Coupons are a mainstay of the retail and product services marketing toolbox. Most everyone uses coupons and they do a great job of influencing purchase decisions for new customers. The fundamental problem with coupons in retention programs is the overall slow degradation of your product or service value through continual discounting.
What are you communicating to your customers when you use coupons? In common use, we tend to think that we are “lowering the drawbridge”, inviting consumers to come on in and reap the benefits of this product or service for a one-time exclusive low price. This works well for attracting new customers, especially in consumer goods, for leading them from your competitors to establish new purchase habits.
But what happens when you use coupons for your loyalty program? Sending coupons to customers who already buy your products (possibly at regular price) communicates that the product they are buying has a lower value than what they pay normally and that they, your loyal customer, should not have to pay the “normal” price again. The sentiment of exclusivity and lowering the bridge are lost, because they are already customers! You have indefinitely lowered the acceptable price for your services or product, shooting yourself in the proverbial foot.
Keeping customers on value not price.
So what is the solution to this problem? Reward, not sacrifice. There is nothing wrong with wanting to give your customers rewards for being loyal, that’s the whole idea of a loyalty program. But instead of issuing coupons to influence purchases, reward purchases with rewards. Think about it like cash flow, have money come in before money goes out. Coupons are an expense in printing, management, and distribution, even beyond the actual discount. By rewarding purchases, you can deliver a one-to-one benefit without many of the associated costs, possibly giving a better reward than a simple coupon. One more point is that coupons reward the next purchase only. Rewards programs should reward the next five to ten purchases, rewarding true loyalty not just one time purchases.
What this approach also does is not sacrifice the value of your product or service. If someone joins your loyalty program, they already have a value proposition embedded in their purchasing mind. Your objective is to sustain and grow this value proposition to secure loyalty. Without value, you slip into a commodity marketplace, where price is the only determining factor in purchase. Loyalty is your platform to establish and grow this value with your customers, so build it wisely.