Coupons are more than just sales, percentages off, and discounts. Coupons, deals and special offers drive new customers, increase brand loyalty and (when used properly) can increase the overall lifetime value of a single customer. Often, that can add more to a business’s bottom line at a cheaper cost (because upselling existing customers costs 7x LESS on average).
But if coupons are so great, why don’t more businesses use them? The #1 reason we hear from local businesses is that couponing a product, service or offer will cut into sales.
While that may seem reasonable, the reverse is actually true. Using coupons will increase sales and customer loyalty in the long run. If you have a business and are interested in growing your customer base, read on the psychology behind how coupons can get you more from your customers and do less expensive marketing.
Why Do People Use Coupons?
1. Coupons Create Happiness
Coupons literally create happiness. One study said when customers received a coupon, their oxytocin levels (one neurotransmitter responsible for happy feelings) increased a whopping 38%. They were also 11% more happier than those who didn’t get a coupon.
2. Coupons Make People Feel Smart
Customers perceive using a coupon as saving money. But here’s where it gets really interesting: customers will then use this “saved money” to buy more. This idea of saving money is what gives people the “smart shopper feeling” and encourages them to spend more at the same store or business in a single transaction.
Customers feel especially special when given exclusive promotions or discounts. Businesses who offer a special discount to repeat customers, a referral bonus or even a special holiday sale create brand loyalty faster. In the end, if you give a deal to an already happy customer, you have a happier and spendier customer.
The Coupon Influence
84% of customers said coupons influence their purchase making decisions. For example, customers will change brands to pay a lower price than pay for the same item somewhere else at a non-discounted rate. They will also pay for a discounted price even if it means spending more money. This all relates to the perceived value of the coupon and the product.
Just look at when J.C. Penny’s opted out of coupons. Sales dropped 20% in the first quarter!
Coupons will also encourage customers to buy from a new brand if there is a discount. In fact, 80% of shoppers feel encouraged to make a first time purchase with a new brand if offered a discount.
Free Ninety Nine
A surprising reveal is the positive effect a sample or trial size can do. The benefit to the customer of a sample is the risk free proposition to try something new for free.
The benefit for the company is the customer’s perception of the company. Customers perceived the company as generous for a free sample. This then makes the company more likeable and creates positive brand association. And this effect will improve customer referrals and sales.
Customers value something free more.
Customers prefer to get something extra for free than getting something cheaper. And if a customer likes the sample or trial, they’re more likely to return to make a purchase and be a loyal customer.
If you need help incorporating coupons in your marketing strategy, contact us today!
