How should you use coupons in your business? Is there a good way to use coupons? And if there’s a good way, does that mean there’s a bad way to use coupons?
In the grand theater of life, we all seek moments of quiet satisfaction. Now, imagine this – a $10 coupon lands in your hand. It’s not just paper, it’s a promise. Those lucky enough to receive it saw their oxytocin levels, the chemical messenger of joy, swell by 38%. They were 11% happier than their coupon-deprived counterparts. Their breaths became 32% more serene, their hearts slowed by 5%, and their perspiration? Reduced to a mere one-twentieth of their peers. These people, they were more than just customers. They were individuals tasting serenity, feeling less of life’s burdensome stress. All thanks to a humble $10 voucher. The power of value, my friends, is more than just monetary.
Dollar vs percentage amounts
Offering a concrete dollar amount as a discount often resonates more powerfully with customers compared to percentage discounts. This is primarily driven by the psychological phenomenon known as loss aversion, where people are more motivated to avoid a loss than to acquire an equivalent gain. When customers receive a dollar discount, they interpret it as a tangible asset, much like cash in hand, creating an urgency to utilize it before it becomes a ‘lost’ resource. On the contrary, percentage discounts, such as 10% or 20% off, may be perceived as mere sales tactics and can inadvertently devalue the product or diminish a good offer in the customer’s eyes. The tangibility of dollar discounts promotes the notion of direct savings, making them more appealing and effective in stimulating purchasing behavior.
Origin Story
The origin of coupons as a promotional tool can be traced back to 1887, with Coca-Cola being the pioneering brand. They launched this innovative strategy to inspire potential customers to taste their novel beverage, and it yielded tremendous success. These complimentary tickets for a Coca-Cola drink were disseminated via mail and also inserted in periodicals and newspapers. It is projected that from 1894 to 1913, one out of every nine Americans had partaken in a free Coca-Cola drink, amounting to a total of 8,500,000 giveaways. This inventive approach not only elevated the brand’s visibility but also laid the groundwork for the incorporation of coupons in the marketing and retail sectors.
Pros of Expiry Dates on Coupons:
- Encourages prompt use: Expiry dates create a sense of urgency and incentivize customers to use the coupon within a specific timeframe. This can lead to increased sales and faster inventory turnover for businesses.
- Efficient inventory management: By setting expiry dates on coupons, businesses can better manage their inventory. They can estimate the demand for their products or services within a certain period and plan accordingly, preventing stockpiling or wastage.
- Promotes new products or services: Expiry dates can be used strategically to introduce new products or services to customers. By offering limited-time coupons, businesses can entice customers to try out something new, generating awareness and potentially driving future sales.
- Controls costs and profitability: Coupons with expiry dates allow businesses to control costs and ensure profitability. By limiting the duration of a coupon’s validity, businesses can prevent excessive discounting or prolonged periods of reduced profit margins.
Cons of Expiry Dates on Coupons:
- Customer dissatisfaction: If customers are unable to use a coupon before it expires, they may feel frustrated or disappointed. This can lead to negative perceptions of the business and potentially deter future purchases.
- Limited flexibility: Expiry dates restrict the flexibility for customers who may wish to use the coupon at a later time when it’s more convenient for them. It may also prevent them from taking advantage of the discount during specific promotions or sales events.
- Perceived pressure to make purchases: Some customers may feel pressured to make a purchase they might not have otherwise made just to avoid wasting the coupon. This can lead to impulsive buying decisions and potentially negative experiences if the purchase doesn’t meet their expectations.
- Complex coupon management: Setting and managing expiry dates for coupons can be challenging for businesses, particularly if they offer multiple types of coupons or run various promotional campaigns simultaneously. It requires careful tracking and coordination to ensure customers are provided with accurate information.
These pros and cons can vary depending on the specific context, industry, and target audience of the business. It’s essential for businesses to consider these factors and strike a balance that aligns with their marketing goals and customer satisfaction.
