Attention CPG Firms: To Coupon or Not to Coupon?

When you’re a consumer packaged goods (CPG) company, your entire business revolves around developing, manufacturing, distributing, and marketing excellent products. The CPG industry sees some of the fiercest competition of any on the market, which means firms need excellent marketing and distribution strategies to beat the hundreds of other companies doing the same thing.

Most CPG companies have considered offering coupons to boost brand awareness at some point. If you’re unfamiliar with the practice, it can seem daunting at best — so here’s a rundown of the advantages and disadvantages of using coupons.

Cons

There will always be disadvantages to a move that helps grow your business. It’s worth looking at the cons with an open mind so you can see the benefits clearly, too — often, they’re insignificant enough that the decision is worthwhile regardless.

• Customer expectations. Convenience and savings are big factors for shoppers, and some won’t purchase until they have a coupon in hand. That can reduce overall profits, but with roughly 80 percent of shoppers using coupons, it’s a large portion of the market to leave on the table.
• Reduced margins. Every coupon redemption is a direct hit to the bottom line. That said, the reduced margin is often worthwhile — it can move an item you were struggling to sell, or foster the brand loyalty that keeps customers spending with you instead of a competitor.
• Coupon cannibalization. Sometimes customers use a coupon for a purchase they would have made anyway. This can’t really be proven either way, and many would argue it’s still better to guarantee the sale with a coupon than hope for it without one.

Pros

An honest assessment will likely show that coupons offer far more advantages than disadvantages for a CPG company building its bottom line and customer loyalty. Here are some of the major ones.

• Coupons are like magnets. Whether distributed by email, mail, FSI (free-standing insert), or IRC (instant redeemable coupon), coupons attract customers to your business and products. Make them visible through both digital channels and print mediums to maximize the effect.
• They draw attention to new products. New products always require more marketing, since customers are creatures of habit. Coupons can draw needed attention to a new item and get more people to try it — and once they do, word of mouth takes over.
• They work on customer psychology. Colors, placement, timing, wording, and value all influence how a coupon lands with a shopper. A professionally designed coupon plays this angle deliberately rather than by accident.
• They’re easily distributed. Social media, receipts, blogs, newsletters, email, SMS, FSIs, and newspapers all work as distribution channels — print coupons remain just as effective as digital ones in many cases, so don’t underestimate them.
• They help you beat competitors. Offering a better coupon than a rival is a direct way to convert their customers to yours, then keep them with strong service. IRCs in particular draw customers into the store who might otherwise shop elsewhere.
• They spread brand awareness. People trust names they recognize. The more your coupons are seen and redeemed, the more customers come to know and trust your brand — and distributing across both digital and print means can extend that reach considerably.