7 Reasons Coupons Don’t Work

by Bob Phibbs, the Retail Doctor

One of the things I typically do when I take on a new client is to discontinue any discount programs. In fact, I often raise their prices. One owner was skeptical of such an idea; after all, any money in the register was money in his jeans. I told him that if we say we are a boutique or a gourmet coffee house, there is a perception of something special, a premium location or gourmet product offered. Once it is discounted, the cachet of the product is cheapened. The competitive edge is gone.

Untrained marketers who say we need to do something always go the easy let’s discount way. It takes very little imagination and since everybody else does it, they assume it must work. Anyone can be a discount whore; it takes no brains or skill. There is no forethought. No magic or relationship results. And once you do it, you’re often condemned to repeating it.

I will admit that certain coupons can bring in business much like spot sales can boost your numbers. The problem is that you are in dangerous waters; the icebergs are numerous.

Here are seven reasons coupons don’t work:

• Coupons are looked at as an ongoing effort. In effect, they become the whole marketing plan.
• By the time you factor in your time in creating them, printing them, distributing them and factoring in the actual discounting itself, you have a very expensive promotion.
• You have taught the customer that your product is not worth what you priced it at.
• The people who found you through coupons will wait for your next one.
• You are rewarding people who have no relationship to the success of your business.
• Your sales staff will keep a copy of the coupon to offer to their own customers or friends.
• If your regular customers who have supported you find out someone who’s never been there is getting a better deal than they are, they just might not return.

That’s precisely what happened at a local restaurant in Long Beach where a group of us went for a birthday celebration. Located in an old craftsman house with antiques and a wood-burning fireplace, this was a great place to enjoy a great meal. We had ordered wine before dinner, enjoyed fabulous entrees and saved room for their signature desserts.

When the couple at the table next to us paid their check with a 50 percent off coupon, the owner must have been tipped off. He went to their table and sat down. We overheard him talk about his participation in the 50 percent off Entertainment Book. He said that he valued the Entertainment Book because it brought in customers who had never tried him before. He told them the story of his business, how he and his wife built it and how many years he’d been there. The coupon bearers told him they were from Pacoima, about an hour’s drive from the restaurant and that they would never have come without the coupon. He smiled, wished them well and said he looked forward to seeing them again.

I was incensed! We lived in the neighborhood. We’d gone there for years, paid top dollar and received no special recognition. How did we feel? Who was more important? Here we had paid full price as usual and the people next to us who had no relationship paid half-price. I haven’t been back since.

Cut your prices repeatedly and you’d better cut your staff because profit is what suffers.