Coupons can serve a variety of purposes in your business, but if you’re not careful, they can be a costly experiment.
1887: Coca-Cola distributes what is widely agreed to be the very first coupon, for one free glass of Coke. “John Pemberton invented Coca-Cola and is the person that got pharmacies to put it in their stores in Atlanta,” said Charlie Brown, vice president of marketing at NCH. As the business began to grow, the company introduced coupons to help it along.
Coca-Cola would “offer pharmacists two gallons of Coke syrup in return for the names and addresses of consumers who lived near that pharmacy, and they’d direct mail the coupon to the consumer. It was a classic new strategy. Consumers would get this thing in the mail for a free glass and of course try it,” said Brown. “And the pharmacist would keep buying the syrup.”
Source: RetailMeNot Blog
Coupons can have two primary effects on your business:
- Trial / 1st Time Customers: Develop a huge list of new 1st time customers. A lot of resource is required the make people aware of your offer, and between the cost of distribution and the cost of redemption, a coupon can create a deficit in a business that can take years to recover from.
This type of coupon campaign can be very effective with a new business or brand that needs a volume of consumer awareness to “launch” the business and encourage consumer trail of their product or service solution.
- Loyalty / Lifetime Value: Develop your existing customers into more frequent, valuable, and loyal customers. This is a much more strategic approach and won’t cost as much to implement. The entire focus here is on increasing the value of each person who is already a customer in your business.
This could be add-ons & upsells to the most basic service that the majority of your 1st time customers buy, or it could be promoting more frequent or larger purchases of your basic offer.
Mobile Coupons are delivered to consumers on their phones. They are usually redeemed digitally. Regardless of how you plan to deliver your coupon, you’ll still need to let people know about it. Marketing creates awareness of the coupon, with access/delivery in a second step, or it can be in 1 seamless step.
In this case study, Canyon Country Car Wash implemented a coupon campaign that targeted only a small segment of their customer marketplace – youth aged 18-24. Knowing that youth are less receptive to carrying or redeeming an “old-fashioned” paper coupon and are more open to the “cool factor” of digital rewards, they targeted them through local signage and posters with “Text to message to 87456” to receive a coupon.
Be aware though that most, if not all, of your customers have cell phones, and they’re also more affluent and more likely to drive fancy cars they want to keep clean. Additionally, they’re also the people most likely to have smartphones, with apps. Your adult, professional customer database is much larger and more affluent, than a small youth segment.
Mobile App Advertising / Location Triggered Delivery
Mobile coupons are delivered to individual prospective customers on their mobile phones; they’re often effective when triggered by geographic proximity of the prospective customer.
How Artificial Advancement Increases Loyalty
Derek Halpern at SocialTriggers writes about the psychology of marketing as it works in the real world, for real businesses. In this article, Derek shares the details of a research study on increasing the profitability of a car wash coupon campaign by constructing the campaign so that customers are mentally & emotionally more close to successfully achieving the requirements to earn the free bonus or gift.
In this test, two car washes implemented similar loyalty coupon campaigns with a punch card system that required customers to purchase another 8 car washes, to get 1 free car wash.
- Getting started: For the location that structured the card & reward that needed 8 punches to earn 1 free there’s a perceived large amount of effort and time for the customer to earn the reward.
- Already going: For the location that structured the card & reward that needed 10 punches, but 2 or 3 were already earned; these customers physically saw themselves much closer to earning the reward, even though the same 8 purchases are required to earn the bonus.
The difference? The second one earned 82% more redemption! That’s a large difference in profitability, even though only a small element of how the coupon was structured was altered.
If they each delivered 100 coupons cards needing 8 car washes at $20 each for full redemption, the “getting started” car wash could have generated $8,000 in additional revenue before redeeming the free washes worth $1,000 (cost); while the “already going” car wash would generate nearly $15,000 before redeeming the free washes worth $1,800.
Be Wary of Social Coupons
Social coupons are distributed through social networks (on group buying platforms), and are activated by the network effect of coupon distribution with increasing savings unlocked by sharing the coupon socially – with more people.
Since social coupons hinge on creating a mass volume of new 1st time customers, social coupon campaigns can easily “tip” into a long term loss for the businesses if it’s not planned and implemented effectively from the start.
There are many different types of coupons available, and any number of small changes could dramatically change your profit margin, so to develop predictable success for all your coupon campaigns, you’ll want to plan to test and carefully note your results. While there’s no one clear answer to if mobile coupons work for car wash businesses, if you’re up for the challenge and like to split-test scenarios, you can find out how they’ll work for you.
About the author: Debbie Horovitch is a 20-year advertising media veteran and SEO content producer currently working on her 1st book and training program for marketers using YouTube and Google+ Hangouts on Air, Celebrity Hangouts on Air. Debbie has been working with automotive and aftermarket marketing professionals and media, since 1996.