Online Coupon Redemption Rate

Online coupons, as we’ve previously discussed, are growing considerably.  This growth is most certainly driven by the current economy; however, don’t expect it to go away after the economy recovers.  Consumers are getting into the habit now to Google for coupons before heading to the mail.  Marketers can use this new behavior to their advantage by driving those consumers to specific products and offers.

One thing to note, as illustrated in this data point from eMarketer, is that online coupons redeem at a much higher rate than printed coupons.  This is because the consumer is proactivily seeking out and printing an online coupon that often requires the consumer to install software to print the coupon.  When you build your budgets keep this in mind.

Prices vary depending on the following:

• Type of display units. Standard banner ads will be less expensive than rich media ads.
• Quality of the content. The more targeted the audience of the web site the ads will be displayed on the higher the price.
• Placement of the ads on the site. If the ads are to be displayed on specific pages they will be more expensive then Run of Site (ROS) ad buys. ROS is where the ads will be displayed through out the entire site. Example: Ads on Yahoo’s home page cost hundreds of thousand of dollars per day. Whereas banners that run ROS throughout Yahoo can go for as low as a couple bucks per 1000 units (CPM)

For “junk” traffic (junk defined as not very targeted advertisements) you can pay between $0.25 to $1.00 CPM.

More targeted traffic will cost anywhere between $3 to $15 CPM (as of mid 2008 — prices are changing for the lower now due to the economy).

Current click through rates for display ads are about 0.3% at the time of this post.

The pricing here is for directional purposes only. The real test is to determine how valuable a media exposure is to you then back into the cost you’d pay for the impressions. For example, if a sale is worth $10 to you and you expect to close 1% of consumers exposed to your advertisements then:

100,000 Ads * 0.3% Click Through Rate (CTR) = 300 consumers to your web site * 1% conversion rate = 3 sales for each 100,000 banner impressions. Those 3 consumers made you $30. So your break-even CPM is $0.30.

The following are the top metrics used to buy online advertising:

CPM (Cost per Thousand). Buying display advertising based on how many times the ad is presented on a web page

CPA (Cost per Acquisition) & CPL (Cost per Lead). Paying advertiser only for a desired outcome like a product purchase or filed out registration form

CPC (Cost per Click). Paying advertiser for each individual click on an ad

Additional terms used:

Impressions: The number of times an ad is displayed on a web site.

View Through: When an individual is exposed to an ad but doesn’t click on it, but later goes to your web site.

ROS (Run of Site): Buying advertising anywhere on a web site as apposed to a specific web page.

CTR (Click Through Rate). Marketers optimize CPM creative to maximize CTR