Advantages and Disadvantages of Using Coupons for Your Business

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.

Key Takeaways

  • Coupons can drive customers to your business and introduce new customers to your store.
  • Coupons can help introduce new product lines and encourage customers to try a more profitable brand or service.
  • Coupons can also help attract existing customers to come back to your store. 
  • The biggest con of using coupons is that they cost businesses money and may lead to lower profit for that sale.
  • Another drawback is when existing customers wait for coupons, cannibalizing existing revenue before the coupon program.

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 campaign to 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 drives traffic 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.

Where Can You Get Coupons?

Paper coupons are often given out in the mail or through coupon catalogs and many retailers give coupons with each purchase to encourage repeat business. In addition, many online retailers use coupon codes to attract potential clients to follow them on social media.

How Do You Make Online Coupon Codes?

Many online storefronts have the built-in functionality to issue and redeem coupon codes. For example, Square, one of the most popular web platforms for online shopping, has a simple interface for managing coupon codes. Other platforms may have different procedures.

How Do You Find Online Coupon Codes?

There are several websites collect coupon codes from many retailers, such as RetailsMeNot, Slickdeals, and DealsPlus. These sites work with retailers to offer coupons, thereby allowing the business to find new customers and helping customers find better deals. There are also browser extensions, such as Wikibuy and Honey, that can search for coupon codes at the point of checkout.

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.

Article Sources
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  1. Vericast Valassis. "Valassis Research: Coupons and Discounts Appeal Far Beyond Savings."

  2. Facebook. "How Do I Create an Offer From My Facebook Page?"

  3. The New York Times. "Is Groupon Good for a Small Business? Do the Math."

  4. Square Up. "Create Online Discounts with Coupons for Square Online."

  5. Washington Post. "Nine Tricks for Getting the Most Out of Online Coupon Codes."

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