Using Coupon Marketing Without Losing Potential Profit

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Many companies, and even small ecommerce outfits are wary about using coupon marketing today. Even if there are some good reasons to begin working with it, there are a lot of people hesitant about it all and the number one reason is because there’s a potential to lose profit. It’s true, if you’re going to discount the price of an item or several items in your shop, you will lose money. However, the losses can be minimized and in some cases, help sell other options if done right. The point of coupon marketing is not to get you to sell through all your inventory and have no money at the end. The notion of “clearance” doesn’t always dictate losses, but some business owners assume that coupons will immediately downgrade their profit margin to a place of non existence. That’s not true.

There are several ways that you can use coupons to help boost marketing efforts, sales, and profits all at the same time. The key is to step back and look at what is selling, what isn’t, and how you can communicate value to a customer base that you may or may not have. Consider the following tips that will help you not only have a good sense of coupon marketing, but maintain a high ratio of profit as well.

Buy One Get One Half Off

Here’s a classic coupon offering that has many brick and mortar shops packed every so often. Passing out discounts where one item is registered at half off when purchased with something that is full price is a good way to not only maintain a good relationship with the consumer but also make profit. The profit margins have to be adjusted so that heavy losses are avoided, but it’s not complicated. A bit of math will add some of the profits to the full price item, while the discounted item will have an increased inherent value. The balancing act here is one that has to be treaded on lightly, because if you overcharge on all items, the coupon will not seem to be effective, and will only cause people to walk away from the offer. Balance the numbers to an appropriate ratio and you’ll never lose profit on this discount.

Give Away Items After Multiple Purchases

Buy 3 get 1 free, or any ratio that you want to come up with definitely works wonders here. Again, the mathematical proportions have to be worked through in order to benefit with this, but it’s not an impossible task. Too often, giving away something seems like you’ll lose every time, but not if you’re selling 3 items that cover the cost of the free item. Again, a balancing act has to be placed here or you could end up messing up your profits overall. You’ll need to know your audience well enough to figure out how this will work out overall, so make sure that you’re very careful how you word your discount on this and what ratio of items are going to be included.

Exclusions

Some companies make sure that they are not losing profit by simply omitting a great deal of items from the coupon itself. You can work with this very well, but be careful. Do not have so many exclusions that the inherent value of using coupons no longer works. The key to working well with coupon marketing is to provide a value to the consumer so that they actually spend more money. If you are discounting 10% (for example) and you aren’t going to let them use the discounted option on a stream of the most wanted items, then you’ve shot yourself in the foot and will not gain fanfare. It’s with that in mind, that you should exclude a very select amount of items, or perhaps only omit “clearance” items.

Focusing on the Future

One way to ensure that you’re using coupon marketing and are still in the black is to look at date structures. Structure the date of the coupon for the future. It takes a little bit of planning, but you can set up a discount coupon for the future, by having people spend a certain amount today. If a customer spends $75 (for instance) today, they can stand to save $50 or any percentage you decide on a future purchase within a certain limit. The key here is twofold. You want people to feel that they are getting a discount for the next time, giving them a purpose to return to the shop. Secondly, you will want the time limit to expire. Chances are people will forget about the future coupon, which means net profit overall, even if a fraction of the customers do remember to use their coupon later on. Chances are, you’ll have more misses, than hits, which means pure profit on the notion of marketing with coupons.

Nick Dean works at Couponedo, an online coupon maker that helps small businesses market more effectively. This is the second article in his coupon marketing series.

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