The Danger of Coupons and Discounts

Many businesses use coupons or discounts to entice new customers to try their products or services.  It's an approach to introduce someone to your business and hope that you capture them as loyal customers.  The coupon is viewed as a customer acquisition cost.  Then with the lifetime value of the customer you recoup that initial cost.  It's great to grow your business, but not for the sake of top line growth- you should be after increased profitability.  Growth for the sake of growth should not be your goal.

 

Realize that there are some dangers or downsides to coupons.

1.  You may attract price sensitive customers.  They may not be the best customers and may not turn in to loyal customers.

2.  You're heading down the path of competing on price.  Competing on price is never a win-win game and typically means that you have a commodity without a unique value proposition.  That is never a good thing.

2.  You may alienate your existing customers.  This happened to us.  We recently ordered a new Dell computer for a new hire.  While the computer was being built we received a coupon for 10% off our next computer purchase.  Because the order had been placed Dell would not honor the coupon.  Guess what- that has given us a jaded view of Dell.  While we were perfectly happy at the initial purchase time, but once we realized that we had missed out on saving 10% we were not very happy with Dell.

 

Our point is not to say to never offer coupons- just realize the potential downside.