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How your business can avoid the pitfalls of coupon websites
Losing too much money on discount offers
It's one thing to make a manageable loss on a coupon offer in order to attract new customers. It's another to lose so much money that it takes months of trading to recover your losses.
One recent US study of 3 small businesses that used coupon sites found that their monthly losses from coupon offers ranged from $6300 at a car wash (equal to their usual monthly profit) up to $11,760 at a beauty spa (almost double their usual monthly profit). Another study of 150 businesses that had used coupon sites found that one-third described it as 'unprofitable', and 40% said they would not do it again.
To avoid losing too much money on a coupon offer, it's vital to pick your product and offer wisely, build in opportunities to up-sell and cross-sell, and consider setting a cap on the number of coupons that can be redeemed.
Attracting only 'deal finders'
Many customers who use coupon sites are what marketers call 'price-sensitive shoppers', who will go wherever they can to get the best deal. Loyal to their coupons, rather than your business, these shoppers are highly unlikely to become repeat customers for your full-priced products.
If you want to discourage these 'deal finders', don't offer big discounts on everyday items, set a minimum spend in order to redeem a discount, and put a cap on the total number of vouchers that can be redeemed.
Not retaining coupon customers
The main point of many coupon offers is to draw new customers into a business, with the goal of converting them into repeat customers. But a surprising number of businesses don't have a strategy in place to encourage repeat custom. In effect, they end up providing their product at less than cost price for no long-term benefit. Before you begin a coupon offer, develop a strategy to encourage new customers to return.
Learn more about how to turn new customers into repeat customers.
Damaging your business's reputation
If you can't effectively handle the number of customers that you attract through a coupon website, or you disappoint coupon customers in some other way, the process can end up damaging your business, not helping it.
One bakery that attracted more coupon customers than it could efficiently serve ended up with numerous negative online reviews from disappointed coupon customers. To avoid this, you need to plan the timing and content of your coupon offer and make sure that you can meet your coupon commitments.
Learn more about managing online customer reviews.
Devaluing your brand
Offering discounts will attract shoppers who are looking for a good deal, but it may also devalue your brand among customers who value quality over price. By offering discounts too frequently, you may also find that customers become increasingly reluctant to pay full price for your products.
Most marketing experts agree that a strong brand cannot be built around discounts. They suggest that successful businesses should only use coupon sites to clear excess stock or to launch new goods or services.
- Find out how to create a digital strategy for your business.