Pros and cons of using coupons

Introduction

Coupons influence customers to buy from your business. Most consumers admit having used the same within the last three months. However, like all other promotional campaigns, they can have a positive or negative effect on your business, depending on your strategy. The following sections explore the pros and cons of using coupons.

Pros

New Customers;

Coupons introduces new customers to your business and as such are perfect when you are launching a new product line. Stores like Kohl’s have tasted massive success by giving coupons while launching new products.  Each product line has a definite lifetime. While some products tend to be profitable for longer durations, some goods with better profit margin come up necessitating the disposal of old ones. Make sure you use strong phrases with your discounts, and you will successfully acquire and retain new customers.

Clearing Inventory;

Coupons provide the best opportunity to unload your present stock of products. Doing so allows you to create space in your storeroom for new products as you issue the old products at a reduced price. Utilize the opportunity to woo new customers with a view of expanding your customer base, to increase sales and hence profits.

Rapid infusion of money;

coupons create a euphoria among the customers who often frequent your business. Their buzz about your marketing tactic increases your sales thereby causing a quick inflow of cash to your business. The strategy, therefore, best suits moments when you need exigent money to meet an urgent financial obligation.

Cons

Cost money;

coupons compel your business to incur some expenditure. Any discount you extend to your customers will mean a narrower profit margin that reduces your income. So, always make sure you discount an insignificant proportion of your profit to avoid incurring a loss. Make sure the revenue you will generate by attracting more customers through the strategy caters for their costs.

Cannibalizes income;

your loyal customers may develop a habit of waiting for discounts instead of buying products at regular prices. This practice cannibalizes the revenue you usually generate without the coupons. Try your best not to offer a discount to customers who would otherwise buy the product at regular price. The best strategy is only to give discounts to first time buyers. Make sure the method you adopt does not impact negatively on your usual customer base.

 Lack of sustainability;

Customers may only purchase the discounted products making the strategy untenable. The new customers may also never come back, meaning your business will incur costs related to the coupons without getting any long term benefit. The secret is to use its discounts wisely; identify the customers who are likely to stick around and offer them the discounts.

Conclusion

When deciding to use coupons make sure you strategize on how to enhance your bottom line. Understand the profit margin on the particular item before settling for a discount amount. Include the overhead in your computation. Avoid only using the cost of material to avoid offering a product to customers at an unreasonably low price. If the product in question has a slim profit margin offering coupons may cause you to run at a loss.