Monday, January 12, 2015

Discounting: Proceed With Caution

One of the most vexing decisions a small business faces is whether to inject discounting into its marketing plan.  Discounts and coupons can attract new customers, and who doesn't like to obtain something at a lower price?  Estimates are that nearly nine in ten shoppers use coupons. Unfortunately discounting can have a terrible downside.  Businesses that coupon generously can easily be locked into a discounting expectation.  Consumers learn quickly that they can wait for coupons and that a business is always "on a sale".  And even regulars can back off to cheaper products when they might well have paid the asking price.  Major retailers like JCPenney have learned to their horror that they have discounted themselves into a corner.

I wouldn't discourage a small business from offering coupons.  The tool is powerful.  What I would advise is to offer coupons carefully.  Do not offer deals frequently, nor on cyclic dates (such as every holiday or every June 1st, say)  Don't give prospects or customers a sense that they can wait for a lower price.  You may want to tie the coupon to a "buy one, get X" deal as opposed to offering a flat "X percent off."  Tie coupons to new products and services to inspire trying out the new offering, but beware overdoing it with existing lines.  Always think hard about the need to discount: is it done to make up for a marketing shortfall elsewhere?

Coupons can be your friend when used with care.


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