Why do some companies charge high upfront then mass give free promotion codes?


2

Godaddy usually sell their products (domain and hosting services) at high prices then give an option to enter a promotion code. There's nothing unusual about that, except that these promotion codes can totally be gotten free online.

For example, a .com domain registration cost about 10 USD per year market rate. I visited GoDaddy and they wanted to sell it to me upfront at 14.29 USD. Then, I randomly googled for a promo code (there are tons), and purchased one at 2.95 USD. I'm sure there is an even cheaper offer to be found, but I can't be bothered because 2.95 looks good enough.

For another example, when I wanted to renew my .com domain, GoDaddy wanted to charge me 14.99 USD upfront. As usual, I found a renewal promo code and purchased the renewal for 8.49 USD. What gives?

I mean, what's the point of selling the product at 14.29 USD upfront, forcing customers to search for a promo code? Some customers may not know that they can search for it and simply buy from a competing company. Yet anyone, and I mean everyone, can easily find a code that would give them a cheaper offer if they know that they can search for it.

How does doing such things profit the company?

Marketing Strategy Promotion

asked Aug 14 '13 at 00:37
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Pacerier
317 points
Top digital marketing agency for SEO, content marketing, and PR: Demand Roll
  • Why is every furniture store in the world having a 50% off sale? People want a "deal" and if they are too lazy to go get the deal, then they pay full price. Win-Win (for godaddy). – Mark0978 6 years ago

2 Answers


1

Promotion is one of the four Ps of marketing:

  1. price
  2. product
  3. place
  4. promotion
This doesn't mean that all companies use promotion to their benefit. Typical promotional activities attempt to increase sales with the following actions:

  1. convince / reinforce buy decision (indecisive buyers)
  2. incentivize desired actions (share buttons)
  3. promote scarcity (limited time offer)
  4. reward / upsell recent purchasers

IMHO, giving out coupon codes without exception runs the risk of reducing your average profit per sale on the customers who would have bought from you anyway. But - in a competitive marketplace, anything goes.

answered Aug 14 '13 at 02:10
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Jim Galley
9,952 points

1

It is all about the up-sell.

When you went through the checkout process at Godaddy they offer you other domains (.net, .us, etc) which they can make profit on.

Then there is the hosting and other subscription services which they can make a lot more profit on, month after month. After signing on you receive email marketing enticing you to purchase more.

Whilst you might not be interested in those add-ons, many others will be.

Finally when the domain is up for renewal, the coupons may or may not work. Many coupons only work on the purchase of new domains. For some people it is often easier just to pay full price than spend time searching for a coupon that works.

Godaddy are not forcing anyone to hunt for a promo code. They put them out there to bring in customers. It is simply a cost of acquiring a customer, not much different to spending money on advertising. They make a short-term loss on day 1, with the long-term goal of customer loyalty and making profit on renewals and up-sells.

answered Aug 14 '13 at 11:14
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Paul Filmer
790 points
  • It's not true that many coupons only work on the purchase of new domains. Many many more coupons work on all products, and every single product has it's own product specific coupon. Those hosting and subscription services are also charged high upfront and sold low with promotion codes. There are promotion codes for all products. Question is, why charge high upfront then mass give free promotion codes for products in general? – Pacerier 6 years ago

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