How to Use Coupons & Discounts without Sacrificing profits

Businesses use coupons and discounts to attract customers and motivate them to shop with them rather than the competitors. But using coupons and discounts too often, or in the wrong way, will eventually eat into profits.

JC Penney used to run some sales that seemed to be permanent. The customers loved knowing that they were getting a great bargain. Since the retailer offered discounts on a constant basis that customers came to expect it. Therefore, when the store altered its strategy and began offering selective discounts, customers revolted. The business remains far from fully recovering from the aftermath.

It is important to note that using coupons and discounts requires the use of a balance.

If you're a proprietor of a shop As a store owner, you're looking to attract customers, but you don't need to compromise profits particularly in the long run.

Here are eight methods to make use of coupons and discount without giving up excessive profits.

1. Inspire a purchase from customers you have not previously met.

If you think about what a coupon is for new customers, it becomes clear that it's an effective lead generation tool. The purpose of the coupon isn't to make just one sale. It's about gaining a new customer and then sell to them again.

How do you encourage a second purchase?

One way is to give the customer a second coupon following they have made a purchase as a thank you for being a new customer. Make this coupon either less, or even require a larger cost of purchase to redeem it. For instance "spend $100 or more and receive 20% savings."

Another way to motivate another purchase is to convince customers to join by providing their email address, and start emailing and sending them texts. With email, you can help the potential customer understand your products and services as well as how you address the problems they face, the ways you can bring joy to your customers, or any other benefit that you can offer. You can do all this with no discounts whatsoever. Stay on their mind and they'll be more likely to purchase again.

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

2. Use tiered coupons instead of percentages

In our last article we talked about the idea to offer discounts of 20% on purchases of $100 or over. Think about the advantages the discount scheme might bring you. What do most people think about? You'll have to spend more money in order to receive the discount.

Similar strategy to offer coupon tiered, however with no percentages. Examples:

• You can spend $40 to earn $10 back
• You can spend $100 to earn $20 back
• You can spend $250 to get back $50

If you use this type of system, notice that the amount the customer will receive is a single amount, regardless of whether they pay higher than what is required.

For example, a customer spending $50 gets $10 back and you earn $40. However, if the customer purchases 80 dollars, they nevertheless get $10 back, which means you earn $70. If their final cost is higher than the amount of $80, they could be able to increase it above $100, so that they could be rewarded with a $20 refund instead. In either case, you earn more profit.

However, with a flat per cent discount, the margins are the same regardless of the quantity they spend. If you spend $100 and get 20 percent off, that's an amount of $80. If they buy $200, the 20% discount will now be $40.

The flat dollar discount works out more in your favor, because it increases average order size without increasing discounts in the same percentage.

3. Utilize a loyalty programme

Although loyalty programs might not be an ideal fit for each business, they can be effective in creating long-term revenues. After all, some customers love them and keep coming back for more rewards to grow!

Also, this gives you something to follow up with them by email since if they do not buy any items for the next few months, it is possible to remind them how many points they've earned, as well as what they are able to buy with points.

4. Make a membership or subscription

Discounts are a great way to increase sales if you can transform them into ongoing revenue. If you can create a successful subscription model to your organization, just about any discount can be financially justifiable.

For example, suppose that you offer a subscription of $19 per month as an option. If you are able to prove that the customers who subscribe to your service will remain for at least six months, on average you'll earn $114 in recurring revenues. Would you offer a $25 discount coupon, if someone joined your membership and earned the average of $114 revenue? What about the first month that costs only 99 cents?

In order to get customers interested in joining your membership, you could offer giveaways, as well as larger discounts. You'll earn your money back and much more. The goal is to lure the customers' attention with a substantial rewardand continue to provide value so they'll be loyal to your service for years.

A different approach is to provide a discount on the 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 due to the potential recurring income.

5. Use product bundling discounts

If you bundle your products, you compete less on pricing and focus more on the convenience you're providing consumers. Bundles can be more enjoyable particularly if you pack them well.

Offer a 20% discount on an item bundle which gives your buyer and yet generates better returns for your company. Why? Your average order value is greater, while the cost of packaging and shipping are less than if you sold all those items separately.

6. Incentivize referrals

Word of mouth is powerful. However, it's not always sufficient, and it doesn't happen as often as you might think it would.

If you have the most faithful customers, offer them another reason to inform your friends about you. You can give them coupons that they could distribute to friends If their buddies redeem them, the customer could also earn a reward.

This is a smart way to coupon because it wins a potential customer that you would not normally have reached. Additionally, you turn your current customers into brand ambassadors.

You can send coupons like this by email, snail mail, or text message. Also, you can provide links to a page on your website with coupons specifically for new customers and ask them to forward it to friends.

7. Make upsells available

Best of all, it isn't like you're trying to pressure customers, since you're providing exactly the same item they've had already made a decision to purchase but with a different version of it.

You can offer other upsells too, including the possibility of selling your subscription. If you're offering coupons or discounts, upsells give you a way to make back any profits lost on the same purchase. Also, if the product you're offering upsells is connected in any way to the products the customer is already buying this is a natural decision for them as well, and some may accept your offer.

8. Give a rationale for your sale

It brings us all the way back to our JC Penney story. They didn't have a rationale for their regular sale price. Thus, consumers came to anticipate and sometimes even demanded these prices.

The way to avoid this is to conduct sales when you have an incentive to do it. You can get creative here. If you are able to justify the sale price the most loyal clients will be willing to take you up with no expectation of it in the future.

Using coupons and discounts in this manner increases the loyalty of customers and draws new ones however it does not tie you in with any long-term expectations of discounts.

Reasons for a sale are found almost everywhere:

• A local team celebrates that has won
• Thanking customers for X many years of business
• There is a lot of stuff you need to clear out
• Festive Season
• Discounts for new customers
• Planning to donate a portion of the sales proceeds to charities
• Profiting from a story in the news in a way that is relevant to your company

Coupons and discounts that are smart boost long-term profits

All these ideas serve the same purpose -- to thread the needle to attract new customers while not making too big a profit or making price-conscious customers.

The things you need are loyalty customers, regular buyers, and recurring revenue. Utilizing coupons and discount offers in ways that produce one or more of these is usually a smart decision.

Leave a note in the comments section if have any other suggestions!