What Are Promo Codes?

In the fast-paced world of e-commerce, promo codes serve as a crucial marketing tool. These codes are everywhere, and understanding their types and functions can be pivotal for businesses looking to boost sales and attract new customers.

What are promo codes?

Promo codes are a series of letters and numbers that online retailers provide to stimulate buying on their site. These codes are an essential part of broader marketing campaigns and are designed to offer special discounts.

The savings linked to a promo code may be directed towards a specific item or might encompass the total value of an order. By offering these incentives, businesses can attract more customers and incentivize them to complete a purchase, thus driving sales and customer engagement.

Due to the amount of savings that can be achieved through the use of coupon codes, many people across the United States use them when shopping online. According to Statista, 88% of U.S. online shoppers used coupons in 2020.

 image showing the percentage of US consumers who use coupon codes

Types of promo codes

Here's a look at the five most common types of promo codes and how they function in the industry.

  • Public: Public promo codes are available to everyone and can be easily found on various coupon websites, social media platforms, or directly from the retailer's website. Online stores frequently use them during high-profile sales occasions like Black Friday or Cyber Monday. The widespread availability of these codes makes them a powerful tool for attracting large numbers of consumers to a brand or product.
  • Private: On the other hand, private promo codes are tailored to specific customers. These can be targeted at first-time buyers or loyal customers to foster a sense of connection and loyalty. Subscription services and niche retailers often use private codes to reward subscribers or members, creating a sense of exclusivity that can be very appealing to certain consumer demographics.
  • Restricted or Secret: Restricted or secret codes take this exclusivity one step further. These codes are often used for specific groups, such as employees or VIP club members. By creating a sense of mystery and privilege, restricted codes can boost brand loyalty and add an aura of luxury to a product or service.
  • Referral: Referral codes form part of a broader referral marketing strategy where existing customers are encouraged to refer friends or family members to a business. They are a fantastic way to organically expand customer bases and tap into networks of satisfied customers. Companies like Uber and Airbnb leverage referral codes to grow their customer base organically.
  • Free Shipping: Lastly, free shipping codes are widely used across various sectors of the e-commerce world. By offering to ship goods at no extra charge, businesses can break down one of the significant barriers to online shopping. This often results in lower cart abandonment rates and increases overall customer satisfaction.

Do promotional codes drive additional sales?

Coupons and promo codes are not just cost-saving tools for consumers; they serve as a strategic lever for businesses to enhance sales.

Here are a few examples of how you can use discounts to drive various business goals and enhance customer engagement.

  • Boost seasonal sales: Businesses can employ a strategic use of promotional codes to enhance their seasonal sales by adapting their strategies to align with particular occasions, such as a festive holiday discount or a refreshing summer clearance sale. This approach creates a sense of urgency and anticipation among customers. For example, codes like "SummerSale15" directly connect with shoppers looking for specific seasonal discounts. Furthermore, the results can also be increased by using targeted techniques, such as developing unique campaigns for various customer segments and tailoring discounts and incentives accordingly.
  • Increase social following and build an email list: Businesses can leverage promo codes as effective tools to boost their social following and cultivate an email list. For instance, by promoting limited-time promo codes on their social media platforms, businesses can prompt users to follow their accounts to stay updated on exclusive deals. Similarly, by placing incentives like a percentage off on first purchases within newsletter sign-up forms, companies can entice website visitors to subscribe for future promotions and updates. This dual approach not only helps build a strong online community but also expands the email list for targeted marketing campaigns.
  • Increase cart sizes: Businesses can use offer codes to motivate customers to buy more, effectively increasing the average order value. Using threshold-based discounts, in which savings become available after a certain amount has been spent, encourages customers to look at more products. When shoppers see that spending more will result in greater savings, they frequently add more items to their carts. Furthermore, tiered discounts with terms like "10% off over $50" or "20% off over $100" encourages customers to increase the value of their carts to qualify for the next tier of discounts.
  • Track promotional marketing: Businesses can effectively track promotional marketing by using distinct offer codes for each campaign, enabling precise attribution of sales. Time-limited promo codes can gauge campaign effectiveness within specific periods. Likewise, personalized codes for different customer segments provide targeted insights. Also, associating promo codes with specific channels or mediums aids in measuring the channel's impact on code usage and subsequent sales.
  • Create a referral program: Businesses can establish a referral program using promo codes by generating unique codes for customers to share with friends. Discounts are given to both the referrer and the new customer after a purchase, creating a win-win situation. Offering progressively larger rewards for more referrals encourages participation. Consistent communication through channels like emails and social media makes sure that the program is seen and is a success.
  • Build customer loyalty: Businesses can foster customer loyalty using promo codes by offering exclusive discounts or perks to loyal customers. Issuing exclusive promo codes to loyal customers and offering them special bargains or perks nurtures a sense of appreciation and encourages repeat purchases. Implementing a tiered rewards system, where customers unlock higher discounts as they reach certain spending thresholds, fosters ongoing engagement and loyalty. Moreover, sending personalized coupon codes as birthday or anniversary gifts showcases thoughtfulness, enhancing the emotional connection with customers.
  • Get shoppers back who abandon their carts: The percentage of online shoppers who abandon their carts is staggeringly high. On mobile alone, 80.6% of shoppers abandoned their carts in quarter two of 2021.
graph showing the percentage of online cart abandonment by device type from 2020 to 2021

How to track promotional codes

The only way to genuinely understand how promo codes help your business is to track their usage, including sales spikes, cart size growth, new customer acquisitions, and returning customer orders.

By systematically analyzing these metrics, you gain insights into which promotions are most effective and can refine your strategies accordingly.

For robust promo code analytics, e-commerce companies can implement two key strategies:

  • Integrate a unique code for each marketing campaign to trace specific sources of success.
  • Employ tracking pixels or tags on your website to monitor user behavior post-promo code application, enabling a thorough understanding of customer journeys and conversions.

Online retailers can leverage tools like Google Analytics or specialized coupon tracking software, like Mezzofy and Voucherify, to create precise analytics for their promo codes. Metrics like the redemption rate and customer acquisition cost (CAC) provide valuable insights.

Can customers use multiple promo codes?

Coupon stacking allows customers to use multiple promo codes or discounts on a single order to maximize savings. This tactic combines various promotions, such as percentage-off codes, free shipping, or bundle deals, to achieve a higher overall discount.

Some businesses allow stacking to enhance consumer appeal, while others restrict it to maintain profitability. Learn more about coupon stacking on CouponFollow.

Can coupon companies help drive sales?

Coupon companies play a pivotal role in boosting sales for brands by connecting them with a vast audience seeking deals. With several million monthly visitors and a thriving community of deal hunters, CouponFollow, a model business in this industry, can be of great help to brands. By partnering with CouponFollow, brands can tap into a ready-made network of bargain-conscious consumers who actively seek out promotions.

This symbiotic relationship allows brands to increase their visibility, attract new customers, and drive sales growth by leveraging the dedicated following that CouponFollow has cultivated.

Tips to implement a promo code strategy

Implementing a promo code strategy is not just a fleeting trend in modern e-commerce and retail marketing; it's a nuanced approach that, when done right, can have far-reaching benefits for a business.

It requires a well-thought-out plan that aligns with the brand's identity, the needs of the target audience, and the overarching business goals. It's about understanding who the customers are, what motivates them to purchase, and how promo codes can fit into the larger marketing strategy to drive growth and profitability.

Here are a few tips to start a coupon and discount program to enhance your business strategy and customer engagement.

Understand your target audience

Knowing your customers’ preferences, behaviors, and needs enables you to create offers that resonate with them. By segmenting your audience and personalizing offers, you can make your promotions more appealing and relevant, leading to higher conversion rates.

Set clear goals and objectives

Having well-defined goals for your coupon strategy ensures that you align your promotions with your business objectives. Whether you aim to increase sales, acquire new customers, or boost brand awareness, a focused approach ensures that your coupons are designed to contribute directly to these specific outcomes.

Select the type of promo code

Depending on the goal, businesses can create various types of discounts, such as free gifts, free shipping offers, and buy-one-get-one-free deals, to name a few. The type of discount must resonate with the target audience and be in sync with the marketing strategy.

  • Percentage discount: Many retailers offer percentage-based discounts on specific items or entire orders. For example, a code like "SAVE15" might give customers a 15% discount on their total purchase. This type of promo code is prevalent during holiday sales and clearance events.
  • Buy one, get one free (BOGO): BOGO deals are common in various industries, from fashion to groceries. An example would be a "BOGO50" code, where purchasing one item allows the customer to get a second item at 50% off. It's a tempting offer to increase sales of specific products.
  • Free shipping: Online stores often use free shipping codes to incentivize online shopping. A code like "FREESHIP" can remove shipping costs for orders over a certain amount. This tactic is frequently used to motivate higher spending on the site.
  • Fixed-amount discount: A fixed-amount discount takes a specific dollar value off the total purchase. For instance, a code like "TAKE10" may provide a $10 reduction in the overall price. It's a straightforward way to provide a tangible saving.
  • Free gift with purchase: Some retailers offer promo codes that include a free gift with a qualifying purchase. A cosmetic company might provide a free lipstick with orders over $50 using a code like "FREEGIFT." This can create excitement and add value to the purchase.
  • Loyalty reward: Special codes may be sent to loyal customers, offering exclusive deals or early access to sales. A code like "VIP20" might provide an extra 20% off during a pre-sale event, reinforcing customer loyalty.
  • Seasonal or event-specific discounts: Seasonal codes like "SUMMER25" for summer sales or "BACK2SCHOOL" for back-to-school promotions target specific times of the year or events. These codes are time-sensitive and help boost sales during particular periods, encourage customer engagement, and provide a sense of urgency that often leads to increased conversions.

Define the terms and conditions

Businesses need to set clear rules for using the promo codes, including eligibility criteria, expiration dates, minimum purchase amounts, and any applicable restrictions.

Transparency in terms and conditions ensures that customers understand how to redeem the offers and avoids potential misunderstandings.

