How coupon websites work

Coupon websites are essentially online advertising sites that use direct marketing to facilitate group-buying deals. They develop large customer databases by collecting the name, contact details and location of each person who purchases from them.

An offer is advertised

The coupon process begins when the website launches a new offer from a business. Offers are generally for a heavily discounted good, service, or event. The offer appears on the website, and is also emailed directly to subscribers in a daily newsletter that highlights one or more offers in their local area. Some coupon sites also promote their deals through other channels, such as television ads or social media.

If a subscriber likes an offer, they click on a button that takes them to an ad on the coupon website. The ad provides information such as:

  • the cost of the coupon
  • the size of the discount and saving
  • how long customers have to purchase the coupon before the offer expires (generally from 24 hours to 1 week).

Customers purchase coupons

Customers can click on a 'buy now' button to purchase the coupon immediately, using their credit card to pay the cost of the coupon to the website.

The website sets a minimum number of customers who must purchase a coupon before a deal is activated. If not enough customers buy a particular coupon, the offer lapses and those who have gone through the 'buy now' process are not billed. Once the required number of customers is met, a message appears on the website confirming that the deal is 'on'.

Customers spread the word

If customers like a deal, they will often promote it through their own networks, and by posting it on other websites that feature the best coupon deals. Each coupon ad includes buttons that allow users to share the ad through media such as Facebook, Twitter and email. Many sites also give incentives (e.g. credit vouchers) to customers who sign their friends up to the site.

Customers redeem their coupons

Customers receive their coupons by email, and can redeem them at the participating business (which may be an online retailer or a 'bricks and mortar' operation with physical premises).

The business uses unique coupon numbers to keep track of each coupon redeemed, usually with the aid of online tracking tools provided by the website. Coupons generally include an expiry date, and may have other conditions such as limited times or days of use, or a maximum number per customer.

The business receives its share

The website keeps a share of the value of each coupon purchased (generally anywhere from 20% to 60% of the coupon's value, depending on the website). They then forward the business its share of the coupons' purchase cost. Some websites pay the business a share of every coupon purchased, while others only pay a share of each voucher that is redeemed.

Payment time also varies from site to site. Some coupon websites pay businesses within 5 days of a deal being activated, others pay soon after a deal finishes, while some pay as long as 60 days after a deal ends.

Specialist sites

While many coupon websites offer products from a wide range of businesses, some sites specialise in coupons for a particular category. Specialist sites include:

  • Getaway Lounge (travel)
  • Fashion Zoo (fashion)
  • Wine Catch of the Day (wine)
  • BargainBaBee (products for babies, children and parents)
  • Dealtronic (gadgets and technology)
  • Grocery Run (grocery deals).

Aggregator sites

As the popularity of coupon websites has grown, 'aggregator' sites have sprung up, which bring together the best deals from many coupon websites. One of Australia's best-known aggregator sites is All the Deals, which draws its deals from more than 100 coupon websites and then filters them according to interest and location.

Bargain sites

Bargain sites are a form of aggregator site driven by members (customers). Members choose good deals from other websites and from businesses themselves (e.g. specials that they find on a visit to a store) and post them on bargain sites to share with others. Other members then vote for a deal and the site ranks it accordingly. A deal with a high number of positive votes can drive strong traffic to the deal owner's website or business. A deal with a high number of negative votes will usually be de-listed.

In addition, members can post product and retailer reviews. Some bargain sites also let businesses post their own free ads, which are voted on just like deals posted by other members.

Well-known Australian bargain sites include OzBargain, BuckScoop and TopBargains.

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