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What To Avoid If You Are a Small Business Owner? The Coupon Illusion

Team Archives, July 18, 2016.


Do coupons help or hurt your business?

While they may appear to be quick revenue boosts, coupons have the capability to negatively impact inventory, staff and loyal customers. Discounted deals may appear useful because they drive heavy traffic through the door; however, you must ask yourself:  Are the customers they bring the customers I really want?

The number of businesses offering deals is limitless, proof that coupon users exist in all markets. These types of customers are customers those who shop around for the best deals and choose a restaurant, salon, etc. for the cheapest price. Businesses fall trap to the traffic and quick sales of these daily deals but struggle to convert coupon redeemers into loyal customers, whether they enjoyed their experience or not. Studies show that deal seekers are loyal to the deal–not the brand–more often than not. In other words, if and when your business cuts down on its coupons, new customers will simply stop shopping there.

Sales gimmicks and coupons can bring the wrong kind of customers into a business. These customers, while seeking ‘steals’ or low prices, are ironically very picky customers and hold high expectations. In today’s social media-fueled world, word-of-mouth marketing has exponentially increased the effects one bad review can hold. Data indicates a correlation between discount users and higher levels of negative reviews.

When you dispense coupons, you’re also training loyal customers to wait for your deals. The frequency of visits will be reduced as regular customers will suddenly stop coming in freely and will opt to wait for the deals—which also lowers your businesses profit margins when they do come in. Through the coupon illusion, if the deals were to stop, it would take a long time to build back your loyal customer base.

A solution to offering the coupon illusion is for businesses to focus on building a strong client base of loyal customers. Loyalty starts with identifying and connecting to the right consumer group for your brand in a local market.

The power of gaining new loyal customers begins with targeting consumers that have a high propensity to become loyal. Consumer groups such as new movers or new parents are consumer groups that are likely to change habits and brands. In fact, the Yankelovich Group states that new movers will change their toothpaste brand 40% of the time after a move.

Welcomemat Services subscribes to a theory called gifting—or inviting someone new to try your business. Gifting creates a sincere relationship in which the consumer is willing to pay full price for the service or product provided. It can also have an amazing effect toward loyalty as it creates a sense of obligation or reciprocation from the gift recipient, leading to long-term customers.

Write to us to gain more insight into your neighborhood and see how you can introduce your business to thousands of new movers in your area every month.

Loyalty rewards programs are useful to help stay top of mind with both new and regular consumers. Such programs allow a business to reward—or thank—its customers for their continual business with personalized offers and services. 64% of customers are reported to increase their frequency of visits with brands utilizing rewards programs.

In a world of daily deals, it’s important to remember that coupons are simply an illusion to get customers in the door. Marketing dollars should be invested in building loyalty platforms instead, in order to build and retain strong relationships.