When it comes to sales and promotion, tools abound. The average marketer is well aware of the coupon, the promo, and the discount.
Coupons, promotions, and discounts are certainly useful, valuable tools — heck, the idea of a sale itself is only a marketing tool, really — but they’re not something that can be relied on for long-term, sustainable growth.
Not of a product, not of a service, and not of a business.
Let’s talk about why.
Sales Promotion — Tools Like Coupons Only Breed Loyalty to the Coupon Itself
That is to say, they do not breed loyalty to your business.
And don’t forget, you’re taking a loss on these things. If you’re taking a loss, with the goal of getting new business, but that new business only shows up as long as you take a loss…
Well, you start to see the problem.
I remember the first time one of my marketing professors in college said “Coupons only breed loyalty to the coupon itself.” I struggled for a moment to understand…
After all, if I’m hooking someone up with a fatty deal at prices that are tip top, ain’t they gonna’ love me for it?
“Heckin’ no” is the answer to that one.
To be fair, I think all customers are different. You certainly can get new customers who will make a first-time purchase based on a discount, like what they get, and keep coming back for more.
However, when you offer discounts, you will always attract a particularly repugnant breed of customer — the Coupon Cutter.
Discounts and Promotions Attract the Wrong Kind of Customer
You know the Coupon Cutter. You’ve gotten stuck in line at the grocery store behind them before. While you’re standing there, with your eggs, your milk, and your now-broken dreams of walking out of this dang grocery store in a reasonable amount of time, they heap pile after pile of coupons on the poor cashier’s check stand.
And everyone in line gets to wait while, one by one, these coupons are scanned in.
These people do not care about your brand, or anyone else for that matter.
For the Coupon Cutter, the discount is the thing of highest importance.
A Coupon Cutter will always come running at even the merest scent of a new, fancy discount or deal.
But rare indeed is the loyalty of a Coupon Cutter to a brand.
They are only really loyal to the discount itself. When you get rid of the discount, these folks vanish like thieves in the night.
It also breeds disloyalty in your business in general: You get so tied up dealing with these people who are taking advantage of the discount that you have to take time away from your actually loyal customers. And suddenly, the people who matter the most are feeling neglected.
They take their very valuable business elsewhere while the dirty, stinkin’ Coupon Cutters continue to harass you over 3 cents off green beans (They’re GREEN BEANS MARTHA! They’re only a buck a can! Just buy ’em and vamoose!).
Now, you can sometimes mitigate this with a solid team, but still, Coupon Cutters generally can’t seem to just do their business and Get the Heck Out. No, instead they often make demands, try to game the system, or even become loud and belligerent (whether in person, on the phone, or via email).
So you spend all this time and energy on the people who will likely never be loyal to you. In fact, the coupon actually seems to actively make them disloyal.
If there were no discount, they’d be forced to purchase your product/service solely on the basis of its given price and quality.
They might actually act right and become loyal to the brand if they had to pay full price and had no choice (or you’d never see them or have to deal with them in the first place), but when they have this expectation of saving money, they get entitled.
When that’s taken away, they get mad.
Story Time — The Customer Who Only Cared About Price Matching
So I worked at a bookstore near a large university. The bookstore used a variety of sales promotion tools to get students in the door.
One of those tools was price matching, and the kind of people who take the trouble to price match are exactly the way you’d expect them to be…
Which is entitled, mostly, to their discounted price.
So a guy walks in. He’s got a list of prices printed out. He wants to get his discount.
He’s been coming into the store for 4 years. He must be a loyal customer then, right?
Not on your life.
We changed our policy slightly since the last time he visited us — no more printing out price matching sheets. You have to show, on your phone or on a computer, a website with the discounted prices.
When we told this guy the news, you would have thought we’d just told him he couldn’t ever come back to Disneyland and that also we hated his face.
He became belligerent. He started to raise his voice. He wanted to argue.
He simply could not be troubled to pull out his smartphone and show us the discounted prices.
I really don’t think this guy was trying to steal from us with a sheet of fake prices he made up.
He was mad that we inconvenienced him slightly and were threatening to take his discount away.
He told us, after he got his discounted books, that he’d never come back.
I was like “…good.”
For 4 years, he seemed like a loyal customer when in fact he was only loyal to the price matching program.
Is the reduced profit we made over 4 years worth the time and energy we had to waste on this jack-o-lantern?
That’s a call only the boss-lady can make.
It’s Not All About Sales — Promotion Tools Can Also Be Used for Retention
Let’s back up a bit and ask a simple question:
What’s the point of a sale?
Well, there can be many. Generally speaking, they fall into these categories:
- To drum up new business
- To get old or overstocked product out the door
- To get customers in front of salespeople
- To reward loyal customers
Ah… that last one is a bit different, eh?
Retention is something that most folks don’t think about when they’re thinking about running a sale or giving out a discount.
But discounts can be very powerful rewards for customers who have already demonstrated loyalty.
This makes plenty of sense when you really think about it. It’s pretty old school.
Back when we had kings everywhere and most of us were just lowly peasants, no king who knew what he was about would give people gifts to buy their loyalty — that never works.
In fact, it usually had an even worse effect — gifts used to buy loyalty only bought fake loyalty, usually from mercenaries who were ready to sell out to the next highest bidder.
(Sounds a lot like our Coupon Cutters, doesn’t it?).
When these same kings instead gave gifts sparingly and cleverly, when they gave their gifts only to knights and dukes and earls and such who had already demonstrated long-term loyalty…
The kings were then rewarded with increased loyalty.
Really think about that. If you’re loyal to someone, if you really show them, through your actions, that you care about them and are a loyal person, unless you’re a really super awesome person, you start to expect some sort of reciprocation, right?
A king can’t reciprocate in the same way that you or I can — they can’t just be loyal back to a knight as few situations arise where that would even be possible to actively demonstrate.
But they can reward that loyalty with a gift, which they often did. This gift might be gold, or it might be land, but these gifts often came with the expectation of continued loyalty through the years.
And if a knight didn’t receive acknowledgement of his loyalty, well… he might just go find another king to serve.
Your customers are the knights, and you are the king — All Hail Her (or His) Majesty!
If you take the time and effort that might have been spent on those nasty, disloyal Coupon Cutters (mercenaries!) and instead focus that time and effort on the customers who have shown you the greatest loyalty, those customers are going to be more likely to stick around.
They’re more loyal, they’re going to be much more valuable to you over their lifetime than the vile Coupon Cutter could ever hope to be, and you don’t have to give them constant discounts to make them happy.
Instead, you can give them out periodically as rewards.
Wouldn’t it be nice to spend your limited time and energy on the people who form the base of your business and to tell the needy, greedy Coupon Cutters to kick rocks?
Of course it would be.
Sales Promotion Tools — Use Them Sparingly and Wisely
Every time you offer a coupon or a discount, make sure you have a good reason for it.
Constant discounts and sales turns you into Walmart. You race to the bottom, your profit margins become razor thin, and you have only yourself to blame.
But a sale every year is fine, or even two or three. If you’re making money by running one, if it’s worth the time and effort to give out valuable discounts on a semi-regular basis, then go for it.
Overall, the best use of a discount or coupon is always going to be as a reward for loyalty.
However, loyalty reward programs come with problems of their own. The intrepid Erez Romas discusses how to get the most out of your loyalty program in this wonderful article — click here to read it now.