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Give Your Small Business A Competitive Edge
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Article 3: Use Coupons Effectively
Increasing business by offering coupons is a strategy that has been around just about as long as commerce itself. But that doesn’t mean the strategy is always the best way to gain a competitive advantage or grow your business.
“I like to say that using coupons is kind of like using drugs,” says Jim McCraigh, a direct marketing consultant and the author of “How to Write Words That Sell” (Salt River Press, 2005). “It’s easy to start and hard to stop.”
It’s easy for businesses to get addicted to coupons and, if they’re not careful, actually end up ‘training’ their customers to expect them. “This can kill your gross margins over time,” says McCraigh.
Keep in mind that, in general, coupon users tend to be non-loyal and to spend less money. “In the restaurant business, we used to call them ‘water people,’ because they’d bring their two-for-one dinner coupon in and order water with their meal.”
McCraigh emphasizes the need to carefully manage your gross margins in any coupon program.
“Whatever your coupon program is, it should increase not just sales, but overall gross margins as well,” he continues. “You want to be happy, not disappointed, when customers come in with a coupon.”
Before launching a coupon program, you first need to decide the objectives for the program.
“Coupons can be used as a trial mechanism to get people to try your business for the first time, or they can be used to help build frequency of customer visits,” says McCraigh. “You need to decide which goal you’re trying to accomplish.”
For example, a new business might send coupons to potential customers to get them in the door for the first time. Coupons can also be used to manage a business’ traffic flow — a restaurant, for instance, might honor coupons during the week only to bring in more customers on slow nights.
“This is an example of using coupons intelligently,” says McCraigh. “Why should you give away two-for-one dinners when you’ve got people waiting for tables on a Saturday night?”
The bottom line? Be careful not to depend too heavily on coupons.
“Don’t just fall back on them because they’re easy,” says McCraigh. “There are plenty of ways to get people into your business other than just giving stuff away.”
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