When searching for marketing strategies that will increase customer attraction and enhance the loyalty of existing ones, small business owners get lost in a myriad of solutions that might work for them or not. And by “work” we mean, deliver results; gain new customers, increase conversion rates, increase the minimum basket of each customer and many more.
We are all aware (hopefully) that the global economy is at a low point, so customers always look for quality at the best price. External factors (that have nothing to do with your products or your prices) have resulted in customers spending less, especially for items that are not of absolute necessity.
It is only reasonable that you will get their attention by offering discounts, run frequent sales on last items or offer free shipping. BUT – here comes the biggest question: How will your company increase revenues when you sell at lower prices (by offering discounts)? And how much lower can those prices be, to still get some value out of such promotional actions?
In this article, we are going to explain how your small business can use discount coupons to boost sales and give examples of how you can do it. The key concept here is that, if you never try you’ll never find out if how your customers will react to them. In any case, you got nothing to lose if you run small “experiments” by tweaking the “recipe” a bit every time.
Small business coupons 101
So, what exactly are discount coupons? A coupon essentially is a percentage-based discount. This can include small incentive discounts like 5% or 10% off, discounts to drive sales up to 20% and 25% off, or large percentages above -50% to liquidate stock that isn’t moving or old.
Discount coupons can be given to your clients printed or (and this is better) be sent to them via email for their future purchases. A quick step back here: It is really important to build a mailing list by using an email service (like MailChimp for example) to help manage your customer base and draw conclusions on how your discount campaigns perform. Your customers or visitors to your online, or physical store, can subscribe their email address to receive news and offers from you. Τhis is a great way to stay in touch with potential customers and tempt existing ones to keep coming back for more.
When and how to use discount coupons
Depending on your company’s industry, you can choose one or more occasions to offer coupons. In almost any kind of retail, you can take advantage of seasonal sales and big events to drive in more sales and meet your goals.
Also, you can always use last-minute offers for your most popular items that last for a day or a weekend. This is great to urge customers to buy NOW your best-sellers, which means guaranteed revenue increase!
Τhere is the case that a lot of customers abandon their cart and never proceed with the purchase (online retail cases). The discount coupons here can be a very persuasive incentive to finalize their order, so it’s a win-win situation really.
Αnother good practice, followed by the majority of retailers, is to offer an “email/newsletter subscription discount” so they can give your online store a try. Plus, you get to expand your mailing list and increase the chance of conversion.
For a small business owner that does coupons for the first time, there are some generally applied principles on how your coupons have to appear, and of course, how much the discount should be so your profit margins aren’t razor-thin.
So here are some guidelines:
- High discount percentages should be applied to items that are well-known. This way you play it safe!
- You want your coupon to have specific terms; Applying to specific products for a specific period of time.
- Τhis time-frame should not be so small that no one has the chance to buy your product or service. But they should not extend for too long, so your offer becomes meaningless.
- One-time promotions don’t tempt repeat customers. You need to keep them coming!
- To figure out the coupons’ expiration dates you can use the average timespan it takes until a customer returns and divide it by two to calculate the coupon’s expiration date.
Let’s look into a hypothetical case study for an e-shop!
If the average basket before applying a coupon is $100 and your profit margin is 30%, then your net profit is $30.
So, by giving a 10% discount coupon and the average basket went to $200 (discount applied) then your net profit would be:
Cost of goods sold 220 x 70% = $154
Profit = 200 – 154 = $46
You realize that, even though you have a 10% off, your profit increased by 13.8%!
This is merely an example of how much your company will gain from coupons, so our strong recommendation is to, at least, give it a go and see how it goes. Experiment and watch how the average basket will perform, while keeping in mind how up it should go in order to gain more from each order. Plus, let’s not forget that your conversion rate is highly likely to go up which means increased orders from the same number of visitors.
Make it appealing
Just because you offer a discount, doesn’t mean that people will rush in to buy your products (which is a bit unorthodox, we know!).
Make sure your coupon is attractive, well-written and simple to understand. The message should be clear and visuals can help you get through to your customers easily. And don’t forget to include your company’s logo to strengthen your brand!
Distributions channels can be both online and offline, of course. Online channels include email marketing, social media posts, online ads and your website. While, offline distribution channels can be flyers, magazines, and newspapers. When your coupons are ready to go, you need to design a campaign (see MailChimp’s services mentioned above for email marketing campaigns) and group your target audiences accordingly. Meaning, separate coupons to your “abandoned carts” from your “first -time buyers” etc. Run tests to see which online distribution channel delivers the best results and focus your energy there.
Offline channels targeted to a broader audience, so you can use for season sales, new arrivals and generally big events regarding your brand.
Service companies can do coupons, too!
In this post, we mainly focused on online retail rather than the services sector. Services have a different approach on coupons, but that doesn’t mean they’re inapplicable.
For example, you can offer coupons in order to urge clients to close a deal up until a specific date, to get 10% off the agreed amount. Another example would be to apply a percentage of discount if the client pays in advance for a project. This could be great if you need to hit your revenue goals in a month that is somewhat “quiet”.
If you have any coupon techniques to share with us, please feel free to add a comment with your success story or, even better, share your experiments!