Too Much Of A Good Thing: How Coupons Can Hurt Small Businesses

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Coupons are a great way to highlight products and encourage customer loyalty when used sparingly. They tend to lose their luster when you can expect them every single day.

That’s becoming a problem for small retail businesses, who increasingly find themselves dealing with the unintended consequences of  embracing coupons. Rather than worrying purely about operating capital financing and the bigger fiscal questions of the day, they’re finding themselves weighing an influx of customers versus the pricing challenges that arise out of it.

The New York Times’ excellent You’re The Boss blog weighs in on the challenges that come with entering a coupon program, such as those offered by GroupOn:

When you charge some customers full price and others half price, you make some happy and others unhappy. Worst of all, you make the wrong customers happy! The regulars are unhappy because they feel they overpaid; the discount customers are happy — but they’re probably not coming back because they’re used to shopping at half price. When you decide to do a daily deal, you are training your existing customers to wait for the next coupon. Does that sound like a recipe for success?

It does not, You’re The Boss. There are a lot of businesses that coupons make sense for, particularly those with large inventories or varied products, as you can focus in on specific products and drive interest to them. When you’re small and offer only a single service, however, you risk losing a considerable amount of money and alienating loyal customers if you’re regularly seeing coupons coming in.

The problem, as the blog notes, is that eventually you’re going to start damaging your price integrity. If customers are used to getting coupons from you, they’re going to be hesitant to spend full price in the future, and your number of repeat customers may suffer.

Yet it may be impossible to avoid the coupon craze altogether. You’re The Boss thinks that companies like GroupOn are not fads, and as they grow, the demand for coupons will grow with them. The best advice anyone can possibly give you is to tackle this phenomenon with the appropriate amount of caution, ensuring that you’re using them in such a way that it ultimately benefits your business.

The alternative isn’t something any of us want. We’d love to hear from you if the coupon deluge is affecting your business.

 

Photo credit to mrceviz at http://www.sxc.hu/browse.phtml?f=view&id=1098660

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