The Pros and Cons of Offering Huge Discounts
If you’re not familiar with social coupon sites such as Groupon and Livingsocial, here’s the basic idea.
As a business, you offer a large discount on your product or service to entice new customers in. It’s free to set up and your offer will be emailed to the thousands of subscribers in your town or city with the coupon company taking a cut of what you generate.
So what are the main pros and cons of going social with your discounts?
- Win more customers
There’s no doubt that offering a large discount with one of these social coupon sites will bring more customers through your doors.
- Make money during traditionally quiet periods
If your business traditionally has quiet days or times of the year, running a social coupon promotion can help you make money when things would usually be slow.
- Raise the profile of your business in the local area
People may not even know your business exists. Running a large promotional campaign like this will help to get your company noticed by local people who in turn may tell their friends/family/colleagues.
- No up-front costs to advertise your promotion
Unlike other forms of advertising, there are no up-front fees to pay when running a social coupon campaign.
- You may not be able to cope with the demand
We all know people love a bargain and if your offer is too good to ignore, you may be swamped with people redeeming their coupons and not have the staff or facilities to cope.
- Customers may not return after getting their huge discount
Unfortunately, some customers have no sense of loyalty and will just follow the cheapest prices. For example, if you offered a 75% discount, the customer may not want to come back and pay full price on their next visit.
- A big discount can cheapen the perception of value in your service
Once you lower the cost of your product or service, it can be difficult to get people to attach a real value to it again.
- You may end up working for peanuts
Once you’ve discounted your service, given a share to the coupon company, deducted all your day-to-day running costs and paid tax on any profit you’ve made, there may not be much left over to show for your promotion.
Social coupon sites look set to stay but they don’t work well for every business. Make sure you do your research, read all the terms and conditions and think carefully about your promotion before taking a leap into the unknown.