What is the purpose of coupons?

If you've ever watched the TV show Extreme Couponing or read about a customer who got $200 worth of groceries for next to nothing, you've probably wondered what's in it for the manufacturers and stores who offer these coupons. Are they actually making money in the process, or are customers getting away with legalized robbery?

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The truth is that coupons create a win-win situation for both companies and consumers. Manufacturers and stores are benefiting from coupons. If they weren't, they wouldn't issue them or accept them. To find out how they benefit, let's examine some of the reasons why companies offer coupons.

Key Takeaways

• Manufacturers and stores benefit from the coupons they offer to consumers.
• Loyalty cards are a form of coupon that allows stores to keep a record of scanned purchases.
• Offering coupons is a way to market products and engage consumers.
• Coupons can entice customers to build loyalty with a specific company or product. 

To Get Consumers' Attention

According to the Food Marketing Institute, the average supermarket carried over 35,000 items in . Out of thousands of products, companies need a way to steer consumers toward their product instead of a competitor's, and a coupon can help an item stand out.

If you have a coupon for a specific brand of paper towels, for example, it will probably be the first brand you'll check the price on among the ten different brands in the paper towel aisle.

To Advertise a New Product

Consumers need to be enticed to take a chance on a new product, especially price-sensitive, coupon-using shoppers.

A company could advertise its new product by offering free samples, but instead of spending money both on the product itself and on getting the product into consumers' homes, it could offer a tempting, high-value coupon and actually make a sale.

If the consumer likes the new product enough, they may buy it at full price in the future when introductory coupons are no longer available.

To Buy Loyalty

Numerous factors go into getting and retaining customers: merely offering a bargain price or a superior product isn't always enough. When a store or manufacturer provides a coupon, the discount generates goodwill and brand/store loyalty.

Think about how you feel when you get a coupon from your favorite store in the mail. Doesn't it make you feel like the company values your business and wants to keep you as a customer?

To Get Repeat Business

Some promotions require consumers to use a reward on their next visit to the store. Such coupons draw customers into the store once to buy something and get a coupon, and again to buy something else and use the coupon.

In a report by Valassis, an omnichannel marketing platform, out of 1,000 consumers, 92% are bargain hunters using coupons, and more than 45% use coupons most of the time.

For example, an Albertsons' grocery store promotion gave customers a coupon for $10 off their next visit when they purchased $100 in qualifying gift cards.

Even if the customer did the bare minimum and walked out with $10 in free groceries on the follow-up visit, that customer might be more likely to come back in the future after having gained some familiarity with the store when they did their coupon shopping.

Other customers will spend beyond the coupon limit, so the store might profit from the promotion right away. Also, the promotion notified customers that Albertsons is a place where they can buy gift cards, which means that the store might gain business the next time that customer wants to purchase a gift card.

To Target Their Marketing Efforts

To get the best discounts at most major grocery store chains, customers must sign up for a store loyalty card and have the cashier scan it each time they make a purchase. In exchange for giving customers lower prices, companies get detailed information about the card user's buying behavior.

What days and times does a customer like to visit the store? How much do they spend per trip? How often are shopping trips made? What is purchased? Do they only buy things that are on sale? Do they always use coupons?

Companies can use this valuable information in their decisions about what products to carry, what prices to set, what to put on sale, how much of a discount to offer, and more. This information also helps companies with targeted marketing efforts. When companies know what you buy, thanks to store loyalty cards, they can save money on marketing costs while sending you offers you're more likely to use.

For example, instead of sending a coupon for diapers to every household in a nearby zip code, the store can send diaper coupons only to customers who have purchased diapers in the past.

The Bottom Line

Consumers pointedly look for and use coupons to save on their purchases, and businesses benefit from offering coupons from helping to build brand loyalty to encouraging repeat business from consumers.

Companies who develop a smart coupon strategy can benefit from increased sales. The key is to develop your coupon strategy so you know how that discount marketing strategy will either increase your long-term repeat business or increase your sales per customer.

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Using Coupons for Business: an Overview

Coupons can drive customers to your business, boost existing customer engagement, and generate new revenue. Physical coupons can be introduced in your store, while digital coupons can be offered through marketing messages on a business website and social media promotions.

It's estimated that 60% of consumers are likely to try a new product as a result of a coupon, while 46% said they'd change their planned purchase.

Whether a coupon is designed to entice a customer to visit a brick-and-mortar store or a company's webpage, coupons can be an effective way to grow sales revenue. However, it's important to develop a strategy when introducing coupons to your customers since they can lead to a lower profit per sale, despite generating new revenue.

