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.
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