© 2017 by Barbara Maisonet Inc.

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August 19, 2019

Many business owners offer discounts and coupons to acquire and retain their clients and customers but - should they?  Before we talk about the psychology that can be at the heart of making these offers available to customers, let’s examine the metrics of doing so first.  If these discounts do not add up to a return on your investment, it makes no sense to offer them.


Let’s say a golf course wants to acquire more golfers.  They offer a coupon worth $100.00 in tee times with this end in mind.  The golf course makes $8.00 profit per golfer per round. It will take 12.5 months for the business to break even on that coupon.


Next, what is the lifetime value of your customer?  Measure that against the acquisition cost, (the discount or coupon).  Is the discount worth the cost of acquisition? Does it make financial sense to spend this money to acquire that customer?  Picking numbers out of thin air has a financial impact so do the necessary math before you use discounts or coupons.


A very successful insurance agent I know went after customers based on the great rates her  insurance company was offering because they were new in the state of Ohio and wanted to ‘buy the business’.  Her manager, an old sage in the industry, told her, “If they come to you for a buck, they will leave you for a buck,” and sure enough, he was right.  As soon as the company decided they had enough customers to make a profit in Ohio, their rates began to climb. And her customers began to flee. After that painful lesson, she began to ‘sell’ differently.  If she received push-back on a rate she offered to a potential client, she simply told them that they could buy their insurance from anyone they pleased but if they did, they wouldn’t get her.  Did they care about that?  Some did not but most of them did.  Why? Because she made sure that she treated her customers better than any other insurance agent in town. She remembered their names, the names of their children, hardships and heartbreaks, milestones and happy times in their lives.  When they called her office, either her trusty assistant or she answered the phone and they listened to their clients and remembered what the client told them by making notes in their files.  When she made a mistake which, of course, happened from time to time, she owned up to it and made it right even if that required writing a check.  In short, she had a reputation for integrity and genuine caring and because of that, she couldn’t write the policies fast enough and her retention was off-the-charts.


Another example of this kind of business management comes from a close friend of mine who is a long-time restaurant owner in my hometown.  The restaurant business is known for its degree of difficulty and the flightiness and disloyalty of its customers. But his family is now on the fourth generation of restaurant ownership, offering the same menu in the same location since the 1950’s.  He never offers a happy hour. He never advertises. He never has a buy one, get dessert/wine/second entree free deals. Never. Why? Because he consistently serves excellent drinks and food partnered with impeccable service delivered by long-tenured, warm and funny servers in an immaculately clean restaurant.  Word gets around, right? His customers are his coupons.


If you are pondering whether or not to offer coupons or  discounts, first ask yourself why you think you should. Are you experiencing a lull in your business, running short on funds, in a slump?  Perhaps you should adjust your sales and marketing strategies first before you begin to give things away. Customers could see these discounts as acts of desperation - and maybe they are!  What does this sort of business activity say about your business - and you?  Could your clients have less confidence in you if you are willing to sell your products and services so cheaply?  What message are you sending to them about the quality and integrity of what you are offering? And - more importantly - what sort of client are you going to attract by offering these incentives - loyal and consistent ones or those who came to you to save a buck and will leave you just as quickly for the same reason?


So before you make the move to give out coupons or discount products and services, do some soul-searching first and determine if this is the best course of action at this time.  If you decide that it is, do the metrics to make sure you are going to have the return on your investment that you really want - in monetary terms as well as the type of customer you acquire.



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