Coupons, Coupons, Coupons

By Dave Balch
Posted Saturday, October 16, 2004

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.

"Make More Money and Have More Fun" with your small business! Dave will show you how with his FREE newsletter, or his FREE 'Min-E-Seminar': "Secrets of an Actual $5 Million Home Business." Comments and/or questions are always welcome at 1-800-366-2347 or Dave@DaveBalch.com. (c) Copyright 2002, Dave Balch.

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