Coupons have 2 purposes:
- Reward existing customers
- Win new customers
This is great. But small businesses are doing it wrong.
In high school I frequented a local Tex-Mex place, Frontera. And I went there… a lot.
I couldn’t afford it, or anything really. But with my $5 allowance, grass-mowing gig, guitar lesson income, and Chick-Fil-A paychecks, I was able to muster the occasional 10-spot.
Enter coupons.
On a regular basis Frontera sent coupons to nearby residents offering ‘buy one get one’ (bogo) combo meals. You know, in universal Mexican restaurant style where #11 is always a taco, burrito, and enchilada.
Cue the problem.
I was already a happy customer, and the coupons were rewarding me. But they weren’t supposed to. How do I know this? Because loyalty programs can’t afford to forego 50% off list prices. Any reward program that tries this, fails.
Bogo is for new customers. Bogo is breakeven marketing. Bogo’s value prop is “Hey there, come eat at our expense and maybe, if we capture your confidence, you’ll come back again.”
So I won and Frontera lost. I didn’t bring them new customers. I turned an outreach endeavor into an aggressive thank-you campaign. It’s almost sad to think of all the profits I inhaled. Almost.
To find out what Frontera should have done, read The Coupon Solution.