If you've ever watched the TV show Extreme Couponing or read about a customer who got $200 worth of groceries for next to nothing, you've probably wondered what's in it for the manufacturers and stores who offer these coupons. Are they actually making money in the process, or are customers getting away with legalized robbery?
The truth is that coupons create a win-win situation for both companies and consumers. Manufacturers and stores are benefiting from coupons. If they weren't, they wouldn't issue them or accept them. To find out how they benefit, let's examine some of the reasons why companies offer coupons.
To Get Consumers' Attention
According to the Food Marketing Institute, the average supermarket carried over 33,000 items in 2020. Out of thousands of products, companies need a way to steer consumers toward their product instead of a competitor's, and a coupon can help an item stand out.
If you have a coupon for a specific brand of paper towels, for example, it will probably be the first brand you'll check the price on among the ten different brands in the paper towel aisle.
To Advertise a New Product
Consumers need to be enticed to take a chance on a new product, especially price-sensitive, coupon-using shoppers.
A company could advertise its new product by offering free samples, but instead of spending money both on the product itself and on getting the product into consumers' homes, it could offer a tempting, high-value coupon and actually make a sale.
If the consumer likes the new product enough, they may buy it at full price in the future when introductory coupons are no longer available.
To Buy Loyalty
Numerous factors go into getting and retaining customers: merely offering a bargain price or a superior product isn't always enough. When a store or manufacturer provides a coupon, the discount generates goodwill and brand/store loyalty.
Think about how you feel when you get a coupon from your favorite store in the mail, doesn't it make you feel like the company values your business and wants to keep you as a customer?
To Get Repeat Business
Some promotions require consumers to use a reward on their next visit to the store. Such coupons draw customers into the store once to buy something and get a coupon, and again to buy something else and use the coupon.
In a 2019 report by Valassis, an omnichannel marketing platform, out of 1,000 consumers, 92% are bargain hunters using coupons, and more than 45% use coupons most of the time.
For example, an Albertsons' grocery store promotion gave customers a coupon for $10 off their next visit when they purchased $100 in qualifying gift cards.
Even if the customer did the bare minimum and walked out with $10 in free groceries on the follow-up visit, that customer might be more likely to come back in the future after having gained some familiarity with the store when they did their coupon shopping.
Other customers will spend beyond the coupon limit, so the store might profit from the promotion right away. Also, the promotion notified customers that Albertsons is a place where they can buy gift cards, which means that the store might gain business the next time that customer wants to purchase a gift card.
To Target Their Marketing Efforts
To get the best discounts at most major grocery store chains, customers must sign up for a store loyalty card and have the cashier scan it each time they make a purchase. In exchange for giving customers lower prices, companies get detailed information about the card user's buying behavior.
What days and times does he or she visit the store? How much does he or she spend per trip? How often does he or she shop? What does he or she buy? Does he or she only buy things that are on sale? Does he or she always use coupons?
- Manufacturers and stores benefit from the coupons they offer to consumers.
- Loyalty cards are a form of coupon that allows stores to keep a record of scanned purchases.
- Offering coupons is a way to market products and engage consumers.
- Coupons can entice customers to build loyalty with a specific company or product.
Companies can use this valuable information in their decisions about what products to carry, what prices to set, what to put on sale, how much of a discount to offer, and more. This information also helps companies with targeted marketing efforts. When companies know what you buy, thanks to store loyalty cards, they can save money on marketing costs while sending you offers you're more likely to use.
For example, Instead of sending a coupon for diapers to every household in a nearby zip code, the store can send diaper coupons only to customers who have purchased diapers in the past.
The Bottom Line
Consumers pointedly look for and use coupons to save on their purchases, and businesses benefit from offering coupons from helping to build brand loyalty to encouraging repeat business from consumers.
Companies who develop a smart coupon strategy can benefit from increased sales, and The key is to develop your coupon strategy so you know how that discount marketing strategy will either increase your long-term repeat business or increase your sales per customer.