular paying customers habitually use coupons. It is hard to discern those customers that would have normally paid full price. Second, because of an old point of sales system, it is hard to track the data of upselling or additional revenue generated when customers redeem. Third, as digital coupons become more wide spread and competitors start using it frequently, its effectiveness may decrease while costs go up to advertise on mobile channels.