How to Avoid Losing Money on Your Next Coupon Campaign

Think you can build your business with coupons? Think twice.

Coupons have their place for many businesses, but they also carry the irksome problem of attracting the wrong kind of buyer. We all know them – the over-eager coupon clipper who stalks only those businesses that offer a special deal. This customer is often a one-time buyer and not the kind of consumer who is going to help you build your business. Even worse, you may incur couponing losses.

So when is couponing right for your business? How can you protect yourself against extreme couponing? Here are a few simple guidelines that can help protect your business.

Are Coupons a Good Fit for Your Business?

in themselves coupons are not money-makers for your business. However, they can be useful to help you build awareness of your in new markets and to new customers. Build awareness and you can hope to up-sell and generate repeat customers. Here are some other considerations:

• Is your business a good fit? – Coupons work best for location-based, product-oriented businesses where local customers can realize quick and easy savings. Good matches are restaurants, hair salons, hotels, spas, pet grooming services, yoga studios and so on.
• Can you scale quickly? – Can your business scale up to meet the potential demand surge the coupons may trigger? Whether you operate online or street-side within four bricks and mortar walls, it’s important that your staff is trained and your operations can scale quickly and seamlessly to deal with a jump in new foot traffic.
• Can you afford the discount? – Make sure you can afford the discount for the duration of its validity. Weigh your long-term goals and how coupons can benefit them. Do you have enough profitable business coming from other product lines or time periods to overcome the costs of offering a discount or special offer? This is a top consideration, especially if you are exploring social or group-buying coupon sites that typically take 50 percent of the revenue you get from your advertised offer.

Develop a Firm Couponing Policy so You Don’t Incur Losses

Once you’ve weighed the pros and cons of couponing and determined that special offers have a place in your marketing strategy, be sure to develop and communicate a coupon policy. This will help keep you from being a slave to coupon clippers, losing money and undercutting your brand value.

Entrepreneur magazine offers these excellent tips from Bob Phibbs, author of The Retail Doctor’s Guide to Growing your Business, for doing just this:

Don’t Allow Combined Promotions – This is a biggie and one that many larger brands have clamped down on. The biggest to avoid is accepting buy-one-get-one-free promotions (also known as BOGO) combined with other coupons. Accepting multiple combined coupons simultaneously is a huge risk for small business owners who may find they are literally giving merchandise away.

Eliminate Identical Coupons – Suppose a customer walks into your restaurant with four $5 off coupons – how do you deal with this? Or perhaps that customer chooses to use the coupons over several visits? Either way, you’re going to lose money on that customer. There are a number of ways for dealing with this:

• Limit the number of identical coupons that a consumer can use per purchase.
• Limit the number of identical coupons per customer.
• Limit the number of identical coupons that a consumer can use over a certain time period (although this can be harder to track).

If you can, use your point-of-sale system to track coupon code usage, and don’t forget to advertise your policy and the expiration date on the coupon

Accept Your Competitor’s Coupons Cautiously – Many large stores such as Walmart, Home Depot, Petco and Staples gladly accept competitor’s coupons. If you accept other retailers’ coupons, make sure you develop a policy outlining limits for their use at your store. For example, are you going to match the coupon or tighten up the conditions? Always check expiration dates and other limitations that your competitors may have placed on the coupons to ensure you don’t get burned by out-of-date or invalid offers.

Post Your Policies and Educate Your Staff – Make sure you advertise your couponing policy on the coupons themselves and at the point of sale. This can help deter extreme couponing practices before they happen. Educate and train your staff on these policies and how they should deal with potentially over-zealous coupon clippers.

For more tips on using coupons in your small business and how to build a coupon-based campaign, check out my earlier blog on coupon practices as well as How to Build Exposure for Your Small Business with Social Coupons.

About the Author

Caron Beesley is a small business owner, a writer, and marketing communications consultant. Caron works with the SBA.gov team to promote essential government resources that help entrepreneurs and small business owners start-up, grow and succeed. Follow Caron on Twitter: @caronbeesley