Up to 45% of businesses fail within 5 years. However, as scary as that statistic is for budding entrepreneurs, it shouldn’t come as a surprise!
After all, running a business is hard work. No matter the industry, you have to stand out from the crowd, attract new customers, retain your current ones, and drive consistent sales over time. That’s no mean feat in the competitive world we live in.
Are you wondering whether you should start offering coupons to customers in the bid for success? It’s a clever idea that’s been used forever and a day. Nevertheless, diving headlong into this particular strategy without thinking it through can be a recipe for trouble.
Want to do see if coupons would be a viable option for your business? Keep reading to discover all the pros and cons involved.
The Pros of Coupons
Businesses eager for sales have long issued coupons to their customers. And for good reason: there are numerous advantages to doing so! Here is a selection of the main ones:
They Attract New Customers
The real secret to business success always comes down to cash. You can never have enough income when you’re trying to grow your brand and solidify your place in the market.
That’s why enticing new customers to buy your products or use your services is so key. Their money pays wages, covers bills, enables re-investment in the company, and funds your marketing efforts! It just so happens that issuing coupons is an amazing way to stimulate new interest in your business.
After all, new customers might be unwilling to pay full price off the bat. Offering them a promo could provide the stimulus they need to take a leap of faith. Then, having had their first taste, they may come back for more (and pay full price when they do).
They Generate Quick Cash
It goes without saying that having access to cash is never a bad thing for businesses. However, there are certain times when it’s more important than others! You might have to pay for a new product, fund a novel marketing strategy, or respond with speed to changes in the market, and so on.
Coupons can generate a quick cash injection to help make this possible. People love a bargain, which means they’ll jump on the opportunity to buy your product/service at a discount. You walk away with more money in the account to spend however you see fit.
They Inspire Loyalty
Your return customers love your business already. Offer them a discount (like the ones you find on Groupon or the Kroger weekly ad) and they’ll love you even more! To put it another way: coupons help to solidify brand loyalty.
It’s similar to being offered a no-strings-attached gift by someone. You can’t help but be grateful and like them a little more in the process. Of course, that newfound loyalty usually translates to further sales and word-of-mouth referrals.
They Help You Stand Out
As we said in the introduction, we live in a competitive world. Businesses in every industry compete against dozens of other companies for market share! Those that innovate, provide the most value and stand out from the crowd achieve the most success.
That’s where coupons come in. If you’re offering coupons and your competitors aren’t, then you’ll attract newfound attention. With any luck, you’ll convince their customers to jump ship at the same time.
The Cons of Coupons
It’s clear that there are numerous incentives to start offering coupons to your customers. However, there are two sides to every story, right? Here are a few reasons that some businesses ought to think twice about coupons.
The Cost
First and foremost, coupons come with a significant cost attached! After all, you’re giving your customers discounts and deals on your catalog of products and/or services. The result?
It’s imperative that your profit margin’s large enough to make the coupons worth your while. Fail to calculate this ahead of time and this particular sales ploy can soon backfire. You may generate new sales, but you’ll be doing so at a financial loss.
The Potential Impact on Current Customers
Imagine being a longstanding customer of a company. You’re loyal to the brand, which means you’ll happily pay full price for their products. But then you notice they’ve started releasing coupons.
Amazing! You can now purchase the same quality for less money. In fact, you might be so happy with this new arrangement that you start waiting for those coupons before buying from them again.
Now put yourself in the shoes of the company. Those coupons were intended to generate sales and drive revenue. However, they ended up reducing the level of income being generated from a subsection of current customers.
It’s Often Unsustainable
The aforementioned cons of coupons mean this particular strategy isn’t always sustainable in the long term. Why?
Because the customers you entice to the business may only be there for the discount. They utilize the coupon with gratitude but never return (until you provide another promotion). Your customer retention rates suffer in the process.
The secret to leveraging coupons to full effect is putting steps in place to reverse this predicament. Find ways to turn one-time customers into return customers and you’re onto a winner.
The Impact on Brand
Every business that wants to attain long term success nowadays has to cultivate a strong brand identity. Furthermore, that brand has to hold a positive place in the mind of its customers! Fail in both regards and you’re in for trouble.
Here lies another danger to coupons. Offering them to customers can have a negative impact on a brand sometimes. They see the discounts and assume your products are less valuable, that people no longer want them, and that their quality must have suffered as a result.
Remember the Pros and Cons of Offering Coupons
Businesses have been offering coupons to incentivize sales for centuries. However, that doesn’t mean you should issue them to your customers without thinking it through first!
As we’ve seen, there are both pros and cons to coupons that are well worth considering beforehand. We hope this post has highlighted the main ones! Keep them in mind and you should be a step closer to realizing their viability for your business.
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