There is a question whether promotional codes are a good marketing tactic to use in order to get consumers to visit your web site. The answers to it vary, depending on whom you ask. Some e-tailers believe that a coupon or promotional codes are a wonderful way to increase sales and gain new customers. They are convinced that a coupon or a promotional code is easy for consumers and e-merchants to apply immediately and that most e-commerce software programs have a technology to support promotion codes. However, the studies prove that a promotion code may drive customers away from your company's site.

Today, most promotional codes are offered through e-tailers' coupon site marketing partners like CoolSavings.com, Coupon Mountain (www.couponmountain.com), DailyeDeals.com, E-centives (www.ecentives.com), eCoupons (www.ecoupons.com), Eversave.com and SmartSource.com. These programs help e-tailers decide on a promotion they would like to offer (for instance, cents off, dollars off or a percentage off a purchase). Then they create a promotional code, comprising letters and numbers, such as "ABC123." After that, the e-tailers sign up with web sites that advertise these codes. They also have to pay to have their codes listed on the coupon sites or linked to their web sites.

"Coupon codes represent a large part of our marketing budget," says Ben Bohannon, a 32-year-old CEO and a founder of Anzen Corp., a Denver inkjet remanufacturing company that manages Inkjetusa.com, a web site that sells printer cartridges and printer paper. Bohannon states he started using promotion codes last year and now he works with many coupon sites, including CoolSavings.com and DailyeDeals.com. Inkjetusa.com's coupon offers a range from twenty dollars off a fifty or sixty dollars order to ten percent off any order. They are used to push new products or to liquidate old ones. Inkjetusa.com provides new deals continuously and the coupons are redeemed on a daily basis.

Bohannon claims that using a promotional code has been very successful for his business. It brought in revenues of seven million dollars in 2002: "One coupon code alone generated more than sixty thousand dollars in revenue for us last year." He also points out that that twenty five percent of his company's sales now come from coupon codes: "Everybody likes a coupon and likes to feel like they are getting a special deal."

A recent research has indicated that a mere mentioning of promotion codes on your web site can actually drive customers away. Last year Vanderbit University's Owen Graduate School of Management completed the study of this question. It found out that when an e-tailer presented a prompt to all shoppers for a discount code at checkout, it caused those customers without discounts to abandon their shopping carts.

"When a web site asks: 'Do you have a promotion code? If so, enter it.', they are pointing out to some consumers that they do not have the code," explains Mikhael Shor, an assistant professor of economics at Vanderbilt University in Nashville, Tennessee, who co-wrote the study, called "Price Discrimination Through Online Couponing: Impact on Purchase Intention and Profitability," with Richard L. Oliver, a professor of management. "We found that the very fact that a web site asks consumers this question leads many people to say 'I am not happy with the shopping experience' and then end up not completing the purchase."

He also proves that the fact that these coupon codes are passed around so freely on the Internet is antithetical to their purpose. "If every single person shows up with a coupon code, they will probably all be pretty happy," explains Shor. "But then, in some sense, you are not segmenting the population. You are just giving everyone a coupon code and hoping they all feel they are getting a good deal and are special in some way. Whether that will work in the long term, and if people will start catching on, is a different question."

However, Matthew Moog, the president and CEO of CoolSavings Inc., Chicago company that runs CoolSavings.com, says, "Coupon codes are popular because they give consumers an opportunity to get a special offer, which is always enticing. Offering some type of coupon or discount or promotional offer is the best single way to build a customer base and attract new customers to purchase at your store."

Thus, if you decide to use promotional coupons for your web site, make sure that they are working for your business, not against it.