Many marketers consider coupons to be an unnecessary drain on a brand's resources and steer clear of them entirely.
Some brands avoid coupons because they negate the brand positioning and have little or no impact on their bottom line. Luxury brands come under this school of thought.
By and large, however, most brands succumb to the fast returns that coupons offer and use them extensively as part of their marketing strategy.
After all, most people like a good discount. In a recent study, 4 out of 5 shoppers stated they regularly use coupons for their shopping.
Are these brands indulging in quick-fix marketing or is there a deeper reasoning behind adopting coupons as a regular tactic? If coupons and deal-seeking behavior are so deeply ingrained in the psyche of users, does that mean that brands have become irrelevant in the chase for the deepest discount? Is loyalty dead, as is predicted by some experts?
Let's find out.
Types of Coupons
Coupons can be of various types depending on the purpose that they are meant to fulfill. Some of the commonly used coupon types include...
- Price off
- Percentage off
- Buy one, get one
- Free shipping
- Free complimentary products
- Bulk-purchase discounts
How Coupons Affect Our Behavior
We know that shoppers love a discount or a coupon. However, what transpires when a shopper gets a coupon and others don't is interesting.
Dr. Paul J. Zak from the Claremont Graduate University conducted a study in which some shoppers at a grocery store were given $10 coupons. The neurological effects of receiving a coupon were then studied by Dr. Zak and his team.
The results were surprising.
Compared to shoppers who did not receive any coupons, shoppers who received coupons showed 38% higher levels of the "happiness hormone" (oxytocin). Their stress levels were markedly lower with 32% lower respiration rates and 5% lower heart rates than the other shoppers.
It is logical to extrapolate from this data that users who experience happiness after using a coupon would associate this happiness with the product they purchased, thus making them favorably predisposed to such a brand.
Brand preference is also strengthened greatly by the availability of coupons. Some 44% of consumers from a survey found that coupons were extremely important in their final brand choice.
The same study also showed that 68% of users buy familiar brands using coupons. That means coupon usage and brand loyalty are positively co-related.
Moreover, that percentage indicates that a coupon program that customers value is a good way to get shoppers to come back over and over again.
Using Coupons Effectively
Scott Gerber of the Youth Entrepreneurship Council talked about the various ways in which coupons can be used by leading online retailers. Some of the strategies described include rewarding Facebook fans, breaking through the clutter of competition, giving a push to your affiliate strategy, or even just writing off a coupon as a customer acquisition cost.
But coupons don't always have to be about offering the lowest price possible. In a lot of cases, just convincing the user that your price to value proposition is awesome is made easier using an appropriate discount or coupon. Your prices may not be the lowest in the market, but the perceived value of the product after the discount is applied becomes much higher than a deeper discount offered by a competitor on a lower-quality product.
Coupons or discounts can encourage customers to do the following.
Test new products
Entering a market that has established players already can be an uphill task for the strongest of brands. A good way to attract attention and encourage trials is to offer a price incentive for a short period of time. The key here is to not convert couponing into a sustained practice—but to use it as a time-bound promotion to generate trials and create a base of users familiar with your product.
Buy often, buy larger quantities
Bulk purchase coupons can encourage customers to buy large quantities at one go to avail a lower price. From the seller's perspective, their doing so helps move stock. It also helps get users hooked on your product. Using the same product multiple times can be habit-forming.
By forcing a customer to buy a large quantity at one go, a brand forces him or her to use the product over and over again, thus forming a habit for the product. This is an investment towards future sales.
Another type of coupon is a frequency-based coupon (e.g., a coupon that offers 10% off on the total shopping amount if the user shops a minimum of three times in one week at the store). Just as customers develop habits by repeatedly using the same product over and over again, getting a user to shop over and over again at your store to qualify for a discount on the final purchase is a habit-forming practice.
Inspire a customer-service gesture
Customer service does not only have to be about solving a customer's problems. It can also be about customer delight. Setting aside a few coupon codes for your customer care and front-desk staff enables them to surprise users with a coupon that stands in for a physical "thank you."
Besides offering a disgruntled customer the solution to a problem, offering a coupon ensures that he or she is pacified at the moment. It also ensures that a bad experience does not sour his or her equation with a brand and that returns at least to redeem the coupons given.
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Deal-seeking behavior is a huge factor in shoppers' purchase behavior, but that is not the only factor that motivates a user. Deals can be used to positively influence certain types of behaviors successfully, which may never have been possible without a real-world incentive.