Does your business need to use coupon codes for customers? Are there any potential downsides to using coupon code promotions? How can you best use coupon codes to make more sales in your business?
These are all things we want to answer in this guide. So read on to discover the biggest pros and cons of using coupon codes for customers and your business, and how to make the most of this strategy to get more sales without losing out.
What are the advantages and disadvantages of coupons?
So what’s the real deal about coupons—do the advantages outweigh the disadvantages? Should you create coupon codes for customers? Let’s find out in this pros and cons list.
Disadvantages of coupon codes for businesses
First, let’s start with the disadvantages of using coupons in your business.
Con #1. Cuts into your profits
One big concern that small business owners might have about giving away coupons is that it eats into their profits for a product or order.
While there’s certainly no way around losing a bit of revenue because of promotions, it might be helpful to always have a reasonable profit margin for your products, so you can afford to create promotions and issue coupon codes for customers.
Some simple calculations should help you mitigate the risk of losing money from promotions like these. Additionally, to avoid any risk of certain customers from abusing your coupons, it’s important to set some limits and conditions for each promotion.
Con #2. Can attract bargain hunters to only purchase with coupons
A second reason why some small business owners might avoid offering coupon codes to customers is that it might attract bargain hunters—or even Discount Detectives, if they’re more on the extreme side of things.
While there’s nothing wrong with looking for a good deal (we’ve all done it!), any business that knows how to offer coupon codes is probably familiar with this type of shopper. After all, the coupon code or discount is practically the Bat signal for the bargain hunters.
There’s not a lot you can do to keep these types of customers from flocking to your business. But it isn’t a terrible thing. As long as you’re still making a profit, bargain hunters and Discount Detectives can still help you rake in a sale.
To help make sure your brand has less bargain hunters, we’ll be dropping some of our must-know tips to increase sales using coupon codes further down this guide.
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Benefits of coupon codes for customers
Now that we’ve talked about the potential disadvantages, let’s take a look at the other side of the coin with the advantages of offering coupon codes in your small business.
Benefit #1. Increases customer loyalty
A big benefit of giving coupons to customers is that it might very well increase customer loyalty. If customers know that you’re a small business that gives promotions like coupons from time to time, it might encourage them to keep tabs on your brand and make more purchases.
When done strategically, you can reward loyal customers with special or exclusive coupon codes—delivered through a secret email or Instagram DM, for example—you can create not just repeat sales from these customers but also fans for life.
Benefit #2. Boosts sales from first-time customers
Another big advantage of coupon codes for small businesses is that it might be the very push a customer needs to purchase from your brand for the first time.
Some shoppers and customers may be hesitant to try new products or brands, but giving a reasonable coupon code for their first purchase might go a long way to encouraging them to actually take the leap.
Benefit #3. Can grow your following
According to a survey by Blippr, 77% of online shoppers follow their favorite brands on their social media channels to stay updated and aware of upcoming sales and offers.
If you promote your coupon codes on these channels, that could help grow your following on social media as loyal customers excitedly await your next promotion.
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Benefit #4. Can increase average order size
As a small business, you know you can’t compete with big companies and brands that have dozens of locations and probably millions of customers. But that doesn’t mean you can’t make more sales from the customers you do have.
Enter average order value—or on Cococart’s nifty Analytics dashboard, average order size.
This is a simple metric that tells you how much your customers are purchasing per order on average. If you have multiple products on your shop or if customers can buy more than one unit of your product (e.g. a 6-pack of beer instead of a single can), then you should be paying attention to this metric in your small business.
A big advantage that coupon codes can give you here is that they can increase average order size when you strategically create a coupon that gives a reasonable discount with a minimum order amount.
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Tips to Increase Sales with Coupon Codes for Customers
Have you decided that using coupon codes in your business is the right way to go? Awesome!
So when you’re ready, here are our top 3 tips for using coupon code marketing to make more sales in your business.
Use them sparingly
As tempting as it is to bombard your customers with all the coupon codes you can, this strategy might actually backfire. For one thing, it could attract more of those Discount Detectives or bargain hunters we talked about, and people end up never paying full price for your products.
Given this, here are some great ideas about when to use coupon codes in your business:
- Local and national holidays. Celebrate with your local community by giving a coupon for a specific holiday or event, e.g. Christmas, Ramadan, Black Friday, etc.
