How to Use Coupons & Discounts without Sacrificing Profits

Businesses use coupons and discounts to attract customers and make them want to shop with them instead of the competition. However, using coupons and discounts frequently, or sloppily, can permanently eat into profit.

JC Penney used to run the appearance of a permanent sale. The customers loved knowing that they got a good bargain. But because the store was offering nonstop discounts and promotions, customers began to anticipate it. When the business altered its strategy and began offering exclusive discounts, the customers were furious. The business isn't yet fully recovered from the fallout.

To sum up: couponing and discounts need an amount of money.

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

Here are eight ways to use coupons and discounts without losing the earnings.

1. Encourage a repeat purchase from customers who are new to you.

When you rethink the meaning of coupons to new customers, it becomes clear that it's actually a lead-generation instrument. The goal of a coupon isn't just to generate just one sale. It's to win a customer in order to sell to them again.

The question is how to motivate to make a purchase again?

A good way to do this is by giving customers a coupon for a second time after the purchase to way to thank them for being an incoming customer. You can make this coupon a lower amount, or require a higher amount of money to purchase the coupon, for example "spend at least $100 and receive 20% savings."

Another approach to motivate an additional purchase is to get customers to join to your mailing list, and start emailing or texting them. By using email, you will be able to help the potential customer understand the other services and products you offer and how you can solve the problems they face, the ways you can bring joy to your customers, and whatever other benefits you provide. This can all be accomplished without any discounts at all. Keep them in mind and they'll be more likely to buy again.

MailPoet offers the necessary tools to create a welcome email series where you can begin the customer follow-up and nurture process.

2. Use tiered coupons instead of percentages

In the last tip, we discussed the strategy to offer a 20% discount for spending $100 or over. Consider the benefits the discount scheme could provide you. What do most people think about? They'll spend more to get discounts.

It is possible to use the same approach to give tiered coupons, but with no percentages. Examples:

• Pay $40, and you'll earn $10 back
• Spend $100 and get 20 dollars back
• Spend $250 and receive $50 back

With this kind of arrangement, notice that the sum the client gets back is a flat amount, regardless of whether they spend way higher than what is required.

For example, a customer spending $50 gets $10 back and you earn the sum of $40. However, if the customer purchases $80 the customer will will get their $10 back which means you earn 70 dollars. If their final cost exceeds the amount of $80, they could attempt to bring it above $100, so that they could get the money back in lieu of. In either case, you earn more profit.

However, with a flat percent discount your profit margins stay exactly the same no matter what quantity they spend. If they spend $100 and receive 20% off, you make an amount of $80. But if they spend $200, the 20% discount will now be $40.

The flat dollar discount works better for you as it boosts an average size order without raising the discount at the same rate.

3. Use a loyalty program

Although loyalty programs might not be ideal for every company, they are an great ways to generate long-term revenue. For one thing, some customers love them and keep coming back for more rewards to grow!

This also gives you something to communicate with them by email since if they do not buy something for a couple of months, it is possible to remind them of how many points they've got, and what they can buy with the points.

4. Create a subscription or membership

Discounts work wonders in the event that you are able to transform them into ongoing revenues. If you can create a successful subscription model to your organization, just about any discount can be financially justifiable.

As an example, let's say there's a monthly subscription for $19 option. If you can demonstrate that your customers will stay subscribed for at minimum six months in total, that's $114 in recurring revenue. Would you offer a $25 off coupon if it meant you had a new member that generated an average of $114 in revenues? How about the initial month for only 99 cents?

In order to get customers interested in joining your membership, you could do giveaways and much larger discounts. You'll earn your money back as well as more. The idea is to win them over with a big reward, and then continue to provide value so they stay around indefinitely.

Another option is to give an offer of a discount on your subscription itself. It could be that everyone who spends over $100 gets 20% off of their membership. The savings are still worth it due to the potential recurring income.

5. Use product bundling discounts

When you bundle items they are less competitive in price and more on the convenience you're providing clients. Bundles are more fun particularly if you pack them well.

You could offer 20% discounts on the bundle of products that provides an excellent deal to the customer and still provides better profits for you. Why? Your average order value is higher and the cost of packaging and shipping are less than if you were to sell each item separately.

6. Incentivize referrals

The power of word-of-mouth is immense. However, it's not always sufficient, and it doesn't happen in the way you'd think it would.

To reward your loyal customers, give them the incentive to tell their friends about you. You can give them coupons that they could give to their acquaintances, and if their friends use them to redeem coupons, your customer will also be rewarded.

It's smart to use coupons as it can bring in a an additional customer who you might not be able to reach otherwise, and you turn your current customers into brand ambassadors.

Coupons can be sent like these via snail mail or text messages. You can also just send links to a landing page which has coupons available to new customers, and request them to forward it to friends.

7. Offer upsells

The best part is that it doesn't feel like you're pressuring customers, since you're providing the same product they previously purchased but with a different version of it.

It is possible to offer additional upsells too, including the possibility of selling your subscription. If you're offering coupons or discounts, upsells give you an opportunity to recoup those profits that you lost from the similar purchase. Also, if the product you're offering upsells is connected in any way to products that the customer is already buying this is a natural decision for them as well, and some may be willing to take it up.

8. Give a rationale to sell your product

We are right back JC Penney story. They didn't have a rationale to maintain their rates. Thus, consumers came to anticipate and sometimes even demanded their prices.

The way to avoid this is to run sales when you have a reason to do so. You can get creative here. If you are able to justify your sale price, even your most loyal clients will be willing to take you up with no expectation of to see it again in the near future.

Using coupons and discounts in this manner increases loyalty , and also attracts new customers, but it doesn't box your customers in to future expectations for discounts.

Motives to sell can be found just about anywhere:

• Celebrating a local sports team that has won
• Thanking customers for X years in business
• There is a lot of stuff needs to be cleared
• Festive Season
• New customer discount
• In the process of donating a part of profits to charity
• Utilizing an article in the media that you can relate to your company

Coupons and discounts that are smart increase long-term revenue

These ideas all serve to achieve the same goal in that they help thread the needle to attract new customers, without making too big a profit or leading to price-conscious customers.

The things you need are loyal customers, repeat buyers as well as recurring revenues. Coupons and discounts used in ways that produce any or all of those are usually the best choice.

Leave a note in the comment section if you have other ideas!