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Wednesday, 18 March 2015

Demand for vouchers among UK online shoppers and implications for business strategy

UK online shoppers get savvier
By Warc, 17 March 2015

LONDON: More of the UK's online shoppers are hunting out voucher codes to use before making a purchase: new research has revealed. Voucherbox.co.uk, a UK voucher code site that has a stable of more than 1,500 stores, including leading retailers, surveyed 1,000 consumers to find out how often they used voucher codes when shopping online. It found that at the start of 2015, 57% were using voucher codes at least occasionally, up from 48% a year earlier.

The biggest increase had come among frequent users. Some 17% of those polled said they now "always" used voucher codes, compared to 10% in 2014. And "regular" users had risen from 13% to 16% over the same period. With one third of UK shoppers now falling into this frequent category, Voucherbox stated that they were "43% savvier than last year". The proportion of occasional users remained steady at 24%, a one point decline on 2014, while that of non-users fell from 42% to 35%. The percentage of respondents professing total ignorance of the subject had also fallen, from 10% to 8%. "Responding to this growth in consumer culture benefits both parties," said Shane Forster, UK country manager for Voucherbox.co.uk. "Sales generated by the incentive of a discount are proven to drive significant extra revenue for retailers," he told The Drum. Younger shoppers are most likely to look for a deal, the research found. Voucher code use has doubled since last year among consumers aged 18-24, going from a reported 32% to 63%, while the proportion of people aged 25-34 using voucher codes jumped to 68% from 40% last year.

A regional breakdown shows the biggest rise has come amongst Scottish consumers, with a 40% increase in voucher code usage over the previous year. Wales saw a 29% overall increase, followed by England (17%) and Northern Ireland (11%). A quarter of online shoppers in the East Midlands region said they always use voucher codes, compared to none in the same category last year. Consumers in the North West seeking out codes each time they shop grew by 172%, to 23%.

Implications for strategic management by retailers 
By Juma CJO
An increase in demand for vouchers is an indication of the fact that the UK consumers are becoming more price-sensitive than in the past. Instead of simply looking for cheaper products, they opt to go for vouchers in consideration of the desired product quality. This is in line with the consumer psychology of the price where cheaper products are often regarded as being of a poorer quality than the expensive products. Emphasis on vouchers can be interpreted by strategic managers as an increase in the number of consumers who want to save on their expenses while not willing to give up on the quality demanded. Understanding this aspect of price-psychology is very important for the marketing mix strategies that the organisation embraces.

One of the tactics that have been used by leading retailers is the use of loyalty cards where subscribers are exposed to larger discounts than other customers. This means that they can make savings without concerns over possible deterioration of product quality. The level of loyalty is enhanced where consumers appreciate that there is a high value attached to their membership to the company's loyalty schemes. For the companies, this development has important strategic operations management implications.

Whether prices are reduced directly or indirectly through an offer of attractive discounts and vouchers, it translates into lower profit margins per unit. This means that an organisation that wishes to sustain its competitiveness must invest in operations efficiency by streamlining internal operations to minimize the resources being used. It is the organisation that is most dynamic and effective in realigning its strategic operations management systems that will be able to emerge as being more competitive in an environment such as the UK where the level of price sensitivity is on the rise.

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