Mystery of Discounts
The Impact on Consumer Psychology: Discounts aren’t just about cutting costs for consumers, they have a profound impact on the emotions and behaviors of shoppers. Research shows that when individuals receive a discount, it sparks a surge in positive emotions like joy, exhilaration, and a reduction in stress levels. This is backed by scientific findings showing an increase in oxytocin, the “feel good” hormone, in people who received a discount source. Moreover, a series of surveys have shed light on the role of discounts in purchasing decisions: an impressive 70% of millennials scout for deals before buying anything, two-thirds of consumers would purchase a product if they had a coupon, and 80% of people are willing to experiment with a new brand if they offer a discount. Yet, it’s noteworthy that almost half of the surveyed individuals would avoid brands that fail to offer deals source.
Free Gift vs Cheaper
Here’s something that might surprise you: the allure of the word ‘free.’ It’s an intoxicating concept that often draws consumers far more than any discounted offer, even when the latter represents a greater financial saving. This also helps with upselling and cross selling.
In a fascinating article from the Economist, the magic of ‘free’ was beautifully articulated. The Carlson School of Management at the University of Minnesota conducted an intriguing experiment, diving into the human psyche to understand our responses to discounts versus freebies. And the conclusion? A resounding endorsement for the power of ‘free.’
We humans, driven by our emotions and an innate desire for gain, gravitate towards the allure of a freebie. The proof is in the pudding, or in this case, hand lotion. The researchers noted a staggering 73% increase in sales when the lotion was part of a bonus pack versus when it carried an equivalent discount.
Even if it defies logic, consumers feel they’re getting a superior deal when they receive something extra, free of charge, rather than just paying less. It’s not just about the money saved, it’s about the perceived value gained. And that, my friends, is the undeniable power of ‘free.’
The Rule Of 100
A principle postulated by marketing expert Jonah Berger, known as The Rule of 100, suggests that the perception of discounts varies based on the price point. For items costing less than $100, a percentage discount seems more enticing, while for items over $100, a dollar-off discount seems more lucrative. This can be attributed to a psychological principle known as framing source.
Preserve Perceived Value:
It’s crucial to remember that not every product should be subjected to a discount. Indiscriminate discounting can erode the perceived value of the product and the brand, particularly when it comes to luxury items. As studies suggest, when luxury items are discounted, they often lose their allure and are deemed inferior or out of fashion. As such, it’s essential to consider your customer’s buying intent when designing your discount pricing strategies source.
Scarcity and Urgency:
The Fear of Missing Out (FOMO) is a potent driver for purchases. By creating a sense of scarcity or urgency around a discount, businesses can tap into this fear, nudging customers towards making a purchase source.
Wrap Up
And there you have it – the riveting saga of coupons, a hero’s tale spun in the world of commerce, a dance of dollars and percentages. They’re not just slips of paper or digital codes, they’re passports to joy, tranquility, and satisfaction. They’re tools that can unlock the gates of customer loyalty, help you manage your stock, and introduce your wares to the world. But, my friends, wield them with care. The power of a coupon can just as easily backfire, leaving customers cold or complicating your sales strategies.
Remember, discounts aren’t just transactions; they’re psychological games of chess. They have the power to elicit emotions, influence decisions, and shape perceptions. They can amplify the allure of an affordable product or lend an aura of attainability to a luxury item. But above all, they can instill a sense of urgency, a thrilling rush that culminates in the sweet satisfaction of a purchase.
So, as you draft your next promotional campaign or strategise your sales, remember the humble coupon. Understand its origins, its power, and its pitfalls. Know when to play the percentages, when to deal in dollars. Use it to preserve the value of your products and to tap into the very human fear of missing out. After all, the world of business is not just about profit margins. It’s about people – their hopes, their fears, their desires. And perhaps, just perhaps, a well-placed coupon could be the key to winning their hearts.
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