The Pros and Cons of Using Coupons for Your Business (2024)

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.

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.

Email 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 email address.

Over time, a long-term marketing strategy can be developed by building an email 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 email 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 campaignto 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 drivestraffic 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 email.
• 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.

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.