The Pros and Cons of Offering Coupons to Your Customers

CouponsCan offering coupons be good for your business?

While offering coupons can help you attract new customers and boost sales performance, you should consider a number of factors to determine its suitability to your business model before taking the plunge. Keep in mind that like everything else, this technique has its own set of advantages and disadvantages so you need to know what to expect before you begin distributing your coupons.

Advantages and Disadvantages of Offering Coupons

The Pros

  • Attract new customers. Coupons can make it easier to entice people to try your product before they buy at full price. According to the results of a study conducted by Rice University, businesses offering coupons have 50% redemption rate. The good news is that 31% of first-time buyers returned to make another purchase. In addition, offering coupons may also persuade people to switch brands and help you increase brand awareness.
  • Build loyalty. Coupons can instill brand loyalty to your existing customer base.
  • Allow for quick infusion of cash. Since coupons can help you attract more first-time buyers, it may result in quick infusion of cash to the business.
  • Meet customer expectations. According to a survey conducted by RetailMeNot, an American multinational company that maintains a number of coupon websites, a great majority of buyers expect a discount or a coupon since this is now considered a normal practice for most businesses.
  • Provide competitive edge. Customers are always looking for the best deal they can possibly find and offering coupons can be a great way to make sure you stay ahead of the competition.

The Cons

  • Offering coupons can cut into your profits. One of the most common disadvantages of offering coupons is that you would be giving a discount to people who would buy your products even without them anyway.
  • It can be costly. Offering a discount without first understanding your profit margins may increase your risk of incurring losses. So, do the math and consider not just the cost of materials but the cost of production and overhead expenses as well. Don’t forget to factor in the coupon service’s share in your calculations.
  • This promotional strategy may not be sustainable. Studies show that offering coupons may not be a sustainable practice for some businesses since some people may only redeem the coupon without returning to make a second purchase for the full price.
  • It may lessen the value of your offerings. Offering discounts on your products and/or services may negatively affect the perceived value or quality of your offerings.

Offering coupons can be good for your business but you need to weigh the pros and cons before making a move.