To Coupon, or Not To Coupon: That is the question

The difficult decision on whether or not to offer discount coupons is something many retailers face in today’s competitive marketplace.

Although coupons, particularly online and mobile coupons, are a significant part of many consumer’s shopping patterns, they can create issues for the small business owner.

A recent poll of small business owners showed that 56% of businesses used coupons at least occasionally in order to generate new business or retain existing customers.

Here are some other important coupon statistics to consider:

  • 96% of consumers use coupons (Source: RetailMeNot)
  • 81% of consumers use coupons regularly (Source: NCH
  • Coupon users tend to spend 24% more than regular shoppers (Source: Deal Nerd)
  • 87% of Millennials, 91% of Generation Xers and 96% of Baby Boomers used coupons in 2016 (Source: PRRI)
  • 83% of ecommerce shoppers receive coupons by advertiser email, 66% by social media, 48% by mobile app or push notification, and 44% through word of mouth (Source: Deal Nerd)
  • 79% of brand loyal consumers are influenced to buy a brand they typically wouldn’t purchase due to coupon influence (Source: Valassis)
  • 54% of ecommerce shoppers expected to receive discounts through email around key shopping holidays (Source: Deal Nerd)
  • 80% of shoppers would switch stores or brands when offered a compelling promotion (Source: Market Track)
  • 78% of consumers are influenced to buy a brand they wouldn’t typically buy due to a coupon (Source: Valassis)
  • 43% of consumers agreed that they would exchange personal data with companies to save money through personalized promotions, discounts or deals (Source: [24]7)

Coupon WebsiteBut the coupon marketplace has changed dramatically over the last few years. Nearly gone are the days of newspaper and flyer coupon-cutters. With coupons being readily available through a variety of online and offline vehicles, it is difficult to avoid the concept of coupons as a whole. Either they’ll find a coupon from you, or they may find one from your competitor… and that can make the difference between completing or losing a sale.

When thinking about the ifs as well as the how-tos of offering coupons to your customers, here are just a few of the pros and cons of using coupon offers in an attempt to boost sales:

COUPON PROS

COUPON CONS

CUSTOMER EXPECTATION
Many, many consumers simply expect there to be coupons or deals available from a retail store.  It’s become so ingrained in their purchase behavior that 96% of shoppers have used a coupon in the last 3 months.That’s more than a significant number of shoppers who use coupons, that’s almost all of them.

As a small business owner, you can’t afford to ignore 96% of the shopping population.

SUBSIDIZING PLANNED PURCHASES
One of the major concerns retailers have with coupons is that it simply reduces the total value of an order that would have been received anyway.

Some believe that the customer would have purchases with or without a coupon, but by providing the coupon they might have just given away an extra discount that simply cost them money.

In some cases, this is true.  With or without a coupon, that customer will buy.In many cases, however, the lack of a coupon could lead the customer astray and end up with them purchasing the same or a similar product or service from another company.

COMPETITIVE POSITIONING
Unless you have an extremely unique product, you are competing against several other retailers for that customer’s attention and pocketbook.Consumers freely admit to being deal sensitive, so it often comes down to who offers the best value.

If the coupon you offer tips the scale in your favor, then that is one more customer you will get that your competitor may have gotten otherwise.

REDUCED MARGINS
Any time you offer a coupon, it reduces the retail price but it rarely (with the exception of manufacturer coupons) reduces the cost of the product to the retailer.Therefore, it is a direct hit to the bottom line profitability of that sale.

This is an understandable concern, but it must be balanced against the potential lost sale.Is it better to make a little less money off that sale or is it better to let that sale go to another company like yours, that is a question only you – as the business owner – can answer.

CUSTOMER SAMPLING
56% of shoppers state that they have used coupons to try a product for the first time.These customers can become long-term, repeat purchasers driving a significant amount of total revenue… but there’s a much higher chance that you won’t get them in the first place if the retailer didn’t offer that initial incentive.
CREATING UNWANTED BUYING PATTERNS
When you offer discount coupons on a regular basis, customers begin to expect coupons and discount. That can train your customers into a buying pattern where they will wait for the coupon or discount instead of purchasing a product or service when it is needed.

This does not, necessarily, increase total sales… but instead, just changes the timing on when the sales occur.Also, once that behavior has become the normal, it is really difficult to break out of the coupon cycle.

EASIER TO PRODUCE AND DISTRIBUTE
With the advent of online couponing, the cost of creating and distributing coupons to customers has reduced dramatically over the print-only days.

A coupon can easily be shared online, trough coupon sites, through affiliate relationship, via email or on various social media networks such as Facebook and Twitter.

REDUCTION OF PERCEIVED VALUE
When you offer a discount or coupon, you are “marking down” the product, creating a reduced sense of total value. This can create a perception that the item you are offering is no longer “Top of the line”.

In the end, each retailer must make the decision about whether or not to provide coupons based on a fairly simple concept.

Will Coupons Generate More Value To Your Business Than Their Total Cost?

Through some trial and error, a retailer must find the right balance of coupon offers that maximizes new customer acquisitions, turning coupons into a valuable marketing efforts.

One way to increase the overall value of coupon offerings is to make the coupon available via email only, where the customer must sign up for your email list in order to receive their coupon.  This provides additional value to you as a business because – even if the customer doesn’t end up buying right away – you now have their contact information (and legally-required permissions) to email market to that customer and attempt to gain their business in the future.

Another way is through the concept of Social Coupons.  Social Coupons are those that are shared exclusively through key social media networks. The difference between social coupons and regular coupons is that these often require an action or engagement before the coupon can be redeemed. For example, you can offer coupons that only your Facebook fans can access, therefore a potential customer must join your online fan base before being granted access to the coupon.  For additional value, you can also make the coupon contingent on the customer sharing something to their own set of followers, turning the coupon into a viral marketing machine.

In the end, it is almost impossible to fully avoid coupons and discounts in today’s retail marketplace — the trick is to use them the best possible way to drive value for both your customer and your business.

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