Today I’m going to cover a topic that small business owners ask me almost on a daily basis.  If you’ve done a quick search online, you’ll quickly discover that opinions are all over the map, ranging from celebratory at one end of the spectrum all the way to demonization at the other end.

So then, what’s the truth?  Well, to add to the confusion, they both are!  Running a daily coupon shouldn’t be a split second decision and you need to understand both the pros and the cons of making this commitment.  Yes, you heard that right.  Running a coupon is a commitment… it’s a commitment to your company, your employees and your customers in a huge way.

Let’s take a look at the pros and cons:

Pros

• Anticipate a massive influx of potential new customers

Individuals are creatures of habit.  They get comfortable with the same neighborhoods, entertainment facilities and retailers of their favorite products.  By offering incentives to customers to try your products or services, you will gain a significant influx of potential new customers.

• Enjoy massive exposure of your business

While gaining a few thousand additional sales is something to celebrate, business owners often forget that tens or even hundreds of thousands who didn’t purchase the coupon still received the email and were reminded about your business.  This is extremely valuable!

• Quickly move stagnating inventory

Running a coupon surrounding products and/or services that are traditionally slower moving during a particular season is a great way to offset those times of the year when cashflow is traditionally tight.

• Helps build relationships

When done right, coupons can help to build more loyal relationships with your customers.  If possible, offer a coupon with bundled products or services that can be redeemed during multiple visits.  It gives your business more of a chance to create a lasting impression with the customer and increases the odds of increasing the loyalty towards your brand.

• Generates incremental revenues

The expenses of many service-based businesses are static.  While bringing in additional customers generates more revenue, expenses typically won’t increase.  Rock climbing gyms, martial arts academies, tanning salons all can benefit from this reality.

Cons

• Be prepared to lose money in the short term

The majority of coupon sites insist on offering significant discounts to maximize your sales (well… okay… their commissions).  If you sell a $50 coupon for $25, don’t forget that  you still need to provide the coupon site with their commission and will likely only pocket $12.50 per sale.  It’s very difficult to make a healthy profit (if any at all) off of 25% of the typical revenue that these services provide.

• Accept that your brand image may take a bit of a hit

If not done carefully, running a coupon could provide significant harm to your image.  If your business suddenly becomes extremely busy and you haven’t planned accordingly for it, the quality of the services and products you provide may suffer.  If this is the case, you risk potentially creating a bad impression with many of your loyal customers and this could cause irreparable harm to your image.  Be careful!

• Doesn’t generate a lot of repeat customers

Accept that many of the customers who purchase your coupons will likely only be one-time customers.  A large percentage of the sales are primarily because of the discount and that individual might not typically ever pay $75 for a haircut or $50 for an hour of entertainment.  Others may go out of their geographical comfort zone in order to reap the benefits of the deal, but otherwise, would typically not travel that far to purchase your services and products if it otherwise was not on sale.

Now let’s take a look at the commitments you need to make before running a coupon and how you should prepare yourself.

Commitments

Company

• Know what you’re getting into

Ensure that you know what you’re getting into.  You’ve decided to run this coupon for additional exposure and additional quick revenues, but not necessarily additional profits.  You need to educate and prepare your staff, brainstorm and market upsell and cross sell opportunities and provide high quality products and services at a discount.  This is your chance to create a lot of additional customers if done right, don’t blow it!  Ensure all of your other affairs are in order – capital on hand, adequate additional supplies on hand (if necessary) and a detailed staffing plan to accommodate additional inquiries.  Organize yourself and re-organize yourself after you adapt to the influx of potential new customers.

Customers

• Honor the deal

You’ve made a commitment to your customers to honor a deal.  The worst thing you can do for customer loyalty is to back out of a potential deal.  Consider the ramifications of bad word of mouth amongst their friends.  If you back out of 10 deals you could potentially lose 100 future customers, I don’t even want to think of the ramifications if you increase that number.

• Staff accordingly

Be prepared to increase your staff during the coupon redemption periods so that you can provide the same high quality services and products that your business typically delivers.  If your quality suffers, your odds of generating business dwindles accordingly.

Employees

• Prepare your employees

Ensure that your employees know how to answer questions and deal with potential issues.  Prepare them for the upcoming promotion to ensure that their stress levels remain low and their quality and professionalism remain high.  Not only will your employees appreciate this and have a higher sense of satisfaction while working, your customers will take note as well.

• Staff accordingly

If you don’t adjust the scheduling of your staff accordingly, quality will inevitably suffer.  Even worse, you could find yourself in the unpleasant situation of dealing with a staff resignation at the worst time possible.

Well that’s it in a nutshell.  Obviously I haven’t covered all the bases but I hope that I’ve provided enough insight to help you to make an informed decision.  I’ve witnessed customers on both ends of the spectrum, some enjoying wild success and some wondering how they will make payroll the following week as a result.  Just remember, running a coupon shouldn’t be an impulse decision, like anything else in life, it requires planning.

–

Brent Mondoux
CEO, N-VisionIT Interactive
brent@betterwebsites.ca

Ottawa web design