In some businesses, like tech startups selling a digital product, or companies with a low Cost of Goods Sold, it may make sense to offer a periodic discount like a “Buy One, Get One Free” or a “25% off on Saturday” type coupon.
Discounting allows people who are current customers to get a little something extra, and potential new customers to visit, sign up, or participate.
However, if your industry has thinner margins and inflexible costs of doing business (labor, rent, inventory or raw materials, insurance, carrying costs, etc.), your ability to offer a discount may hinder or actively hurt your business model.
Consider the latest brouhahas from Groupon, the group coupon service. Ellen from Restaurant Intelligence Agency breaks down a groupon for the restaurant industry:
http://unplugged.restaurantintelligenceagency.com/2010/03/5772-new-customers-how-can-i-not-love-groupon.php and TechCrunch archives the Groupon fallout from a fradulent photography deal: http://techcrunch.com/2010/09/16/groupon-photography/
For some businesses (do the math), a groupon or periodic discounting service may work. In some cases, it will not work for your company. In some cases, it will.
Consider, too, the impact to your business of having a “discounted” rate and what that does to your existing product and service list.
- Do you attract people who just need a freebie?
- Do you think any of the people using a coupon intend to continue doing business with you?
- Is the clientele that “can’t afford you” unless there’s a discount going to be a supportive clientele that continues purchasing from your business after that initial coupon deal?
- How many times must that customer return until you “make back your money” on the coupon cost?
Without adequate data, it’s difficult to assess if marketing through the use of discounting and coupons provides a bottom-line boost to your profit. In some cases, you’ll have to accept the cost as a advertising expense.
However, in our line of work (web design and development), our belief is that you can create greater “buzz” and increase the types of customers who interact with you (on Facebook, Twitter, through your website and blog, or on review sites) by targeting your desired customer base and speaking directly to them.
Does it make sense to offer a coupon to 1000 mis-matched people who will never come back to your company, restaurant, small business, or practice again?
Does it make more sense to provide an excellent finished product or service to 100 people, who then go on to tell their associates, and who return to you for any additional work?
Does it make even more sense to embark on a targeted customer acquisition strategy, and provide value-added items to your existing base?
How much does the coupon cost you? – it’s a real coupon, which buys real products and services, which cost real money…
Difficult questions for the business owner, but important in today’s economy.
Consider what works for your company, do some conservative financial projections, then make a choice about how you’ll reach out to your customers.
Web developer Monica S. Flores of 10K Webdesign works with green businesses, progressive organizations, and membership groups to build websites that foster a feeling of community. She is the author of “Fifty-one Ways to Build Your Community of Clients Online” (book and e-version), “Social Networking for Women in Business” (book and e-version), and “Thirty Steps to Starting your Green Business” (book and e-version).
Follow her at @monicadear for information and news on multicultural women in business, green business development, and success-oriented women.
I agree with a lot of what is in this post. Really what it comes down to any coupon deal worth doing ends up being a bait and switch. I really don’t mean thins in a bad way, but providing a perceived value.