Tuesday, March 22, 2011
The benefits of coupon codes
Etsy has added a lot of improvements to their website lately, one of which is the ability to create coupon codes for your customers. This is a great tool because not only does it help you increase your sales, but it also saves you a lot of time that used to be spent on updating invoices and sending refunds through PayPal. Here are some great benefits of using discount codes.
New customers. I love coupons, and I'm always on the lookout for good deals and discounts. More often than not, I'll make a purchase because I had a coupon code that saved me some money. And I know I'm not the only one who thinks like that. Coupons give you an advantage over other sellers with similar products and can attract new buyers looking for a good deal.
Increase sales. The more customers you get, the more sales you'll get. Each customer is also likely to buy more than the usual amount because of the discount offered.
Increase profits. More sales could bring more profits, even with a discount. Of course, this may not apply to all types of businesses, but if your marginal costs are close to zero and you're sitting on a lot of inventory, you should think about offering a coupon code. It sounds a bit counter intuitive, but let's look at an example. Say you have an item that sells at $20 and on average you get 5 buyers per week. This will give you $100 in sales. If you offer a 20% off discount ($16), you expect to get 8 buyers, which gives you $128.
Gain more repeat customers. Offering a coupon code to customers who've already purchased from you and are pleased with the product can incentivize them to make another purchase.
Help you track your customers. You can customize your coupon codes for different customer groups or discount amounts. Tracking how often buyers have used any of those coupons can help you figure out better who your customers are, which groups to target more, and even come up with a better pricing model for you products.
Coupon codes for a limited time frame create scarcity. Scarcity is good for your business. Seth Godin, founder of Squidoo, has talked a lot on this topic - you can read about it here and here. In short, scarcity creates value. Scarcity creates fashion. People will want something that is available only for a limited amount of time.
If you have an Etsy shop but haven't tried this feature yet, check it out. You can find it under Etsy > Your Account > Coupon Codes. Coupon codes can me made for either free shipping or a percentage discount off the price of an item.
Once you have a coupon code, there are numerous outlets and places where you can promote it for free. Here are a couple of examples:
- word of mouth
- Your shop newsletter
I'd love to hear about your experiences with coupon codes, so please comment below!