How to Use Coupons & Discounts Without Sacrificing profits

Coupons and discounts are used by businesses as they draw customers in and make them want to buy from them rather than the competitors. But using coupons and discounts too often, or in the wrong way, will eventually reduce profit.

JC Penney used to run what seemed like permanent sales. People loved the feeling that they were getting a great deal. Since the retailer was offering nonstop discounts that customers came to expect it. So when the company altered its strategy and began offering exclusive discounts, the customers were furious. The business isn't yet fully recovered from the fallout.

To sum up: using coupons and discounts requires the use of a balance.

As a store owner, you want to attract buyers, but you don't wish to lose money, especially over the long-term.

Here are eight ways to make use of coupons and discount without sacrificing too much in profit.

1. Inspire a purchase from customers you have not previously met.

When you rethink the purpose of coupons for prospective customers, you see that it's actually a lead generation tool. The purpose of the coupon isn't to make just one sale. The goal is to gain a client and then offer them a second time.

So how do you motivate to make a purchase again?

Another option is to offer the customer a second coupon following the purchase to reward for becoming new customers. You can make this coupon smaller or even require a larger amount of money to purchase it. For instance "spend $100 or more and save 20%."

Another approach to motivate another purchase is to convince customers to join to your mailing list then begin sending emails or texting them. By using email, you will be able to inform the customer of your products and services and how you can solve their issues, and the ways you can bring joy to your customers, as well as any other advantages you offer. This can all be accomplished with no discounts whatsoever. Be on the lookout for them, and they'll be more likely to buy again.

MailPoet provides the entire set of tools needed to build a welcome mailer series where you can begin the process of nurturing and follow-up for your clients. process.

2. Tiered coupons are better than percentages

In the previous tip, we discussed the strategy that offers a 20% discount for spending $100 or over. Consider the benefits such a discount plan could provide you. What are the most common actions customers take? You'll have to spend more money in order to receive discounts.

It is possible to use the same strategy to offer tied coupons but without any percentages. Examples:

• You can spend $40 to receive $10 in return
• Spend $100 and get $20 back
• Pay $250, and you'll receive $50 back

If you use this type of system be aware that the sum the client will receive is a single amount, regardless of whether they pay over the amount required.

A customer, for instance, paying $50 will receive $10 and you earn $40. However, if the customer purchases around $80 the customer will will get $10 back, and you make $70. If their final cost is higher than the amount of $80, they could attempt to bring it above $100, so that they could receive the $20 back instead. Either way, you make more profit.

With a fixed percentage discount, your margins are exactly the same no matter what sum they pay. If you spend $100 and receive 20% off, you make $80. However, if they purchase $200, the 20% discount will now be $40.

The flat dollar discount works out more in your favor as it boosts the size of your order, but does not increase discounts by the same percentage.

3. Make use of a loyalty program

Although loyalty programs may not be the best fit for every company, they are an great ways to generate sustainable revenues. In the end, there are some who love them and keep coming back to watch their rewards rise!

This also gives you something to communicate with them over email, since if they do not buy anything for a few months, you can remind them of how many points they've got, and what they can buy with them.

4. Set up a subscription or a membership

Discounts work wonders in the event that you are able to turn them into recurring revenues. If you're able develop a profitable subscription model to your organization almost any discount can be financially justifiable.

For example, suppose you have a $19/month subscription option. If you can demonstrate that the customers who subscribe to your service will remain for at least 6 months in total, you'll earn $114 in recurring revenues. Would you offer a $25 discount coupon if that someone signed up to your program with the average of $114 revenues? What about the first month that costs only 99 cents?

To motivate customers to join your membership, you could offer giveaways, as well as larger discounts, because you'll make cash back on the purchase, and much more. The idea is to win the customers' attention with a substantial reward, and then continue to offer value, so that they'll be loyal to your service for years.

Another option is to give an offer of a discount on your subscription itself. You could say that anyone who spends over $100 gets 20% off their subscription. This is still profitable for you because of the eventual recurring revenue.

5. Use product bundling discounts

If you bundle your products they are less competitive in pricing and focus more in the ease you offer your clients. Bundles are more fun particularly if you pack them properly.

It is possible to offer a 20% discount on an item bundle which gives your buyer and yet generates better profit for your business. Why? Your order's average is higher, and your packaging and shipping costs are lower than if you were to sell each item separately.

6. Incentivize referrals

Word of mouth can be powerful. However, it's not always sufficient to be effective, and it's not happening in the way you'd think it would.

If you have the most loyal customers, provide them with the incentive to tell their friends about you. You can give them coupons that they could pass out to their friends, and if their friends redeem them, the customer could also earn a reward.

This is a smart way to coupon as it can bring in a an additional customer who you might not be able to reach otherwise, and the existing customers turn into brand ambassadors.

You can send coupons like this via email, snail mail, or text messages. You can also just link to landing pages which has coupons available to new customers, and request for them to forward the link to their contacts.

7. Upsells on offer

Best of all, it does not feel as if you're threatening them, because you're offering exactly the same item they've had already made a decision to purchase -- just more of it.

There are other options for upsells too, including selling your subscription. When you're making use of coupons and discounts, they provide a way to make back those profits that you lost from the very similar purchase. And if the item you're offering upsells is connected in any way to products that the customer is already buying this is an appropriate choice, and some will be willing to take it up.

8. Give a rationale for your sale

This brings us right back JC Penney story. They didn't have a rationale to maintain their prices. So, customers came to expect and even demand these prices.

A way to stay clear of the problem is to only run sales only when you have a reason to do so. You can get creative here. So long as you justify the price you are charging the most loyal clients will be willing to take you up with no expectation of to see it again in the near future.

Using coupons and discounts such a way increases loyalty and attracts new customers, but it doesn't box your customers in to long-term expectations of discounts.

The reasons for selling can be found just about anywhere:

• The celebration of a local sports team taking home a trophy
• We thank our customers for X number of years in business
• There is a lot of stuff needs to be cleared
• The holidays
• Discounts for new customers
• Planned to donate a percentage of the sales proceeds to charities
• Taking advantage of an event in the news that you can relate to your business

Discounts that work and coupons that make sense boost long-term profits

Each of these strategies serves all have the same aim -- to thread the needle between attracting new customers without making too big a profit or making price-conscious customers.

You want loyalty customers, regular buyers and regular revenue. Utilizing coupons and discount offers to generate one or more of these is usually a smart decision.

Make sure to leave a message in the comments if you have any other suggestions!