- Payday sales. If you know when most of your customers are getting paid, put up an occasional payday sale to help them celebrate their hard-earned cash.
- Shop milestones and anniversaries. Did your store recently hit that coveted 10K follower mark on Instagram? Or maybe you just turned a year old—either way, any milestone is a wonderful milestone to celebrate with customers, so why not offer a coupon to mark the occasion?
Create urgency with expiring promotions
A big tip to increase sales with coupons is to set some limits and conditions, so there’s a little bit of urgency involved. An example of this is setting a specific time frame for the promotion, say, 3 days or the upcoming weekend.
Customers are more likely to purchase soon when they know a promotion for a product or brand they want is expiring. This is linked to a psychological phenomenon called “anticipatory regret,” where customers think they’ll regret it if they don’t take advantage of a sale or discount while it’s there.
For best results in your coupon marketing efforts, be sure to set some limits like expiration dates (“3 days only”), limited redemptions (“for the first 50 customers”).
Consider creating influencer promo codes
Want to hit two birds with one stone? If you’re already considering tapping some influencers to help you get the word out about your business and wanting to offer coupon codes for customers, why not combine these two strategies?
Create a special coupon for every influencer you want to work with—e.g. COCOCAT20 gets all fans of CocoCat a whopping 20% discount on their next purchase on anything in your shop.
Of course, aim to be strategic in your influencer marketing efforts. When you’re a small business owner, it’s going to be a lot harder to get the attention of some celebrity-status influencers, so make a solid plan to ensure your efforts pay off in a monumental way.
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The Complete Guide to Influencer Marketing for Small Businesses with No Budget
How do I create a coupon code or promo code?
Here’s the golden question: “If I’m already sure I want to use coupon codes in my business, how do I actually create them?”
Don’t think we forgot about that important step, business buddy! Here are a couple of ways you can offer coupons to your customers.
Option 1: Manually process coupon codes
Cost: Free, but time consuming
Are you taking orders in the DMs? Or maybe using Google Forms, Jotforms, or Typeform (or really anything related!) to take in orders?
The good news is that these methods are free to do and use. It’s usually free to set up an online form, and Direct Messages are a free feature anyone can make the most of.
The bad news is, however, that this can be time-consuming to implement.
It might take no time at all to create the coupon code and put that on your order form, but the trouble lies in actually making sure customers receive their discount or promotion perk.
For instance, if you issued a free shipping discount for a minimum order, you’d have to 1) manually check if the order value fits your minimum, 2) send customers their total bill with the free shipping promotion, and 3) wait for customers to pay and manually verify their payments.
This could eat up a lot of hours in your time, and might discourage you from doing more coupon marketing in the future.
We propose an easier solution for offering coupon codes to customers, and the best part is that it’s both affordable and incredibly convenient to use.
Option 2: Set up coupon code promotions with an online store builder
On Cococart: Easy.
Other platforms: Easy to medium, depending on the platform
On Cococart: starts at $5/mo
Other platforms: starts at $29/mo, with additional transaction fees
By using an online store builder to help you create, implement, and manage coupon codes, you easily save hours in your week.
Some ecommerce store builders like Shopify or Woocommerce might have the ability to quickly create coupon codes, but the downside is that they could have a lot of hefty fees—especially between payment transaction fees, subscription fees, and hidden fees from these platforms themselves.
That’s why small businesses are flocking to Cococart, which makes it possible to create coupon codes for customers starting at $5/mo, with no hidden charges.
Creating the coupon is easy. If you already have a Cococart shop, sign in to your admin dashboard and head over to the Promotions tab.
There, you’ll see everything you need to make a super sales-generating coupon code, together with all the limits and conditions you might want to set, e.g. limited redemptions, specific dates, minimum order requirements, and more.
Start using Coupon Codes for Your Small Business
Coupon codes for customers could just be the next strategy that takes your business to the next stage, creating loyal customers and boosting your revenue as a whole.
It might take a few tries before you see some traction in this strategy, so keep your experimenter’s hat on, commit to doing new things, and soon you’ll see your coupons making some serious ROI.
Want an easy way to create and offer coupon codes for customers? Cococart’s got you covered with everything you need to get started. Set up your store for free today, and make your first promotion when you’re ready to rake in the sales.
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