Is Couponing Worth Your Time?

It’s a great debate in the marketing world right now: Will coupons help you grow traffic or just cannibalize sales? Online and mobile have changed the nature of couponing: Coupons can be printed out, called up on a mobile device or represented by a short code.

Couponing remains very popular with start-ups, particularly those using a subscription billing model. Coupons attract new customers.

Don’t underestimate coupons. Ron Johnson lost his job as CEO of JCPenney partly because he didn’t understand the power coupons still hold on the public imagination. He said, “I thought people were just tired of coupons and all this stuff. The reality is all of the couponing we did, there were a certain part of the customers that loved that. They gravitated to stores that competed that way. So our core customer, I think, was much more dependent and enjoyed coupons more than I understood.”

Of course, retail is very different sales environment from online subscription services, but there is ample evidence that new customer acquisition is still motivated by coupons.

Pros and Cons of Coupons

Here are some important things that coupons do for your brand image, along with recommendations on the type of subscription service that can benefit from coupons.

Pros

• The best part about coupons is that they make marketing efforts trackable. You know who saw what and and how much revenue it generated.
• Coupons attract new customers, which is hugely important for subscription businesses. The hope is that those customers will stay with their subscription.
• Having solid numbers is crucial before an important round of funding.

Cons

• Would those new customers have paid full price? Will they jump ship as soon as someone else offers a coupon?
• Constant coupon offers condition customers to wait for new offers.
• If average order size is one of your critical metrics, coupons can hurt by reducing orders to only what is covered in the discount.

Who should be using coupons?

Coupons work for businesses that position themselves as cost-reducing or time-saving alternatives. If you are confident that customers will see your value once they give you a try, couponing is one of the fastest ways to grab attention and referrals. Unfortunately, this is only a short-term strategy if you are working on thin margins. Also, if your strategy is to move up quickly into the higher end of the market where service matters more and customers are not so price sensitive, coupons work against the impression of exclusivity.

Want to learn more tips to make the most from each sale?

In our free price optimization guide, you’ll learn how to set up and run experiments that help you get the most from every sale, with specific experiments based on your business stage, and more. Get it below: