Why are promo codes a part of Internet Shopping?

I placed my spring time Burpee Order for my container plants. Googled Burpee promo code and there were several coupons available. Picked one that was 25% off on orders over a $100. a nice saving on my $200 order. It paid the $27 shipping and a little off on the plants. I’m a happy gardener. :smiley:

But, why does the system exist? What’s in it for Burpee except the loss of 25% on orders over $100? What does the coupon site get for sponsoring the coupon? I was pleasantly surprised that it didn’t launch a dozen pop ups or required eight mouse clicks for the coupon. One easy mouse click got me the coupon/promo code.

This seems somewhat unique to the Internet. Local brick & mortar stores sometimes have coupons. But you have to wait for one to show up in the mail. Usually the coupon is for a specific product and brand. Usually for something you already have or don’t need. The Internet coupons are much more generous.

Whats the deal? Why the generosity? What does the web sites get out of this?

I would have placed the identical order with Burpee without the promo code. Getting the discount was just a nice bonus.

They exist for the same reason that coupons have always existed: Price discrimination. Imagine that you’re a retailer, selling some product. The product costs you some amount, and you want to maximize your profit. There are some people who aren’t even willing to pay the price you pay for your product: Ignore them, you can’t make any profit off of them. There are some people who are willing to pay a very high price for your product: Ideally, to maximize your profit, you’d want to sell it to them for that very high price. But there are also some people in between, who are willing to pay more than it costs you, but not that very high price. You can make a profit from them, too.

What you really want to do, if you can, is to charge a high price to those willing to pay a high price, but to also charge a low (but still profitable) price to those only willing to pay a low price. Methods for doing this are called price discrimination. One common method is haggling, and another is coupons: Either way, some people aren’t going to consider it worth the bother to get the lower price, and some people are going to bother. So you make a profit off of those willing to bother with the coupon, and you also make more profit off of those who aren’t.

In addition to the price discrimination mentioned by Chronos these kinds of codes allow one to see how effective various ads are.

You can see this easily with audible.com. Audible sponsors a tonne of podcasts and they offer a discount on your first order if you enter a promocode (that’s unique to that podcast). The discounts are for the same amount but which code you use tells Audible what podcast you’re listening to. In aggregate this lets the company figure out their best return on sponsorship dollars.

And it has guaranteed that I will never sign up for audible, or ting, or squarespace or netflix (if I hadn’t already used my free month long before they started doing these promos) or any of the other services doing this because how the heck will I ever choose which podcasts to sign up through? No matter which one I’d pick, I’d feel like I was betraying the rest!

That’s a pretty silly reason not to avail yourself of a product that you would otherwise desire.

Besides the very good reasons posted above, another reason is to maintain MAP online - if you’re an internet retailer, especially if you’re a branded website who sells their own merchandise - you want to keep your prices consistent with other websites and with any retailers selling your products at stores.

It’s important not to undercut your competition if you have both a retail and a wholesale presence - if a wholesale client sees your products selling cheaper on your own branded website, they may cancel orders or demand markdown money to match your prices.

However, you still want to sell merchandise, so having promotional codes active means that customers can get a discount pretty easily.

Also, probably the best reason for it, every internet retailer does it, and customers expect it. If they can’t buy the product from you, they’ll buy it from a different site because they have a coupon for that one.


I’ve not lost sleep over it yet.

I’ve been foolish in the past for not seeking out and using promo codes before clicking checkout on my shopping cart.

Sometimes it can be hard to find a working coupon code. They only work so many times before they are rejected. I got lucky with my first try today.

I fit in between Chronos’ description. I’m often too lazy or forgetful to seek out a coupon. Today, I was mildly irritated that several of my plants had gone up in price ($1 to $2 each) from last year. I knew that because I was ordering using the item codes from my last years email order confirmation. The higher cart total stung and I decided to seek out a discount.

Do the coupon sites get a payment for sponsoring the coupon/promo code? I guess it’s like ads with coupons in a newspaper. The store pays for that ad.

In addition to what Chronos says, there could be an anchoring effect with coupons.

Some might be reluctant to buy your product if it was simply priced at $80. But if you ask $100, and let them find a 20% discount coupon, $80 now seems like a good deal because they have more expensive alternative to compare it to.

The coupon/promo-code hosting site gets their revenue the same way any other content publisher does: through ads on their pages.

Finding the coupon codes doesn’t cost all that much as many of them are provided by other users, and a lot of them could be found simply by signing up for promotional emails with the various retailers.

They also get revenue through “affiliate links” - you’ll notice many really try hard to redirect you to the site via their link, often through “click here to reveal the code and visit the site” or similar. This is because many webstores pay a % of your sale to a site that sends you to that store. You can turn that around and get some or all of that % back yourself if you visit a “shopping portal” first, then add items to cart, then use coupons. For example topcashback.com or aadvantageeshopping.com give you cash or airline miles, respectively, for shopping at many merchants.