Loyalty program vs coupons?

[Mancub]

Yo

So which do you like more coupons with money off or the value added type or a loyalty program buy 10 get 1 type deal.
I’m inclined to go with the loyalty program because I feel like coupons are for deal hunters that just go to the lowest bidder also it changes the expectations of customers paying full price. On the other hand guess if you price them and it works why not. Let me know what you think.

Thanks

 

[d9phoenix]

Both have advantages and disadvantages. Plus you need to find out what your customers will actually use.

Both can be used effectively together or separately. In my area, the previous owner had a loyalty program and did regular mailings. After a year i dropped the loyalty program because it was not worth the investment. My customer almost exclusively used the coupons.

Coupons do not always have to be about massive price cuts or deals. They are just another form of advertising that get your name and product out their. Coupons done correctly can be a great marketing tool. Remember, coupons do not always have to even be a discount. They can just be a advertising tool for getting a regular price out there, if that price is a moving point, or if you have the quality to back it up.

 

[Diran_A]

I’m inclined to go with the loyalty program because I feel like coupons are for deal hunters that just go to the lowest bidder also it changes the expectations of customers paying full price. On the other hand guess if you price them and it works why not. Let me know what you think.

A very astute observation, indeed.

Statistically, less than 12% to 20% of your customers will make up 80% of your business’s profits. Those customers are usually referred to as “loyal” customers. Loyal customers not only return more often, pay more but also are your business’s best advocate. Here are some great stats on customer loyalty:

• It costs 6–7 times more to acquire a new customer than retain an existing one – Bain & Company.
  
  []The probability of selling to an existing customer is 60 – 70%. The probability of selling to a new prospect is 5-20% – Marketing Metrics.
  []A 2% increase in customer retention has the same effect as decreasing costs by 10% – Leading on the Edge of Chaos, Emmet Murphy & Mark Murphy.
  []Retailers taking meaningful steps to drive consumer loyalty are 88% more profitable than their competitors who do not, says a recent Deloitte Research study
  []“Up to 15% of a business’s most loyal customers account for 55-70% of the company’s total sales.” - Center for Retail Management, Northwestern University
• “A 5% reduction in customer loss can result in a 25% to 125% increase in profits.” - Bain & Co.

Coupons, with the exception of the kind that d9phoenix is referring to above, are intended to offer discounts in exchange for volume traffic. In doing so, coupons drive revenue, but not necessarily profit, and usually end up costing the business owner more than just profit, but reputation as well, as the higher volume of customers can lead to problems providing the proper service and the highest quality products, especially if you aren’t making enough profit to support it. That can lead to poor online reviews, which in turn leads to more couponing to drive more traffic. It can be a vicious circle.

With that said, I do believe that coupons have a place in any business, however coupons should focus less on discounts and more on promotion, as explained by d9phoenix, above.

 

[Nathan_Hersey]

I think a combination of both can be very helpful. However I think a loyalty program would be more helpful on its own than coupons by themselves. Coupons that give discounts are going to encourage customers to come in only when there is a deal in place. Loyalty programs will give an incentive to come in regularly, which is what you are going for. Coupons can have value but they can also stop customers from using your service if they aren’t sent out regularly.

 

[bodegahwy]

Hmmm… This discussion is interesting but I think we are working too hard to find distinctions that just are not there.

While loyalty programs are great for rewarding and reinforcing your existing customer base, that might also be considered preaching to the converted… The good news is that we know who these customers are and can reach them less expensively using tools like email and text programs or targeted mailing. This kind of activity is more important in markets with stable long term residency. All the comments above about these reduced costs and the importance of customer retention are valid… just not the whole story.

Coupons have the ability (placed correctly) to attract new customers which is something all businesses need to accomplish regardless of the fact that it is expensive to do so. This is especially true in a market where the customer base changes EVERY WEEK like it does in a resort market or one with high population turnover like campus shops. In this environment new customer acquisition is a necessity regardless of the fact that it is more expensive and loyalty programs do not address this need.

I don’t really buy into there being a difference between coupons and loyalty programs with respect to training your customer to shop when there is a deal. Our industry has trained them to look for a deal. Ignore that at your peril. Most clients are not so unsophisticated that they do not recognize that this is just two different colors of the same ornament. Those of us that use coupons price them into our model. This is necessary with loyalty programs as well.

I also do not agree with the reputation argument. Customers understand different business models. In pizza, coupons/deals/loyalty programs are part of the business. Yes, I realize that there are exceptions (some are tiresome and pious about the subject) but those exceptions do not change the fact that coupons are the prevailing model in the Delco business and many customers expect them. Yes, it is possible to have the reputation for the best pizza in town AND offer incentives whether presented as coupons or loyalty programs.