This may sound counter-intuitive, but coupons are a great way to make more money.
Think about it. How many times have you bought something because it was on sale? Or better yet, how many times have you chosen to use a particular company because they offered a coupon? If you are anything like me, you have done this more than once.
So why not use coupons more often in your business?
Why Coupons Work
Coupons are a marketing promotion where a customer is given a special offer when they are in possession of a certain code, certificate, or other form of a promotional pass. While the benefit for the customer is fairly obvious - usually a discount or special offer - coupons can be beneficial in a number of ways.
Coupons Create Urgency
First, coupons create a sense of urgency. When a coupon has an expiration date and is about to expire, customers are faced with a choice; they must use the coupon or let the coupon expire. The psychology behind this is that the consumer feels a since of lost value when a coupon expires and they are not able to receive a discount. Therefore, a sense of urgency to use a coupon before it expires will motivate potential customers to make a purchase that might have otherwise been delayed.
Coupons Provide a Competitive Advantage
When consumers are shopping for a product or service, they often compare multiple competitors to find the greatest value. In searching for the greatest value, consumers look for things like reputation, the scope of the product or service, and the price. A coupon can provide a competitive advantage and help a consumer chose your business over the competition.
Coupons Provide a Greater Perceived Value
Following the thought process for creating a competitive advantage, coupons also provide a greater perceived value. One of my favorite things to do is to share with my wife how much money I saved when I purchase something new. What this means is that I am drawn to the psychology behind coupons. They provide me with a sence of accomplishment from saving money. I feel like the value I received was much greater than what I actually paid - even though I paid a price that was still acceptable to the business. Basically, coupons add a sense of increased value for purchasing customers.
6 Ways to Use Coupons Effectively
The key to effectively using coupons is to understand why they work and then to strategically implement a coupon program. Without being strategic, you could just be arbitrarily cutting into your margins without understanding the effectiveness of the coupon. Basically, if you just hand out coupons on every sale you make without having a reason for doing so and without raising your profits, the result is decreased margins and subsequent profits - just like you reduced your prices.
Therefore, it is important to have a strategy behind your coupon program. Here are six ways you can strategically use coupons to make more money.
1-Understand the Strategy
First, it is extremely important to understand that coupons are a specific sales strategy. Yes, you are going to be selling your products for less than you could, but you can’t think of this as you are loosing money. This is actually a strategy for you to increase sales.
While there are many different strategic reasons to use coupons, there are a few strategies that are good to start with.
If you have too much of a specific product, you can use a coupon to drive sales to this specific offer. This can either be a result of expiring produc (like groceries) or due to the fact that you were able to get a price break for purchasing a larger quantity of inventory. Either way, a coupon can be used to encourage customers to buy a certain product.
Similar to the strategy of decreasing inventory, coupons can be used to increase sales. This is especially beneficial if you have a product or service that has fairly high margins so that, even when a customer uses a coupon, your pofits on that item are similar to the profits of other products or services you offer. Basically, the goal is to increase your profits by selling a larger quantity at a slightly lower margin than selling less at a higher margin.
Bring In Customers
Coupons can also play an important role in your sales proces. As your sales process is dependent on getting new customers in the door and introduced to your business, a coupon can be a great way to acquire new customers who otherwise may not have visited your business.
One of the greatest benefits of coupons for a business is that they can help to create a sense of urgency with customers. This sense of urgency results in increased sales at a particual time as customers who may have been considering purchasing your product now find an incentive to buy now. This strategy is especially effective on slow days (such as midweek coupons for restaurants) and at the end of a quarter or fiscal year.
3-Have a Follow-Up Strategy
Bringing more customers into your business is great, but it is also important to figure out how to turn these coupon customers into loyal fans of your business. As part of your sales funnel, you can strategically design a next step for your customers. This could be as simple as getting them on your e-mail list or inviting them to come back to your business for another promotion or special event. The key is to strategically plan where you want your customers to go after they use a coupon and to prive a clear path to get there.
4-Strategic Coupon Distribution
Another key to effective coupon use is making sure they get to the potential customers who are likely to use them. This means that you need to find where your customers are at. You can ask yourself the following questions: Are there magazines, blogs, or other programs that specialize in the product or service you are offering? What strategic partners can you find to help drive traffic to your business? Who would be likely to send referrals to your business?
5-Set Your Coupon Margins
Another key to making more money with coupons is to strategically set your margins. This can be done in a number of ways. First, you could slightly inflate your prices so that the coupon only reduces your desired margins by a slight amount. Alternatively, you could use a coupon to offer a bundle where your total revenues are increased though the profits are slightly decreased - basically, you can sell more but make less per item. Alternatively, you could offer a unique product that you only intend to sell with the coupon and can price that product accordingly. Establishing effective margins is a key component in coupon use.
6-Monitor Your Coupon Program
The final step in strategic coupon use it to monitor the effectiveness of your coupons. This can be done initially by starting small and evaluating the process. The goal is to make sure you aren't loosing money and that your sales are increasing, at least over time.