ARE COUPONS DRIVING YOUR BUSINESS OFF A CLIFF?
Coupons will drive customers to your business. In today's world, 96% of consumers have used a coupon in the past 90 days. JC Penney tried to break consumers of the coupon habit in 2012 and quickly saw a 23% drop in sales for the first three quarters of 2012. If JC Penney couldn't change people's shopping behavior, you probably can't either.
So the question is not ether you should use coupons, but instead:
ARE USING COUPONS DRIVING YOUR BUSINESS OFF A CLIFF?
Advocates say couponing is a relatively easy way to attract new customers and make a brand more appealing in the face of competition. But naysayers point to the possible loss of profits from continually discounted purchases.
Both sides have valid points, but studies indicate businesses offering coupons do have a competitive edge. Among those customers who aren't driven by a need to "replenish" products (a segment representation half of all brand purchases), the availability of store coupons is the top influence for the way they shop in a certain store, according to Nielsen.
While print coupons are still widely used, the uptick in mobile couponing has been the real spur for coupon campaigns in recent years. Come 127 million adults in the U.S. will redeem digital coupons this year, Statistica reports, representing a 13% hike since 2014. Another researcher, Juniper, projects 1.5 billion mobile coupon users by 2019. Additionally, Nielsen reports 30% of U.S. consumers to get their coupons from websites, while 11% retrieve them from email or mobile apps.
Digital mediums can play a significant role in influencing brand purchase decisions, particularly when consumers are planning their shopping trips, while coupons are the top pre-store band purchase influence, digital drives how shoppers obtain coupons.
For may businesses (but not all), couponing can effectively drive customers to your business without leading to unsustainable revenue losses. Here are a few tips for creating a coupon strategy.
YOUR IDEAL CLIENT IS NOT A COUPON-CUTTER
While everyone loves a great deal, those that ONLY come to your business or clinic because of your promotional coupon are not likely to come around the second time. Sure, you tell yourself that you provide outstanding service and if they like you, they'll come back. And that is logical thinking -- but it is a tad flawed. And doesn't often come true, sadly. If you are retaining more than 10% of the clients that first see you with a coupon, you are way ahead of the rest of us. (To calculate this percentage, divide the number of clients who came back a second time to pay full-price by the total number of clients who used that coupon.) If you don't track your retention rates, or how many coupons are being redeemed, you should be.
Measuring the impact of your marketing is the only way one can be sure that the money spent on marketing is growing (and not hurting) your business.
EVERY SINGLE SERVICE YOU DO SHOULD BE PROFITABLE
If you are offering a 20% or 30% off coupon, do you make any money? My guess is no. While offering a $10 or $20 coupon might seem like a better choice, they too need to be calculated whether you are profitable.
The simplified calculation of service profitability is PRICE minus LABOR COST minus SERVICE COST minus OVERHEAD = NET PROFIT BEFORE TAXES.
Labor cost is what you pay your staff (or you) to perform that service. Service cost is the cost of the products used in that service [your product supplier should be able to help you with this.] Overhead is everything else like rent, utilities, insurance, marketing expenses, etc. that you have to pay even if you don't do any services.
To calculate the overhead service, you could simply guesstimate it as 40% of your price. But to be a bit more accurate, you would total your average monthly overhead costs and divide it by the average number of services you provide in a month to reach your average overhead cost per service. You'll probably find that your profit margin is 10% - 20% or less for your services -- which doesn't give you much if any wiggle room on offering motivating discounts.
THERE IS ANOTHER WAY, IT'S CALLED THE "VOUCHER"
You can still attract new clients with promotions that do not require you to pay them money when they receive a service.
Upgrades and add-ons are great solutions and they don't add time to the service, but most importantly, much cost. This is also known as a VOUCHER or ONE-TIME ADDED VALUE INCENTIVE.
FREE Advanced EducationFREE VIP Coaching or TrainingFREE Massage (if you provide this service)FREE Dinner at a Local Restaurant*FREE Month at the Local Gym or with a Personal Trainer (Great ways to provide local community incentives so that other businesses looking to team up can also build their clientele.) FREE Access to Special Events
Notice the word "FREE" is common in all of these promotions.
Free has to be one of the most powerful marketing words you can use (but that is just in my opinion). Do be careful with the giveaways, however. As a general rule, they need to cost you less than 10% of the price of the service in order to maintain your profitability.
Michael J. Johnson
Business and Sales Development Executive and Adviser
Visit us at www.vigormediaservices.com