The Bloom Intelligentsia

When (and When Not) to Use Coupons to Entice Loyal Customers

Posted by Megan Flatt on Jun 1, 2017 9:56:00 AM

Coupons are an extremely effective way to influence consumer behavior, but they may not always be the right marketing choice for your business. Before you start a coupon program, consider your short- and long-term goals. Coupons can be great to get a new customer in the door, but that visit may not turn a bargain shopper into a loyal patron.

Some companies turn to coupons for a quarterly bump in sales or to move inventory that’s been sitting too long. If your company wants to use coupons to address customer churn, you’ll have to keep a close eye on several data points and structure the offers for repeat customers. Making haphazard decisions won’t get you the desired goal and may even lead to losing money.

Here are several factors to consider before beginning a coupon program to develop a loyal customer base.

Cost

Coupons aren’t free. They result in a decrease in your profits. You’ll probably want to sit down with your CFO or financial team to carefully consider the costs of a particular coupon program in relation to the potential upside in revenue.

For example, giving away a coupon for a free drink to someone who’s already sitting at your bar doesn’t exactly make sense. If they want a drink, they’re probably going to pay for it. However, offering a two-for-one drink special to someone for the next time they visit might make a lot more sense. For starters, they’ll likely buy more than just one drink, which means an improvement for your bottom line.

Also, if you’re trying to build a loyal consumer base, bringing people back to your business is a great way to build habits, establish a relationship with the customer, and generate more revenue in the long run. So even a coupon at the bottom of a receipt stating "Bring in your receipt and receive ______!" can be a successful and cost-efficient coupon strategy.

Brand Messaging

Consider what a coupon offer says about your brand. For example, how often do you see a coupon for a Rolls-Royce? Given that it's a premium brand, many of the car maker's potential customers would only find a coupon to cheapen the brand value.

On the other hand, most bars offer discounts or a happy hour. And, plenty of coffee shops have a loyalty program. Because coupons or discounts for these businesses are commonplace, they may not affect the customer's perception of quality.  So, depending on the brand-positioning of a business, such as a restaurant, a coupon may bring in customers or it may turn off potential diners.

Be sure to speak with your publicity and marketing teams before moving forward with a giveaway program. 

New Versus Long-Term Customers

Are you trying to reach new or existing customers? The answer to that question will dictate how and where you promote your coupons. Companies searching for new customers can put their coupons in newspapers, on Facebook, or even hand out postcards. They might even consider Groupon.  However, in circling back to cost, businesses need to be mindful of how much they're willing to spend to target those new customers. High Customer Acquisition Costs can quickly cause financial woes.

Companies trying to attract repeat customers and decrease churn rates must forecast the long-term benefits of such a program. For example, consider Bed, Bath and Beyond’s coupons that offer 20 percent off to regular customers. It may seem like a simple proposition, but such a large offer to so many people has to take into account how many customers are brought back to the store with the offers and the amount they spend on each visit.  

The right tools

There are many myths about offering coupons to drive customer loyalty.  But one thing is true: data is at the center of any effective loyalty program.  As noted in one article, without the "capability of using information about [customers] and turning the[] data into tailor-made individual shopper-specific propositions," loyalty systems "are no more than an expensive gadget."

Companies that offer Wi-Fi marketing and analytics can work with businesses to capitalize on the data collected for the most impactful coupon programs. For example, a company's Wi-Fi signup page can be designed to include a coupon that's given away to customers who are willing to enter their email address. A company can then use that email address to send numerous offers, making sure the offers are enticing for the consumer and impactful for the business.

And, with the email address, the business can A/B test slightly different coupon programs to see which produces better results.  You can even evaluate the types of customers who respond to certain types of coupons rather than others and create new coupon programs to target the specific buying personas. 

Customer churn is a challenge every business must tackle. Coupons can be a great way to address the issue. If you enact the program wisely, it can be a cornerstone of your marketing plan.

Learn How Stores And Restaurants Can Improve Customer Loyalty Programs With Wi-Fi-Generated Data | Download Our Free E-Book

Topics: coupons, Churn Rate, Bloom Intelligence, customer loyalty, loyalty program

Intelligentsia

noun in·tel·li·gent·sia

\in-ˌte-lə-ˈjen(t)-sē-ə, -ˈgen(t)-\

"A group of intelligent and well-educated people who guide or try to guide the political, artistic, or social development of their society."

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