Advantages and Disadvantages of Coupon Codes in Your Business

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Business

Published on: 09 May 2018 Last Updated on: 12 September 2024
Coupon Codes

There are two sides to offering coupon codes in your business. One side shows that you could make more sales with coupons while the other side shows you could lose profits after discontinuing the coupon purchases. Both sides have a point, and you should pay attention to these things while coming up with a discount strategy. Many businesses still view couponing as a perfect way to drive customers and sales without experiencing revenue losses. If you are considering using coupon codes on your business, here are some of the advantages and disadvantages of the idea.

Advantages of Offering Coupon Codes :

Businesses like Vistaprint have been offering coupon codes with the idea of attracting first-time buyers and it is working really well. You could also attract customers with this method without having to give them more discounts on future purchases. Use it as a customer acquisition strategy.

If you have inventory that you want to unload quickly, offering coupon purchases is the best way to trigger quick sales. It will influence more people to prefer your products over those on other stores as long as the quality matches. You could also use coupon codes to encourage brand switching where buyers from another brand are encouraged to buy from your brand because of the pricing lure. Getting customers to make the first purchase might lead to add-on sales for products that were not discounted, which could help to raise revenues.

Disadvantages of Offering Coupon Codes :

This is a costly decision. You need to estimate the correct amount you can afford to give away. If the profit margin is not impressive, you won’t find coupon sales profitable, so it’s only sensible to use coupons on products that have a good margin. Not sustainable as a promotional strategy because customers may only choose the discounted product and never come back. Some businesses have experienced unprofitable Groupon promotions because customers only pick discounted items and only return when there are more discounts to be exploited. Could affect the image of the business as this in some cases may make it look cheap, which in perception may send a message that the quality offered is not good. This strategy could also encourage customers to always wait for discounts and only buy when you are offering discounts.

Also remember that offering discounts, especially to first-time buyers, could alienate loyal customers who are made to feel they deserve the discount more for sticking to the brand.

Conclusion

With the points discussed here, you can see how adding coupon codes to your business could affect its performance. You need to be careful with offering discount codes as this could also damage the business by lowering profitability even with more sales. Only use this strategy if you are sure the revenues to be gained are enough to get the business running smoothly. It is a perfect way to raise cash and you can clear inventory that has been stuck for a long time. Just make sure it does not lead to losses.

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