Key Takeaways

• Coupons can drive customers to your business and introduce new customers to your store.
• Coupons can help introduce new product lines and encourage customers to try a more profitable brand or service.
• Coupons can also help attract existing customers to come back to your store. 
• The biggest con of using coupons is that they cost businesses money and may lead to lower profit for that sale.
• Another drawback is when existing customers wait for coupons, cannibalizing existing revenue before the coupon program.

Advantages of Using Coupons for Business

The pros of offering coupons include introducing new customers to your store or website. Coupons can also introduce new product lines and help sell excess or unwanted inventory to make room for newer products. Coupons can be used to strategically encourage customers to buy a new, more profitable product to help boost your profit margin. Also, coupons can create loyalty with existing customers by using the discount as a reward to ensure they continue to buy from your store. 

Marketing List

One way to maximize the advantage of coupons in today&#;s digital world is to use coupons as a way to build a social media marketing (SMM) strategy. For example, before receiving a coupon, each customer can be encouraged to provide their address.

Over time, a long-term marketing strategy can be developed by building an marketing base, which can be used to encourage repeat business, offer new products, or for other marketing campaigns. If your coupon is not an online coupon, require them to give their name and address to use the coupon at the register.

Social Media Pages

Another good way to distribute coupons is on social media websites, such as Meta (META), formerly Facebook. You can offer discounts and coupons on your Facebook business page. Customers can redeem the coupon in the store or online. Also, an expiration date can be established to create a sense of urgency, which encourages new or existing customers to buy your product by using the coupon.

Your business page can also be used to promote products and events, and communicate with your customers. By frequently interacting with repeat customers, offering discounts, or sharing news, you can build stronger relationships and better understand the customer's needs. It's estimated that 55% of consumers said that businesses that offer coupons and discounts create a more positive impression of the store or its brands.

Disadvantages of Using Coupons for Business

The biggest con of using coupons is that they cost your business money. Any discount you offer will mean less money in your pocket. The key is to calculate whether that discount will make a difference to your profit margin by introducing new customers to your store or bringing back old customers who may have gone elsewhere chasing other coupons. In The New York Times column, Jay Goltz, &#;Doing the Math on a Groupon Deal,&#; developed a method to calculate whether or not a coupon discount is worth it for your business.

Cannibalizes Existing Revenue

Even your regular customers can get in the habit of waiting for coupons, which cannibalizes revenue already generated before you introduced the coupon program. So, it might be best if you considered when and how to offer those coupons to avoid impacting your existing customer base. 

Reduced Profit

Coupons may result in a reduced profit on the item or items included in the coupon campaign, but the cost of producing the product will not change. As a result, it's important to consider the value of a coupon campaign to the business and whether the discount will lead to enough new sales revenue in the long term to offset the cost of the campaign.

Special Considerations

When planning a coupon strategy, think about how you want to use that strategy to improve your bottom line. For example:

• When a coupon drives traffic to your store, those customers may buy other non-discounted products&#;a common strategy used by food stores.
• The coupon could introduce new customers to your store, helping to foster long-term communications with the new customer through social media or .
• The coupon could encourage customers who haven&#;t been in for a while to come back. For example, you can send a coupon to customers who haven&#;t been in for 60 days or more, using a good marketing database.

Where Can You Get Coupons?

Paper coupons are often given out in the mail or through coupon catalogs and many retailers give coupons with each purchase to encourage repeat business. In addition, many online retailers use coupon codes to attract potential clients to follow them on social media.

How Do You Make Online Coupon Codes?

Many online storefronts have the built-in functionality to issue and redeem coupon codes. For example, Square, one of the most popular web platforms for online shopping, has a simple interface for managing coupon codes. Other platforms may have different procedures.

How Do You Find Online Coupon Codes?

There are several websites collect coupon codes from many retailers, such as RetailsMeNot, Slickdeals, and DealsPlus. These sites work with retailers to offer coupons, thereby allowing the business to find new customers and helping customers find better deals. There are also browser extensions, such as Wikibuy and Honey, that can search for coupon codes at the point of checkout.

The Bottom Line

Coupons can drive business to your store and help create a discount marketing strategy to increase your long-term repeat business or sales per customer. Coupons can also attract clients to more profitable products and services that you offer. However, it's essential to compare the new revenue generated from a coupon campaign to the costs of the discount or lower profit per product from both new and existing customers.

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