In the world of D2C brands, discounts and coupons have become a ubiquitous marketing tool. On one hand, they attract more customers, but on the other, they reduce profits. So how can we strike a balance and use discounts to maximum advantage?
1. Benefits of Discounts:
- Attract new customers: Discounts are a great way to introduce potential customers to your brand and product.
- Increase loyalty: Regular discounts and offers encourage repeat purchases and strengthen customer loyalty.
- Boost sales: Lowering the price can nudge customers to buy, especially if they were already interested in the product.
2. Optimizing Discounts:
- Choose the right discount: Not all discounts are created equal. It’s important to find the optimal discount size that will attract customers without hurting profits.
- Target audience: Offer discounts to those customers who are most likely to use them.
- Analyze results: Track the effectiveness of discount campaigns to optimize them in the future.
3. Tools for Optimization:
- Discount management platform: Specialized software can help you automate the process of creating, distributing, and tracking discount campaigns.
- Personalization: Use customer data to offer them personalized discounts and offers.
- A/B testing: Run tests to determine which discounts and offers work best.
4. D2C Brand Example:
Brand: Casper Strategy: Casper offers 10% off on the first order and 20% off on the second. Result: A 30% increase in sales within a year.
Discounts and coupons can be a powerful tool for D2C brands if used correctly. With a discount management platform, personalization, and A/B testing, you can maximize the profit from your marketing campaigns.
Project Overview
The most common marketing strategy employed by sellers of physical goods is the use of discounts and coupons, such as those for the next purchase, specific product categories, or purchases within the next few days.
Every promised discount naturally attracts a certain number of buyers. At the same time, offering discounts means the seller earns less, thus sacrificing potential profit. This raises the question: could the seller potentially earn more without offering any discounts? Yes, there might be fewer buyers, but they would purchase items at full price.
Monocle has developed an AI-powered tool that can predict the impact of discounts and coupons on a seller’s profit. In essence, it can forecast future sales with and without discounts, compare them, and indicate the scenario where profit would be higher.
However, the platform’s goal isn’t to justify a no-discount strategy, but quite the opposite π. The AI tool can devise a discount system that allows the seller to gain additional profit from their announcement β adjusting it in real-time based on current statistics and sales forecasts.
Sellers offer coupons and discounts not only to attract new buyers but also to retain existing ones β sending out special offers to their customer base.
Monocle’s AI can optimize discount options for each individual client, relying on their purchase history and reactions to past special offers. It operates on product categories that might interest specific clients and discount sizes sufficient to attract them.
The AI executes these calculations so swiftly and independently that it can handle millions of interactions between the seller and their clients.
Moreover, since the Monocle platform integrates with popular email and SMS systems, the AI tool can regularly and automatically dispatch personalized discount and coupon offers to the seller’s entire customer base.
For this, the seller only needs to set the parameters β for instance, offering certain types of promotions with specific discount limits. Afterward, the AI will autonomously select the optimal offer for each client within the set parameters.
The results of conducted campaigns are visible in a dedicated section of the platform. Sellers can analyze them and adjust previously set parameters β removing some promos, adding others, or changing discount sizes.
And this strategy works! Platform clients report a revenue increase per user by 20 to 46%, as well as an increase in the number of returns to abandoned carts by 30β40%.
Monocle released its platform just last year, attracting modest initial investments at the time. Now, it has raised a new investment round totaling $7.5 million.
The target audience of the startup comprises D2C brands, which typically promote their products through discounts and coupons, as well as marketing agencies working with D2C brands.
In one of the interviews, Monocle’s founders mention that D2C brands spend around 400 billion annually on such promotional activities, which likely includes expenses on direct advertising as well as the monetary equivalent of discounts offered through these promotions. This makes it an enormous market, which explains investors’ keen interest in the startup.
However, Monocle’s main standout feature is its automatic individual customization of coupon and discount offers for each user. Without AI, manually tailoring such offers for a reasonably sized customer base would simply be impossible.
Hence, platforms like these have become feasible only recently, making their development a very timely endeavor π
A startup called OfferFit is creating a similar platform for automatically sending individualized offers, about which I wrote in November last year. However, OfferFit doesn’t specialize in calculating additional profit from discount offers but simply optimizes the efficiency of mailings for each recipient β from individually selecting the essence of the offer to choosing the optimal time to send the message to each recipient to increase the likelihood of opening it. OfferFit has already raised $39 million for this purpose.
Moving in a similar direction is Y Combinator graduate Lancey, which I wrote about in February. It proposes using AI to conduct product “micro-experiments” aimed at automatically identified small user segments.
Another Y Combinator graduate, Subsets, which I covered in January, is focused on retaining subscribers of online publications. Its standout feature also lies in personalization since different users develop different reading habits for publications β some read them every morning, some in the evenings, and others once a week. The platform’s AI automatically identifies such segments and incentivizes users from each segment in different ways to maintain their own habits.
ΠΡΠ΄Π° Π±Π΅ΠΆΠ°ΡΡ
In essence, all marketing tricks and gimmicks have long been known. There’s hardly anything new to invent here π
However, a new way to increase their effectiveness has emerged β through the use of AI, which can tailor specific marketing tactics that will better resonate with each individual user. And collectively, this will result in a significant gain β even though all the techniques used are far from new. Because the novelty lies in automatic individualization.
Thus, the potential direction of movement is towards creating AI platforms for personalized marketing.
Since this involves fine-tuning marketing, platforms that are also tailored to specific areas of use are likely to be the most effective. Like today’s Monocle, which is geared towards distributing coupons and discounts for D2C manufacturers, or Subsets, which can analyze the habits of subscribers to online publications.
To create a successful startup, it’s not necessary to invent something entirely new. You can significantly improve something old through new technologies. Like Uber did by enabling users to call a taxi in 5 minutes by pressing a button on their phone.
A similar technological breakthrough could happen in marketing now β if we learn to build marketing not at the level of the audience or its large segments but at the level of each individual user. And you can jump into this topic right now.
In which areas do companies already spend significant amounts on direct marketing communications with their users? What marketing techniques do they use for this? Will the efficiency increase if the same techniques are used, but tailored to each individual user? Based on what data can this customization be done? Can AI handle this?
About the Company
Monocle
Website: usemonocle.com
Latest round: $7.5M, 02.05.2024
Total investments: $7.5M+, rounds: 2