How to Use Coupons & Discounts, without sacrificing profits
Companies use discounts and coupons to attract customers and make them want to shop with them rather than the competitors. However, using coupons and discounts too often, or sloppily, can permanently eat into profits.
JC Penney used to run what seemed like permanent sales. Customers loved feeling like they were getting a great bargain. However, since the shop had a regular schedule of discounts that customers came to expect the same thing. Therefore, when the store changed course and started offering exclusive discounts, the customers were furious. The company remains far from fully recovering from the saga.
It is important to note that using coupons and discounts requires the use of a balance.
For a business owner As a store owner, you're looking to attract customers, but you don't need to compromise profits particularly over the long term.
Here are 8 ways to make use of coupons and discount without giving up excessive profit.
1. Inspire a purchase from customers you have not previously met.
If you think about what a coupon is for prospective customers, you see that it's a lead-generation tool. The goal of a coupon isn't just to generate just one sale. It's about gaining a new customer and then continue to sell them.
The question is how to motivate to make a purchase again?
One way is to give the customer a second coupon following their purchase, as a way to thank them for being a new customer. The coupon should be either of smaller or even require a larger amount of money to purchase it, such as "spend $100 or more to get 20% off."
Another way to motivate an additional purchase is to convince customers to join with their contact information to begin emailing and sending them texts. Through email, you are able to educate the new customer about the other services and products you offer as well as how you address their problems, what you do to bring them joy as well as any other advantages you offer. All this can be done without having to offer any discount at all. Stay on their mind, and they'll be more likely to buy again.
MailPoet gives you the necessary tools to build a welcome mailer series that allows you to start the follow-up with your customers and nurture process.
2. Use tiered coupons instead of percentages
In our last article, we discussed the strategy of offering discounts of 20% for spending $100 or more. Think about the advantages the discount scheme might bring you. What are the most common actions customers take? You'll have to spend more money in order to receive discounts.
You can use a similar approach to give tiered coupons, but not with percents. As an example:
- You can spend $40 to earn $10 back
- You can spend $100 to earn 20 dollars back
- Spend $250 and receive $50 back
Using that type of structure, notice that the sum the client gets back is a flat number, even though they pay over the amount required.
For example, a customer paying $50 will receive $10 and you earn the sum of $40. However, if the customer purchases around $80, they still get their $10 back which means you earn the sum of $70. If their final cost ends up anywhere above $80, they can attempt to bring it over $100 so they can receive the $20 back instead. Either way, you make more profit.
But with a flat per cent discount, the profit margins stay identical regardless of the amount they spend. If you spend $100 and then receive 20% off, you make $80. If they buy $200, the 20% discount now becomes $40.
The flat dollar discount works to your advantage since it will increase the an average size order without raising the discount at the same rate.
3. Make use of a loyalty program
Although loyalty programs may not be an ideal fit for each company, they are an great ways to generate sustainable income. After all, some customers love them and keep coming back for more rewards to rise!
Also, this gives you something to keep in touch with them over email, since if they do not buy anything for a few months, it is possible to remind them of how many points they've got, and what they can buy with points.
4. Create a subscription or membership
Discounts can be extremely effective when you convert them into regular revenues. If you can create a successful subscription model for your business almost any discount can be financially justifiable.
As an example, let's say that you offer a subscription of $19 per month as an option. If you can demonstrate that the customers who subscribe to your service will remain for at least 6 months, on average you'll earn $114 in recurring revenues. Would you offer a $25 discount coupon if you had a new member that generated the average of $114 income? Would you consider offering the first month at 99 cents?
In order to get customers interested in joining your membership, you could give away prizes and even bigger discounts. This is because you'll get your money back and more. The goal is to lure the customers' attention with a substantial incentive, then by offering value to ensure they'll be loyal to your service for years.
A different approach is to provide an offer of a discount on your subscription itself. It could be that everyone who purchases more than $100 receives 20% off their membership. This is still profitable thanks to future recurring revenues.
5. Use product bundling discounts
If you bundle your products they are less competitive in cost and instead focus in the ease you offer your customers. Bundles can be more enjoyable, especially if you package they well.
You could offer 20% off a product bundle that gives an excellent deal to the customer and still provides better returns for your company. Why? Your average order value is greater, while the cost of packaging and shipping will be lower than if were to sell each item separately.
6. Incentivize referrals
Word of mouth can be powerful. But it's not always enough but it's also not frequently as often as you would think it would.
For your most loyal customers, provide them with an extra reason to tell your friends about you. Give them coupons they can pass out to their friends as well, and should their friends use them to redeem coupons, your customer will also be rewarded.
This is smart couponing because it wins a new customer you wouldn't have otherwise reached, and you turn your current customers to brand ambassadors.
Coupons can be sent like this by email, postal mail, or text messages. You can also just link to a landing page that has coupons for new customers and ask customers to forward it to friends.
7. Upsells on offer
It's also the best thing about it. doesn't feel like you're pressuring them, because you're offering the exact product that they have previously purchased and just a little more of it.
You can offer other upsells too, including upselling your subscription service. If you're offering coupons or discounts, they provide an opportunity to recoup the lost profits on the very same purchase. Also, if the product you're offering upsells is connected in any manner to what consumers are currently purchasing this is an obvious choice for them as well, and some may accept your offer.
8. Include a motive for your sale
We are back to the JC Penney story. They never had a reason for their regular sale price. Thus, consumers came to expect and even demand their prices.
The way to avoid this is to conduct sales only when you have a reason to do so. There are many ways to do this. If you are able to justify the price you are charging, even your most loyal customers will agree on it without expecting that they will come back in the future.
Utilizing coupons and discount codes by this method increases customer loyalty and attracts new customers, but it doesn't box your customers in to long-term expectations of discounts.
The reasons for selling can be found anywhere:
- A local team celebrates taking home a trophy
- Thanks to customers for X year of operation
- There is a lot of stuff must be cleared
- The holidays
- Discounts for new customers
- Planning to donate a portion of the sales proceeds to charities
- Utilizing an article in the media that you can relate to your company
Discounts that work and coupons that make sense can boost revenue over time.
These ideas all serve the same purpose -- to thread the needle between attracting new customers, without offering too much money or leading to price-conscious customers.
The things you need are loyalty customers, regular buyers and regular revenue. Utilizing coupons and discount offers with the intention of generating either or all of them are usually the best choice.
Make sure to leave a message in the comment section if you have other ideas!