Like other types of promotions, coupons can be effective but there are a few things to consider before drawing that dotted line around a special offer.
Advantages
As a promotional tool, coupons offer a few distinct advantages.
Action: Discounts and expiration dates give consumers a sense of urgency and incentive to spend money with your business.
Measurability: Coupons are a great way to find out how many people follow through on a particular offer. In order for this to be effective, be thoughtful about not only the coupon, but other simultaneous promotions. A campaign can't be accurately measured if coupons aren't collected, so staff must be trained to follow through.
Testing: Other ways to use coupons is to test the effectiveness of features including creative, offers, headlines and copy. Segment the total list and send one coupon to group A and a different coupon to group B. Be sure to only change one element or it will be nearly impossible to test which change made the difference.
Pass along: If someone receives a coupon they can't use or aren't interested in, it's easy to pass it on to others who may use it.
Disadvantages
Many businesses are turned off by the idea of using coupons because of the following real and perceived negatives.
Image: Just like every other marketing decision you make, offering coupons affects your business image. If your industry doesn't traditionally coupon, think through your strategy carefully and have a good reason to go against the norm. Consider providing a special offer in a more upscale and sophisticated way - like a gift with purchase - instead of a coupon.
Price freeze: New customers lured with coupons may only buy on price and won't come back without another coupon. One way to track this is by writing the total spent on the back of each coupon to determine if customers only came in to buy the advertised item, or if they bought more. If you consistently coupon, it can be hard to wean customers off the discount.
More work: In addition to design and list issues, coupons must be collected and documented to determine their effectiveness. If you have a sales or wait staff, be sure to inform them of the campaign and its importance. Different offers and other elements must be tracked and analyzed. Write down the comments made by coupon customers for even more insight. Is it a new or repeat customer? Had they heard of your business before receiving the coupon? Did they seem satisfied with their experience? Document the details in a designated notebook because a month or two later, you won't remember.
Determine your goals
Salvation: If you're trying to save a failing business, coupons aren't the answer. The problems that brought your business to the brink are still in place, and now you're exposing those problems to lots of new customers who'll use word of mouth to tell even more people.
Generate traffic: If you have confidence in your product or service, coupons can be a great fit. A tempting offer will bring people in, and if they like what they see, you'll earn new customers and more positive word of mouth. Again, the design and delivery method must be a good fit for your industry and customer base.
Reward loyalty: All too often, businesses focus on getting new customers and forget to thank current customers. It's more expensive to acquire a new customer than to keep an old one, so consider special coupons for your loyal customers, through an email club, for example.
Build segments: Coupons are a great way to focus attention on a particular product or increase an area of your business. A restaurant can use coupons to bring in customers on slow days, and a hair salon can use coupons to build a client base for a new stylist.
Increase Effectiveness
Once you've decided to give coupons a try, use these tips to make your campaign work as hard as possible.
Design details: Be sure to include the following and keep your ad as uncluttered as possible.
o An offer
o A concise headline
o An appropriate image
o Other relevant information like address, phone, store hours, website, etc.
o Don't clutter the ad or coupon with unnecessary information or too much detail.
Time limit: An expiration date encourages recipients to use the coupon sooner rather than later.
Simple math: Make it painless for people to use your coupon with an uncomplicated offer that's easy to calculate. $10 off is better than 15% off. If a percentage off is the best option (perhaps your offer includes a wide variety of products), then use a round number like 20%.
No games: They may not want to spend a lot of time calculating 15% off, but let's face it, your customers aren't dummies. They won't fall for tricks like increasing your price for the length of the sale and then discounting it back to its original price. Another no-no is making claims like "only available for the first 100 people" and "prices will never be this low again," if they're not true. These types of tactics are ineffective and damage your business reputation in the long run.
High value: Give the most perceived value to the customer at the lowest cost to you. For example, a glass of house wine usually costs less than a dollar to the restaurant owner, but has a value to the customer of $5 or more. Therefore this can be a better option than $5 off a meal. If you're not willing to offer something of value to your customers, don't bother using a coupon, as a weak offer, like a free soda with the purchase of $30 or more, typically backfires.
Disclaimers to consider
Add these to the coupon itself if they apply (not just on the ad since some people tear the coupon off and only bring that), so there's no confusion when customers take you up on your offer.
o Expiration date
o Purchased item must be of equal or greater value than the free or discounted item
o Only one discount/coupon per person/party
o Original coupon is required to get the offer/discount
o Coupon is only good on certain days or hours (i.e., Sunday through Thursday only or lunch menu only)
o Coupon is only good on certain items (i.e., free glass of house wine versus free glass of wine)
Delivery options
Whichever method you choose to get your coupon in front of someone, build in campaign measurement through redemption codes.
o Direct mail - either a solo mailing (postcard) or cooperative mailing (Valpak)
o Email to your opt-in list, preferably via a well-designed newsletter or e-blast using service like MailChimp
o Cell phone technology - companies like Cellfire deliver coupons directly to your mobile phone and/or PC
o In-store promotion
o Loyal customer promotion
o Newspaper or magazine ad
o Radio or TV code mention (technically, it's not a coupon but can work in some of the same ways and is a good practice for campaign measurability)
Redemption rate facts and fantasy
Will your coupon campaign be successful? What kind of response can you expect?
o The most critical factor is your list. Make sure you're targeting the right audience. If you're sending to current customers you can expect higher response rates than if sending to a list of prospects or a broad-based list.
o The offer is also important and again, must be well matched to your industry and audience. Think about what would entice you to change your behavior and try a new business or product, and then do something of that scale.
o Redemption rates also depend on what you're asking people to do (simply sign up for an email club versus make a purchase), and how many restrictions you put on them.
o Design is important as it must wear many hats: reflect your brand, get instant attention and stand out from all the other marketing messages people get daily.
o Don't forget repetition. It can take 7-10 impressions before someone's ready to take action, so looking at an isolated coupon campaign and expecting big numbers isn't realistic.
o Instead of looking for a magic number or industry average, designate a specific goal for your campaign and compare new campaigns against prior campaigns. Continue to test, analyze and refine coupon elements to improve redemption rates.
Adding coupons to your marketing mix can be successful if done thoughtfully, and not as a knee-jerk response to a slow month. As with any customer acquisition or retention effort, know your audience, your goal and how effectiveness will be measured. With this data in place, even a low response rate will yield valuable information about future marketing strategies.
Julie D. Thompson is a consultant, writer and partner in J&J Marketing, http://www.2jsmarketing.com, which provides marketing strategy, analysis and copywriting services.
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