The Benefits and Risks of a Coupon Marketing Strategy
Coupons and similar marketing tools can be an effective way to build your business. According to Advertising Age, 87 percent of all shoppers use coupons and according to the A.C. Nielson Co., 60 percent of consumers actively look for coupons.
Benefits of Coupon Marketing
1) Increases Your Marketing Area – Coupons, if used properly, have the effect of expanding or increasing your market area as many customers will even travel significant distances to redeem a valuable coupon.
2) Entices New Customers to Try Your Business – According to a recent study 33% of customers say that the will wait for a product to go on sale before they purchase. Coupons provide you a tool for putting items on sale!
3) Reactivates Old Customers -The same study showed that over 15% of retailers’ sales are from “loyal” customers…but where did the other 85% go? Use coupons to lure them back into your store!
4) Drives the Sales of Related Products– Many of your products have accessory or “add-on” products that can make your transaction and your business more profitable. Tie coupon campaigns to the purchase of two items in order to drive margin!
Avoid the Risks of Using Coupons
Using coupons to drive incremental business is an old trick, and many retailers are using it to build revenue. But pursuing revenue without profit does not make sense. You will need to avoid the dangers that can be associated with a poorly planned campaign. These include:
1) Using Coupons or Discounts as Your Only Marketing Strategy– retailers need to focus on building their brand through the value of their service and the customers experience in the store first. Otherwise you will only be competing on price and that is a losing strategy with Amazon and Wal-Mart dominating that space.
2) Teaching Customers That Coupons/Discounts Are Always Available – If you use coupons on a regular basis, you may be teaching your customers that they should hold off on the purchase of items until the next coupon arrives in the mail. All you need to do is watch the TV programs about extreme couponing to know that this behavior really exits.
3) Selling Discounted Merchandise Only– If you are only selling the discounted merchandise, you are failing to take advantage of the core reason for providing the discount…to drive profitable foot traffic into your store!
Simple Rules for Retailers
Coupons and other discount retail marketing programs have their place and they can drive incremental revenue and profits when used properly. So follow these simple rules for maximizing your return on investment:
1) Bundle Your Offer to Build Margin– Coupons must be used to generate profitable foot traffic. Therefore give the customer a discount when they purchase a product PLUS a profitable accessory at full price (and margin). Another example could be a buy two – get one 30% off offer.
2) Capture Customer Information– If you use coupons to build your trade-area or to get new customers to try your business then make sure that your investment pays off by capturing the customer’s information so you can encourage them to return to buy items at full price. Email and text messaging campaigns are great and can effective tools for marketing, but you need the customer’s information first.
3) Use Coupons to Drive Loyalty– Success in retailing is often a matter of winning loyal customers and keeping them away from your competitors. Therefore if you can use coupons with your existing customers in order to maintain and grow your base at the expense of your competitors, you will be more likely to grow.
Do you want to learn more about how you can improve your retail store operations? Contact us for a free one-hour consultation!
- David Goodwin is the Principal of the Retail Advocacy Group. As a 30 year veteran of the retail industry he has operated hundreds of retail locations and has hired, trained, and performance managed thousands of retail sales representatives and retail managers. You can learn more about instructor-led, e-learning, and other training solutions for retailers at www.retailertrainingservices.com.