Monitor and analyze performance

Constant monitoring and evaluation of the performance of your coupon codes provide insights into what works and what doesn't. Analyzing data like redemption rates, sales increases, and customer engagement helps in fine-tuning your approach, ensuring that your promotional efforts align with actual customer behavior.

Avoid overusing coupons

While coupons can be a powerful sales driver, over-reliance on them can diminish the perceived value of your products and cause customers to wait for discounts. Maintaining a strategic balance between regular pricing and special offers preserves your brand's value perception and ensures that coupon codes remain an effective, occasional incentive rather than an expected norm.

Ensure a seamless redemption process

The process of applying and redeeming coupon codes should be user-friendly and free of friction. If customers find the process cumbersome, they may abandon their purchase altogether. Ensuring that codes can be easily applied and that the benefits are clearly stated heightens the user experience and contributes to a successful transaction.

By paying attention to these areas and integrating them thoughtfully into your overall marketing strategy, promo codes can be a valuable tool in meeting your business goals. This approach ensures that you not only attract and convert customers but also build long-term relationships by offering value in a way that resonates with your target audience.

Pros and cons of using promo codes

Promo codes offer the advantage of boosting sales, attracting new customers, and fostering loyalty through exclusive offers. However, their frequent use might erode perceived product value and impact profit margins if not managed strategically.

If the idea of implementing coupon codes for your small business is on your radar, here's a rundown of essential information to keep in mind.


  • Increased sales: Promo codes not only drive immediate sales boosts but can also be strategically timed to align with periods of high customer engagement, such as holidays or special events. The psychological trigger of a limited-time discount can spur impulse purchases and larger order values.
  • Customer attraction: Beyond expanding your customer base, promo codes act as an enticing entry point for potential customers. They introduce your brand to individuals who might not have otherwise considered making a purchase, helping you establish a broader reach.
  • Customer loyalty: Promotional codes can foster a deeper connection with existing customers when used thoughtfully. By offering personalized discounts or exclusive codes to loyal patrons, you demonstrate appreciation and encourage ongoing engagement.
  • Clear inventory: Discount codes can efficiently address inventory management concerns. Rather than relying solely on clearance sales, timely codes can motivate customers to purchase specific items, preventing the accumulation of excess stock.
  • Data collection: Using promotion codes provides valuable data insights that extend beyond sales figures. Analyzing code usage patterns, redemption rates, and customer preferences equips you with actionable information to refine your marketing strategies.


  • Reduced margins: While discounts can yield immediate sales, it's crucial to evaluate their impact on profit margins. Carefully consider the balance between attracting customers with discounts and maintaining healthy profitability.
  • Perceived value: The frequency of promo codes can affect how customers perceive your products. Strive to strike a balance that preserves the value proposition of your brand, ensuring that discounts don't undermine the quality and uniqueness you offer.
  • Cannibalization: Thoughtful planning is essential to avoid inadvertently shifting sales from full-priced items to discounted ones. This potential revenue shift highlights the importance of segmenting your audience and tailoring codes accordingly.
  • Discount dependency: Over-reliance on promo codes can lead to a customer base conditioned to wait for discounts before making purchases. Implement strategies that emphasize the broader value of your products beyond just the price.
  • Complexity: Successfully managing multiple codes, each with its own terms and expiration dates, requires meticulous organization. Implementing effective code management systems and communicating clearly with both customers and staff can mitigate confusion.

What types of promo codes are most popular with consumers?

In 2021, 53% of U.S. consumers saw instant discounts as one of the main benefits of joining loyalty programs. Below is an infographic of the most popular types of promotions that motivated consumers to buy.

graph showing the leading benefits that motivate consumers to invest in loyalty programs

Frequently Asked Questions

What is the best way to create promo codes for my Shopify store? For Shopify users, creating promo codes can be accomplished easily through the platform's built-in discount section. This feature allows merchants to craft various discount codes tailored to their specific needs without the need for additional apps or plugins. However, if more functionality is needed, apps like Discount Ninja or Bulk Discounts can be added to the store. These apps offer advanced features, such as tiered pricing and scheduled promotions, providing merchants with greater flexibility and control over their promotional strategies.

What is the best way to create promo codes for my BigCommerce store? BigCommerce store owners can take advantage of built-in discount management features, but for more tailored solutions, apps like Discount Rules or Coupon Pop can be utilized. These plugins offer a range of customizable options for creating promo codes, such as time-bound offers and customer-specific discounts, giving merchants a more versatile and targeted approach to their promotional campaigns.

What is the best way to create promo codes for my Woocommerce store? For WooCommerce users, plugins like Smart Coupons or WooCommerce Coupons Countdown can facilitate the creation of promo codes. These extensions integrate seamlessly with the WordPress dashboard, offering a range of features that enable store owners to design various types of discounts, enhancing their promotional marketing strategy.

about the author

Marc Mezzacca
Founder and CEO, CouponFollow
As the Founder and CEO of CouponFollow, Marc has a passion for helping consumers save time and money while shopping online. He’s been a bargain and deal hunter since the early 2000s.