Insights For Success

Strategy, Innovation, Leadership and Security

Are coupons an efficient marketing tool

Behavior, Marketing, salesEdward KiledjianComment

From newspapers and magazines to flyers and pamphlets, coupons are everywhere. They have become so popular that “coupon clipping” is now a hobby. Putting aside the thrill of saving money (sarcasm intended), is the cost worth it for the retailer or manufacturer?

Risk Sharing

Using your friends and neighbors as your own personal test subjects is always a lot of fun. Recently a new Greek restaurant opened in my area. The decor looked simple but elegant and their menu appealing. I have gone to too many “bad” restaurants and I simply wasn’t in the mood to risk going to another one. But I started thinking about what would make me try this new place? After all, if I liked it, I surely wouldn’t mind paying their moderate prices. It is when it dawned on me, a coupon would have made the decision to try them easier. In my particular case, not out of a desire to save money, but as a risk sharing mechanism. If I go and dislike the experience, at least the cost of the experiment would have been acceptable. If I liked it, they would have made a new customer who, in the future, would be willing to pay full price.

Determine if leveraging coupons as a risk sharing model makes sense. If it does, then this may be an excellent and cost effective marketing vehicle.

Hello World

Some companies use coupon distribution as a way to generate awareness of their business or offering. This one is a maybe. Any marketer will tell you that a standard coupon redemption rate is between 2-4%. There are many reasons why the response is so low, but getting visibility in the pile of other coupons may be one of them.

It is true (and I will write about this in the future) that you must constantly be in your customer’s line of sight but you will likely realize this was a waste of time. Spend your money on other marketing channels.

The Zero-Sum game
A zero-sum game is any market where your gain is someone else’s loss. This applies to markets where the number of new potential customers is slim or non-existent. Customers buying a prepackaged loaf of bread in the supermarket may be zero-sum in certain markets. Most customers will walk in and buy whatever is cheaper or appealing that day.

Are coupons for these types of products effective? No. Although manufacturers will continue to offer them hoping to build enough familiarity to create long-term customers, in the short-term, it’s not worth the investment. If you are in this type of a market, try differentiating yourself instead of cutting your prices. In the sliced bread example, companies know that kids prefer white bread but that parents want the wholesome goodness of whole grain bread (brown). So some companies have decided to create white bread with the added goodness of whole grains. This is a much better strategy than simply trying to buy a one time customer with a coupon.

Think differently
If you decide to implement a coupon marketing strategy, be different and measure. Whatever you do, find a way to differentiate your coupon and make it stand out. It doesn’t matter if it is oversized, colored in pink or jumps out at you when you open the paper, be different to get attention.

Once you determine the best vehicle, measure it as granularly as possible. Run statistics to ensure you are targeting the right people, at the right place, at the right time with the right promotion.