What exactly is a coupon?

Coupons are just one type of several consumer sales promotion techniques that affect sales at a brand, category, and store level usually in a way that is tangible, and its effects tend to be immediate.

As it is expected this technique is highly attractive to results-oriented managers seeking a reliable way to increase sales in the short term.

The main reason why it works is because every consumer focuses more on what’s called transaction utility which is the bargain value of the deal, rather than on the acquisition utility which is the value from the intrinsic utility provided by the item relative to its price. (Thaler 1985) Basically, everyone focuses on the bargain rather than the price itself; and the main reason why is that transaction utility offers two general benefits. Utilitarian benefits focus on price savings, convenience, and quality upgrades, and hedonic benefits focus on exploration and entertainment according to researchers Chandon, Wansink, and Laurent (2000) However there is a global benefit that entails both the utilitarian and the hedonic aspects, and that is self-expression.

All these aspects vary a lot depending on the demographic and momentary psychographic characteristics of the consumers, which makes it difficult for marketers to manage pricing in general; so, they turn to a market segmentation strategy based on price sensitivity, called price discrimination, which is the result of selling the same good or service at different prices, either to the same consumer or different consumers.

This strategy allows marketers to increase profits by selling their goods at higher prices to consumers who are willing to pay more, and at lower prices to consumers who are willing to pay less. This is where sales promotions like coupons come in handy.

Coupons substantially impact market share and are effective in shaping the market.

• They induce brand switching (ensuring that loyal customers will pay higher prices and switchers lower prices)
• Consumers stockpiling (buying more of a product is rewarded with lower prices)
• Increase primary demand for a product or service among light users (light users are willing to increase their primary demand when the price is low)
• Increase primary demand for a product or service among low-time/cost consumers. (as they are willing to make the effort of engaging with promotions to pay lower prices)

However, there are other reasons other than price discrimination for sales promotion techniques.

• Forecast errors occur when marketers make inaccurate demand predictions and make use of promotions as clearance sales to sell off extra inventory.
• Post-promotion effects show that firms will use promotions when the bargain value of the promotion is larger than the sticker shock consumers experience when they later see the product at its regular price.
• The trial of new products is arguably another reason to use coupons because they lower the costs of perceived risk.

Understanding this definition helps us make better use of this sales promotion technique.

Great digital coupons will come from marketers and business owners that understand the value this tool brings them. It isn’t a matter of creating coupons just for the sake of harvesting email addresses from your customers or just because the competition is doing that. We need to understand our own objectives and how we can achieve digital coupon success using the right tool.

If you want to get started with coupons, visit https://circusoffers.com and you’ll be amazed at the tools we give you to wow your customers.