Loathing coupons

I do, I really loathe coupons and for good reason. Very few businesses have ever helped themselves using them. And until only recently has an entire industries (read pizza delivery) been held hostage by them.

The reason is that a coupon will bring you customers who:  

  1. are very price-conscious and rely on coupons as a means to find the best deals. They have little to no loyalty to any business. They are in it for the hunt. They will go out of their way to wherever the best deal is offered.
  2. will only return when they have a coupon. They like your product/service better than your competitors but know to wait for the next coupon. If you stopped sending out coupons they will probably return but not a soon as if you hadn’t made them wait for another coupon.

And, maybe most importantly, you’ve now reduced your product/service offering to a matter of price, if you’ve been reading past articles here you know that’s a really, really bad place to go.

So let’s say you have competitive pricing and then issue a coupon to discount good pricing even more, is it worth attracting these two groups of new customers? I don’t think so.

Now if you’re willing to overhaul (read raise) your pricing like the national pizza chain, Dominos Pizza, recently did, using coupons can be right up there with ringing the bell for Pavlov’s dog. What Dominos did was to announce they had completely changed their pizza formula and as such could come out with whole new pricing. The new prices are much more expensive than their competitors. But then their marketing flooded the marketplace with coupons, at first they were “come try our new formula” introductory-type offers and then they fell back to simply issuing this month’s coupon specials.

You can’t throw a rock without hitting one of their coupons. And if that isn’t enough, they will put staff on the street on their slowest days with a sign-board announcing a non-coupon special for that day. In short, they really don’t expect many of their customers to pay the posted rate. If a big part of the market can be pulled in with coupons, then they simply make sure that they’re making money on those customers.

This is much like grocery, drug and other stores who issue affinity cards with the promise that, when you present your card at checkout, you will be given better prices than those who don’t. This was easy for grocery, drug and sundries stores to implement since they offer thousands of products whose pricing has bounced around anyway. Not many people really noticed that their loyal customer card was simply protecting them from paying exorbitant prices, marked up so they could be discounted.

What I do recommend, if you really feel the need to provide discounts, is to do so unexpectedly at the checkout stand. I’ve seen this at some national chains. Instead of cash register errors in the store’s favor which irritate the customer, they’ve intentionally posted a higher price in the store than will be rung up at the cash register. The customer walks out feeling a “win” just happened. One win like this can greatly reduce the pain of the total purchase price of a basket of items purchased. It replaces the mundane checkout process with a sense of “tee hee. I’m getting away with something.”

So unless you’re willing to live off coupon customers, often at the risk of losing most non-coupon customers, don’t start giving out coupons. Instead, surprise current customers with a free coffee or dessert, a surprise discount price at checkout, or a $5 loyalty card mailed to them for their next purchase over $25. Just don’t announce it to the marketplace. Because surprises are always the best.