Attracting new customers to your business is vitally important to maintain your longevity. It’s also critical to keep your current customers happy and coming back for more. One of the most tried-and-true methods of customer acquisition and retention is the offering of coupons and discounts. Read on to understand why and how.
Why coupons and discounts?
Offering clients or customers savings on your product or service might seem like a risky sales tactic since your business model relies on making money. However, by offering discounts, you can build an incredibly loyal customer base and frequently encourage new consumers to try your product without spending as much on marketing.
Coupons and discounts allow customers to receive your product or service at a lower price point; examples may also include offers like rebates, vouchers, promotional offers and loyalty programs. Most coupons and discounts offer a certain percentage or dollar amount off, and they’re typically only valid for a limited time to encourage consumers to act quickly and take advantage of the offer.
How do you use coupons and discounts?
As a business owner, there are many different ways to use coupons and discounts. The most important piece of the puzzle is distribution; how will consumers find out about your discount or receive your coupon? Here are a few popular options:
- Relationship Marketing: As the name implies, this involves building a relationship with your customers and then marketing to them. Coupons can easily be transmitted to an email list (see how to increase your subscriber list here) or printed and sent to physical mailing addresses. Also, with the rise and prevalence of social networks, deals can be communicated through Facebook posts and tweets, making it easier for your offer to spread to new consumers as well as your loyal fans.
- Advertising: Whether you use traditional media, such as print, TV or radio, or digital media like Facebook, Google AdWords or online banners, you can promote your offer to a specific audience through advertising. This might be good for a new business trying to build a customer base. Also, with the amount of online and mobile ad targeting available, you can purchase advertising impressions that are very niche and, therefore, directly address the consumers you’re interested in reaching. This helps small businesses deliver a more impactful, localized message without the need for a large advertising budget.
- Point-of-Purchase/In-Store Promotion: To encourage repeat customers, you can offer incentives to customers who make a purchase during a particular timeframe. This type of in-store offer is very popular among department stores, such as Kohl’s, which offers Kohl’s Cash at select times during the year. Basically, consumers are spending money to earn more money to spend in the store during another timeframe. This puts your sales on a rolling cycle, giving you the chance to target times during the year when business may be slow and encourage patronage.
- Daily Deals: Sites like Groupon and Living Social give small businesses the chance to offer a special deal to untapped customers, putting the marketing aspect in someone else’s hands. These sites offer great exposure since they are based in almost every major city in the United States, have an extremely large email subscriber list and are mobile-friendly. While partnering with daily deal sites almost guarantees your offer will be seen by new customers, daily deal sites don’t have the best return for small businesses. Not only will your profits be low; more often than not, a customer that redeems a daily deal will not be a repeat customer. If you’re looking for a wide reach, these sites might work for you, but if you’re looking for an immediate uptick in revenue, you might want to look at other discount options.
How have coupons and discounts changed with digital media?
In a word: convenience. While it was very common for people to clip coupons from Sunday circulars found in the newspaper and then bring stacks to redeem at the store, this method is falling out of fashion as the population ages and our smartphones get, well, smarter.
Many businesses now allow consumers to present the coupon on their smartphone, reducing the need to remember a coupon while out shopping. Also, to encourage the use of a particular app, some businesses will incentivize consumers by offering a discount if the app is downloaded or used. Those businesses without an app may choose to partner with third-party app providers, such as Yelp or Foursquare, to offer discounts to customers who check in at a certain location.
The most important aspect of this latter option is exposure. Most consumers have their Foursquare or Yelp check-ins connected to another social media account, such as Facebook or Twitter. Therefore, if someone checks in to your business on one platform, their check-in will show up across all three, tripling the number of people who see your business name (and adding to the legitimacy of a promotion by showing that a “friend” recommended a place, instead of just an ad).
What are some other discount alternatives?
Some businesses have chosen to implement a customer loyalty program, i.e. CVS Pharmacy. This entitles the member to select discounts on certain items and often allows them to earn points towards other, more substantial rewards. In the case of a drug store, where product cost may be fixed and the competition is fierce, loyalty programs can be a nice incentive for consumers to use one chain over another. The same is true of supermarkets that often have similar customer loyalty programs.
Your loyalty program can also be much simpler, such as offering punch cards (example: buy 10, get 1 free) or specific offers on certain days of the week. You can also offer things at a discounted rate at certain times during the day or offer coupons at the register for products or services.
What are the drawbacks to coupons and discounts?
While the implementation and use of discounts is very beneficial to businesses, there are a few drawbacks to be aware of:
- Fraud: Shows like “Extreme Couponing” have easily demonstrated how possible it is for consumers to get extreme discounts, or even free products, when abusing coupons and discounts. Ensure that your terms and conditions are clearly stated, and make sure you have an attorney look it over to avoid any unintentional loopholes.
- Availability: If your discount is an attractive one and the product is in high demand, you could find yourself with severe supply problems. Anticipate the amount of business you think you’ll do and how popular the offer might be to make sure you can meet the demand.
- Cyclical Sales: By offering discounts and coupons at certain times during the year, you might become a business that is only frequented by consumers when those offers are available. When forming your discount strategy, take this into account and focus on times of the year that are harder for you than others. If Q3 normally sees your balance sheet in the red, devise specific promotions during the summer months that will attract business.
- Repeat Business: It’s common for customers who use coupons not to return. Your goal when these folks come into the store is to encourage their repeat business. How can you capture their interest? One way might be to ask for email addresses or mailing addresses so that you can stay in touch with these consumers and send them more coupons or specials in the future. You also want to be sure that the shopping experience at your location is a pleasant one. Is your location or website user-friendly and aesthetically pleasing? Is your staff and/or customer service friendly and helpful? Make the customer’s experience the best one possible to encourage them to come back.
Overall, coupons and discounts can be very important and beneficial tools for businesses in gaining and retaining customers. With a little forethought and planning, you can easily implement this tactic and find success while keeping your customers happy and coming back for more.