Coupons can be a great way to promote, increase, and improve
your business. They can be used to entice new customers, move
hard-to-sell merchandise, "time-shift" your customers by getting
them to come in during traditionally slow times, or as a
stand-alone product when sold as gift certificates.
And, what could be simpler? Print a piece of paper and it's
done. Right?
Maybe.
Coupons can get much more complicated than you might think. What
restrictions do you want to impose? Good on certain days?
Certain hours? Is there a minimum purchase required? What about
'rain-checks' if the promoted merchandise is temporarily
unavailable?
What about the structure of the offer? Buy-one-get-one-free?
Percentage discount, flat dollar-amount discount, or special
one-time only price? Should the coupon expire?
Lots of questions, but how should you go about making all of
these decisions?
Start at the beginning: before you do anything else, decide
exactly what you want to accomplish with your offer. Do you want
to increase sales, get new customers, introduce a new product or
service, use the coupon as a product in and of itself (as in
"gift certificate"), or ??? It is imperative that you make this
determination first because all of the other coupon-related
decisions depend on it.
When you finally do come up with the parameters of your offer,
be sure that it is reasonable and easy to take advantage of. I
remember seeing a restaurant coupon for $2 off the bill, but
there were so many restrictions that I almost laughed out loud.
You practically had to be an attorney to decipher the offer; it
was good during certain hours on certain days of the week, for
parties of 4 or more (adults only, kids don't count), meals must
meet certain minimums, and so on. It was ludicrous. They
apparently wanted to stimulate business, but I can't imagine
that ANYone EVER took advantage of the offer. (It may be
significant to note that the restaurant in question failed.)
If you are selling gift certificates, they cannot expire.
Someone has given you money for a product or service that you
have not yet delivered; to allow that to expire is unethical in
my opinion, unless you return the money to the purchaser after
the expiration date.
Accounting for them, however, can be a problem. A friend of mine
received landscaping gift certificates for several years. She
accumulated them until she had a big project to do, and the
nursery that issued them was mortified that they were going to
have to honor them all at once. If you think about it, though,
they got a better deal because they had use of the money for all
of that time, and the buying power of the money they received
has diminished over time; a $100 certificate, for example,
issued 5 years ago won't buy as much today as it would have
then. Gift certificates should be carried on your books as a
liability. That way, you don't realize the revenue or take the
profit until the certificates are redeemed.
Some people have the feeling that gift certificates are too much
trouble because of the liability and accounting, but my feeling
is that you should do what's best for your customer, not what's
best for you.
Coupons and gift certificates are good tools. Use them, but be
smart about it.
About the author:
"Make More Money and Have More Fun" with your small business!
Dave will show you how with his FREE newsletter, or his FREE
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Business." Comments and/or questions are always welcome at
1-800-366-2347 or Dave@DaveBalch.com. (c) Copyright 2002, Dave
Balch.
