Tips for Using Coupons and Discounts Without Sacrificing profits

Companies use discounts and coupons as they draw customers in and encourage them to buy from them instead of the competition. The problem is, using coupons and discounts often or in the wrong way, will eventually eat into profit.

JC Penney used to run some sales that seemed to be permanent. The customers loved knowing that they had a fantastic deal. However, since the shop had a regular schedule of discounts and promotions, customers began to anticipate that. When the business altered its strategy and began offering exclusive discounts, the customers were furious. The company remains far from fully recovering from the saga.

To sum up: using coupons and discounts requires the use of a balance.

As a store owner, you want to attract buyers, but you don't need to compromise profits, especially over the long term.

Here are eight methods to utilize coupons and discounts without losing too much in profits.

1. Inspire a purchase from customers who are new to you.

If you think about what a coupon is for prospective customers, you see that it's an effective lead generation instrument. The goal of a coupon isn't to make only one purchase. It's to win a customer so you can offer them a second time.

So how do you motivate a second purchase?

One way is to give them a second coupon after their purchase, as a thank you for being a new customer. Make this coupon either a lower amount, or even require a larger purchase price to use the coupon, for example "spend $100 or more to save 20%."

Another approach to motivate an additional purchase is to get your customer to sign up by providing their email address then begin sending emails or texting them. With email, you can inform the customer of your products and services as well as how you address their issues, and how you deliver joy, and whatever other benefits that you can offer. You can do all this without having to offer any discount at all. Be on the lookout for them, and they'll be more likely to buy again.

MailPoet provides the necessary tools to build a welcome mailer sequence that will allow you to begin the follow-up with your customers and nurture process.

2. Use tiered coupons instead of percentages

In our last article, we discussed the strategy that offers a 20% discount when you spend $100 or greater. Take a look at the benefits that this kind of discount structure could provide you. What are the most common actions customers take? You'll have to spend more money in order to receive the discount.

You can use a similar strategy to offer coupon tiered, however without any percentages. As an example:

• You can spend $40 to receive $10 in return
• Spend $100 and get $20 back
• Spend $250 and get back $50

Using that type of structure, notice that the amount the customer gets back is a flat amount, regardless of whether they are spending more than the minimum.

In this case, a person who spends $50 receives $10 back which means you get $40. If a person spends around $80 then they will get their $10 back making you 70 dollars. In the event that their total cost exceeds $80, they can try to get it to above $100, so that they could be rewarded with a $20 refund instead. In either case, you earn more cash.

But with a flat per cent discount, the profit margins stay identical regardless of the amount they spend. If you spend $100 and then receive 20% off, you make $80. If they buy $200, 20% off now becomes $40.

The flat dollar discount can work to your advantage, because it increases an average size order without raising discounts by the same percentage.

3. Use a loyalty program

While loyalty programs aren't necessarily the best fit for every firm, they're an an excellent way to create sustainable revenues. After all, some customers love them and keep coming returning to see their rewards increase!

This also gives you something to communicate with them over email, since if they do not buy any items for the next few months, you could remind them of the points they've got, and what they can buy with them.

4. Make a membership or subscription

Discounts can be extremely effective when you convert them into regular revenue. If you're able to build a successful subscription system for your company almost any discount is financially justified.

As an example, let's say that you offer a subscription of $19 per month as an option. If you can demonstrate that the customers who subscribe to your service will remain for at least six months, on average this is $114 in recurring income. Would you consider offering a 25 percent off coupon if it meant that someone signed up to your program with an average of $114 in revenue? What about the first month that costs only 99 cents?

To get people to sign up for your subscription, you can offer giveaways, as well as larger discounts, because you'll make cash back on the purchase, and more. It's the idea of winning customers with a huge incentive, then to provide value so they stay around indefinitely.

Another option is to give an offer of a discount on your subscription itself. You could say that anyone who makes a purchase of more than $100 will receive 20% off of their membership. This is still profitable thanks to future recurring revenues.

5. Use product bundling discounts

When you bundle products, you compete less on pricing and focus more in the ease you offer your clients. Bundles are more fun particularly if you pack they well.

It is possible to offer 20% discounts on the bundle of products that provides an excellent deal to the buyer and yet generates better returns for your company. Why? Your order's average is higher and the cost of packaging and shipping are lower than if you were to sell each item separately.

6. Incentivize referrals

Word of mouth can be powerful. But it's not always enough, and it doesn't happen in the way you'd wish for.

For your most loyal customers, provide them with an extra reason to tell them about your business to their acquaintances. Give them coupons they can pass out to their friends If their buddies use them to redeem coupons, your customer could also earn a reward.

It's smart to use coupons as it can bring in a an additional customer who you might not have otherwise reached, and the existing customers turn to brand ambassadors.

You can send coupons like this via email, postal mail, or text messages. You can also just send links to a page on your website that has coupons to new customers, and request them to forward it to their contacts.

7. Upsells on offer

The best part is that it isn't like you're trying to pressure them, because you're offering the exact product that they have had already made a decision to purchase but with a different version of it.

It is possible to offer additional types of upsells, for example, upselling your subscription service. If you're offering coupons or discounts, you can use upsells to provide a way to make back the lost profits on the exact same purchase. If the product that you're selling is related in any manner to what the customer is already buying and buying, it's a natural decision for them as well, and some may be willing to take it up.

8. Give a rationale to sell your product

This brings us right back JC Penney story. They didn't have a rationale to maintain their prices. Thus, consumers came to anticipate and sometimes even demanded them.

The way to avoid this is to conduct sales when you have a reason to do so. You can get creative here. So long as you justify the sale price, even your most loyal customers will take you up with no expectation of it in the future.

Using coupons and discounts in this manner increases loyalty and attracts new customers However, it doesn't tie your customers in to long-term expectations of discounts.

Motives to sell are found almost everywhere:

• The celebration of a local sports team that has won
• Thanks to customers for X many years of business
• There is a lot of stuff must be cleared
• Festive Season
• Discounts for new customers
• Planned to donate a percentage of sales to charity
• Taking advantage of an event in the news that you can relate to your own business

Discounts that work and coupons that make sense increase long-term revenue

These ideas all serve all have the same aim -- to thread the needle in the direction of attracting new customers without giving away too much profit or creating price-obsessed customers.

What you want are loyal customers, repeat buyers and regular revenue. Using coupons and discounts with the intention of generating one or more of these are usually the best choice.

Make sure to leave a message in the comments if you have any other suggestions!