A lot of businesses use coupons to lure guests to their stores, or to increase sales. Other businesses complain that they lose money with coupons. The business owners that complain aren't doing it correctly.
A coupon is an incentive for new customers to use your business. However, you never structure a coupon to get just a basic item. You use coupons to encourage multiple sales. (A "2 for 1" coupon where they buy one pizza, and get the second one free means that the customer just spent $20, instead of $10.) A coupon where you give away a free meal, just for showing up, might get people in the door, but it costs you money.
In a previous article, I wrote about incremental revenue. http://power2negotiate.blogspot.com/ In this post I want to talk about how to use coupons effectively.
1) A coupon should bring people to your store. If it doesn't accomplish that, it is a failure.
2) A coupon should bundle products and services so that you increase revenue. (Giving away a free taco is NOT a coupon, it is suicide.)
3) A coupon should demand immediate action. This is not an attempt to establish "awareness" but to buy. (I don't need to put expiration dates on a coupon. I need all coupons to be profit centers, every time, and for every occasion.)
4) A coupon should bundle high profit margin items with low profit margin items to increase revenue...and increase profit. ("Buy a meal, get a free beer", "Buy two, get the next one free", "Free dessert with every family meal", "Buy three pizzas, get free breadsticks") By increasing the per head (dollars spent per customer) you are exponentially increasing the profit margin, and profits.
5) You MUST know your costs. What are your fixed costs? What are your incremental costs per unit? What is your shipping costs? What is your cost per sale to a new customer? What is your cost per sale to an established customer?
6) Your coupon must be an orphan. This means that it must NOT steal profits from the rest of your business, but must add profits by itself. If it does not, a coupon could put you out of business.
7) BUNDLE, BUNDLE, BUNDLE each service with another product/service to increase revenue. Always be thinking of giving a discount on the ADDITIONAL purchase, rather than the INITIAL purchase. $20 of revenue is better than $10 of revenue.
8) Take action NOW! Each coupon should have such an attractive offer that it brings people in the door.
If you use coupons correctly, each coupon will generate additional revenue...and be profitable. If you do it incorrectly, you will lose money on each sale, but you will make up for it in volume.
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