Coupons

Seth Godin has an interesting post on his blog today that fits nicely into our discussion on pricing.  The subject is coupons.  He points out three benefits of coupons and two warnings.  First the benefits.

Number one, a coupon allows you to offer different prices to different customers. Maybe you'd like to offer a greater discount to customers who travel a greater distance.  Zip code mailing lists would be one way to do that.  Zoned advertising would be another. 

Number two is that "they provide the shopper with a totem." Some customers view a coupon almost like a check.  They have to cash it.  If they don't buy, they lose something, the value of the coupon.

Number three, coupons create a feeling of urgency.  If I want to save (or not lose) the value of the coupon, I have to buy before it expires. 

I would add two more benefits.  Coupons level the playing field.  You don't have to be a giant retailer to offer a coupon.  If you use email or the Internet to distribute them, you have virtually no cost until they're redeemed.  Even if you use other media, the cost of the discount is only incurred when the coupon is redeemed.  Occasionally you'll give a discount on a sale you would have gotten anyway, but most coupon sales will be incremental business that you wouldn't have gotten otherwise.

Finally, when a shopper walks into your store with a coupon you immediately know two things.  One, she's serious about buying.  She wouldn't have gone to the trouble to bring in the coupon if she wasn't considering a purchase.  Two, you know that price is important to her and can tailor you presentation accordingly.

Godin's two caveats?  Don't do a coupon if you can't execute it properly.  In particular, don't use coupons for high-end products. If you're selling to the luxury buyer, a coupon sends the entirely wrong message.  Even the value shopper may be put off if the coupon isn't presented properly.  Finally, "if you make the use of the coupon a hassle, you've blown it."  If there are exceptions, state them clearly.  If there's an expiration date (which there almost always should be), make it very clear.  Spending money to bring a customer into your store and then making them mad is not a good use of advertising/marketing dollars.