This past week a fellow blogger wrote about an unpleasant experience he had at a local restaurant. The entire matter boiled down to the restaurant not honoring a coupon that they posted on their Facebook page. Granted the coupon was poorly worded and the terms of the deal would have cost the business money in this situation. But instead of satisfying a customer and earning their repeat business, the restaurant created an unhappy person who is now telling his friends about the experience.

Are coupons the best marketing tool for your businessCoupons are a great way to attract new customers to your business, in fact 78% of consumers used coupons in 2010, which is up 14.7% from pre-recesssion levels. Sites like Living Social and Groupon have become very popular for consumers precisely for this reason; people are looking for deals and businesses are willing to offer them. I often tell the businesses that I work with that coupons can be a great promotional tool and to really think outside the box in their use.

But coupon use has a dark side that can hurt a business, ranging from lost profits, devalued perception of worth, and hurt customers when a coupon or discount won’t be honored. Coupons can be a great way to build new business or promote a new product or service, but business owners need to be savvy about their use. Since coupon use is growing year after year, and cash strapped consumers are looking for any type of discount, here are five tips for effective coupon use for your business.

  1. Know the terms. If you are putting out a coupon, make sure the terms and conditions are up front. If you want to put a limitation on its use, like time of day or number in your party, it should say so right on the face of the coupon. Consumers are smart and will check the terms before using a coupon and the terms are what will keep you from losing money on a coupon promotion.
  2. Educate your staff. Let your staff know of what coupons are out there, their time frame and value. Post this information in a well traveled place, like near the time clock or other spot employees pass every day. Your front line staff are the first contact with customers and will interact with them when a coupon is offered. How does it make your business look when your staff doesn’t know about a promotion you are launching.
  3. Don’t forget about the repeat business. Coupons are often about attracting new customers, but they can also be used to reward loyalty. Bounce backs and receipt coupons are a great way to keep customers coming in over and over. A bounce back is a two part coupon that you can use twice, say for $10 off your first oil change and $5.00 off the second. Or print a coupon on your register receipt that encourages repeat business. The value does not have to be big, just offer a small reward for their loyalty.
  4. Deal of the day sites aren’t much of a deal (for you). Deal of the Day sites like Groupon or Living Social seem, on their face, to be a great way of attracting new business, and in fact they can be. Businesses that offer Groupons often find themselves overwhelmed with new business. But statistics show that Groupon use does not translate into repeat business and some businesses that offer Groupons will often end up losing money. Before you consider launching a deal of the day promotion, talk to me first for more effective methods of marketing. The only person making money with Groupons is Groupon itself.
  5. Customer is always right, maybe. I’ve worked in retail myself and know the truth about this phrase. The customer may not always be right, but we are providing a product or service in exchange for their money. If something isn’t right, either because of our fault or the customers; it’s in our best interest as business owners to fix the situation. Honoring a poorly worded coupon may be the easiest solution to the problem my blogger friend had and it would have created a bunch of goodwill that would spill over into repeat business. Call it the ‘cost of doing business’ because alienating the customer by not acknowledging and correcting the problem does nothing for building your business.

Finally, as a bonus tip: Coupons may not be the right tool for building your business. Since coupons can attract the value conscious segment of the market, it may not make sense offer coupons if your marketing strategy is to position your product in a high end tier. Coupons could devalue your perceived worth. Do the research, know your market, and offer coupons accordingly.

Do you have a positive or negative coupon story? Feel free to add it to the comments below.