Promo codes destroy the customer experience. Here’s what to do instead.

Customers experience a seamless checkout when using their Starbucks app or taking a Lyft. They now expect that same magic with every purchase.

While some companies are catching on, many still offer traditional ecommerce checkouts that sharply contrast with frictionless payment. It takes a customer an average of 25 form fields to complete a transaction. No one has time for that!

And while meant to drive customer attraction and retention, promo codes further damage the customer experience by adding friction to the checkout. Brands facilitating seamless and incentivized payment processes that eliminate the promo code are forging ahead quickly, and consumers are with them.

A broken checkout flow

Getting a promotion, especially one targeted and personalized, should be a magical experience. The value received should be a satisfying part of a successful online purchase.

Sadly, when a promo code is involved, the data entry does not result in magic.

The option to enter a promo or coupon code raises an alarm in customers. It causes them to wonder if they’ve got the best promo code available, where they left their coupon code or, horror, why they weren’t provided a promo code at all. The experience causes checkout friction and often results in abandoned carts, incomplete sales, and disappointed customers.

cart abandon statistic

Checkout is a pain point for most online retail platforms. The Baymard Institute found 69.23% to be the average online shopping cart abandonment rate with extra costs like shipping and taxes the top contributors. These are hurdles enough without additionally sending your buyers all over the internet looking for a promo code.

A survey by Userzoom found that 73% of visitors who saw the option for a promo code would leave the site in search of a code.

Some marketers understand this behavior and have developed workarounds. To minimize cart abandonment, platforms conceal promo code boxes, alter language or design buttons to be found only by those making efforts to look. Other alternatives offer the option to search for a coupon within the same website or offering buyers the opportunity to register for future promotions. Unfortunately, these strategies only add more friction and complexity to the online shopping experience resulting in rising levels of customer frustration and attrition.

Friction when redeeming a promo or coupon means distrust from customers as well lost sales. When shoppers have to search for the box to enter their code, they raise questions about how badly the merchant wanted them to receive the discount.

When you provide incentives without the high-friction barriers, customers feel confident you are invested in earning their business. Feeling valued builds loyalty, which not-so-incidentally also results in future purchases.

So what if, instead of giving customers a series of 25 hoops to jump through, we streamlined the process, applied discounts directly into user accounts, auto-filled fields or applied incentives up front, and avoided the promo code box altogether?

Meeting new expectations

Progressive companies avoid interruption during the customer experience, allowing payment to be a brief formality on the path to purchase.

customer shopping experience

Lyft embeds credits and promos directly in their app. When a user receives a promo code, they can add it the app immediately—even if they aren’t ready to book a ride. The credit is applied to future bookings, without requiring the user to enter codes or experience delay at check-out. This separation between the association of a promo code with a rider’s account and the application of a promotion to a specific ride, allows Lyft to track code origins and gather data about new customer acquisitions while encouraging retention through repeated smooth transactions.

Starbucks transitioned a longstanding gift card program into a dynamic, digital loyalty program. Customers easily earn and spend Star Rewards, receive custom marketing promotions based on behavior segmentation, and skip the line with mobile payment. Analytics showed the company that if customers didn’t put money on their card in the first week, they were lost. So a great deal of energy now goes into onboarding new members, creating targeted welcome messages and testing different ideas to see what resonates.

cover of Starbucks case study

Starbucks: Taking Loyalty to the Next Level

Starbucks gift cards have been coveted by coffee-loving customers since 2001 and have now evolved into a robust, multi-channel rewards program.

A former product leader explains how they modernized their loyalty program—and what companies small and large can learn from it.

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Sephora shares all active promo codes at checkout with one click. Offering promos on the check-out page builds further trust in the brand and expedites the checkout step.

In 2017, the Checkout Conversion Index™ found that top performing merchants reduced online purchasing time to an average of 126.8 seconds. This turnaround doesn’t allow for second-guessing or frustration. Promo codes can be used wisely in the marketer’s tool belt but ultimately, they have a shelf life as directly added value overtakes data entered codes.

What’s coming: voice and the disappearing checkout

E-commerce giants are catching up to consumer’s expectations around frictionless payment and using new payment technology to redesign the process.

Earlier this year, Andre Lyver, Head of Payments at Shopify announced the company’s initiative to #KillTheCheckout. The company now offers consumer’s the convenience of Shopify Pay, which allows payment and shipping info to be pre-populated across Shopify stores. The result is that checkouts complete 40% faster and convert 18% higher for returning customers. Similarly, with growing access to Apple Pay and Google Pay, consumers can connect with their saved payment information in any platform within their devices and use it instantly, promotions automatically applied. This is frictionless commerce.

google home

Some shoppers are now speaking up to make purchases with the growing popularity of voice-activated devices. Users are trusting Alexa, Siri, and Google with purchase power as well as payment information. When a user requests a product from Amazon Echo, the device automatically selects the previously ordered brand, taking the guesswork away from the customer and automating brand loyalty. Voice commerce plays an important role in the future of invisible payments.

The future requires a little magic

The more data we have from our customers, the better we can serve them and sell to them. The more familiar we are with their habits, the better we’re able to create a frictionless shopping experience.

Discounts and targeted promotions will always be valuable. Promo codes offer us the ability to track where and how buyers have made contact with our brand. The now face the challenge of making promotions magical. It’s well understood that the less complicated the checkout, the more sales, the happier the customer. As we move towards invisible and voice-activated payments merchants must integrate promotions with existing payments, automating whenever possible.

The current promo-code model is not magical. It causes customers to abandon their purchase.

Forward-thinking brands understand that there are two steps: associating a promo code with a customer’s account and using that promotion on a specific transaction. Both can be simple and speedy, asking little effort of the customer and creating additional value with each check-out.

However, this requires the right investment in technology and experimentation to build the frictionless experiences that give customers the magic that now drives continued loyalty.


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