Unveiling the Mystery of Discount Coupons: A Lesson in Market Segmentation

The first thing that blew my mind at B-School

In the hallowed halls of B-School, amidst theories and case studies, one topic stood out: discount coupons. What seemed like a simple marketing tactic turned into a profound exploration of consumer behavior and market segmentation.

Picture this: you receive a discount coupon offering Rs. 500 off your next Rs. 2000 purchase at a popular retailer. Your first thought? Why would a company willingly slash its profits? As doubts swirl, the allure of coupon codes like nearbuy, grabon, and the latest entrant, GPay Rewards, further confounds. Free Lenskart Gold, discounted licious transactions — seemingly too good to be true. Yet, beneath the surface lies a strategy as intricate as it is cunning.

Market Segments & Self Selection

Enter “Self Selection,” the enigmatic force driving consumer choices. With every coupon use — or non-use — we inadvertently reveal our market segment to businesses. But what exactly are market segments? They’re clusters of consumers with similar needs and characteristics, each representing a distinct target for businesses.

Consider the airline industry. A business traveler and a student may both seek flights, but their Willingness-to-Pay differ vastly. Recognizing this, airlines deploy tactics like differential pricing — charging different fares based on traveler profiles. This is known as 3rd degree price discrimination, a cornerstone of marketing strategy.

But where do discount coupons fit into this intricate web of market dynamics? They’re the ultimate test of consumer behaviour. Some customers eagerly hunt for bargains, clipping coupons and scouring the web for deals. Others, less price-sensitive, are content to pay full price. This phenomenon, known as Self Selection, allows businesses to cater to both segments, effectively offering a different price point for the same product/service, making higher profits with some customers while not losing out on the price sensitive ones.

Now, you might wonder: are companies using coupons to manipulate consumers? Or is it a win-win scenario, offering savings to savvy shoppers while maximizing profits? The answer lies in the delicate dance between consumer psychology and corporate strategy.

As we navigate the world of discount coupons, let’s ponder the intricacies of market segmentation. Behind every coupon lies a story — a story of consumer preferences, market dynamics, and the ever-evolving landscape of business. So, the next time you reach for a discount coupon, remember: you’re not just saving money, you’re revealing your place in the market.