Why Do Businesses Provide Coupons/ Discounts? The age-old Question

Consumer_ProductsIn reality, all companies are gluttons. Every sale, discount, and even seasonal products are all designed to get to buy more and to keep doing it.

The same logic applies to coupons. Do not think for a minute that coupons are a stores’ way of giving back.

Let’s look at the attitude of the average shopper (which encompasses the majority of consumers).

If a consumer is looking for item “A” from a popular online store. We typically explore one of two options:

a) We go to the store/website and purchase the item.
b) We check for any coupons associated with the item first then buy the item at s discounted price.

Option “b” might seem like the company you received the discount from is literally throwing away money and its landing right on your face.

But that is not the case…

Let’s see what companies have to gain from using this strategy vs what they lose.

Actually, let’s start with what they lose since that is the smallest part of the equation.

Ok so in actuality they lost a bit of profit from that sale.

But that is all they lost, and for what they might have gained in returned that loss will probably turn into a massive profit!

Let us explore this.

What Did they Gain From Losing?

First off that company got you to buy something from them, their presence is now in your mind and in a positive light (discounted prices). You are more likely to check with them first about any other related items, or even make them your store of choice.

You are probably going to mention to a friend or two that you got this item at a ridiculous discount. Now that friend is also aware of the company.

Have you also noticed that many companies only support coupons when shopping online? Makes no sense right? If you can get the same item at a cheaper price online why can’t you just go to the store and purchase it at that price — it saves them delivery anyway?

It’s simple.

In order to buy that item online, you had to sign up with that company. They now have your email address and maybe a phone number. And somewhere in the fine print (which we hardly read especially when dealing with a bigger trusted brand), you allowed them to send you emails or text messages about offers. Once again allowing them to reach you whenever they please with a message.

Lose or Gain from Coupons…in the long run?

Also, do these companies really lose that much when offering coupons?

Look carefully at the items with the largest discounts from coupons. Those products often require you to buy additional products. For example Godaddy an online hosting provides some of the biggest discounts in the industry. Godaddy promo codes can be as much as 90% off services. Why would they do this?

1) They don’t sell a tangible product, they sell a service which they delegate a value to and it makes it difficult for you the consumer to know what that might actually be worth.

2) Secondly, in the domains and hosting industry you tend to spend a lot of time and money on your websites and if that host has been good to you for the duration of the service purchased with the coupon, why not stay with them? On the other hand, note that no web hosting companies offer coupons on renewals fees and that is how they make their money back. These renewals are also often at a premium fee which was probably hidden when you signed up for the sale.

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Many other companies also play using these rules. For example, Walmart is known for having some of the best prices around (and they do because of their scale and efficiency) but often the items with the best prices also require sister items which just happen to be…you guessed it…right beside the main item.

For example, most of their electronic devices are at very low prices. But what you don’t realize is they make that money back because you might need batteries, cables, additional controllers, warranties, and extended warranties etc. You might think well if it cost so little why not secure it. Because of the size and diversity of Walmart, you end up paying much more than you would have at another store without such low prices.

Are they Stealing by Giving?

So we have discussed coupons which actually work and might save you money. But another common strategy is to use coupons as an illusion to saving money.thief walking

Many popular large companies (I won’t name any) mark up their merchandise extremely high then offer you coupons to make it seem like you are saving money. When in truth and fact you are just paying what the items should have been marked up to in the first place. This is common, especially in luxury brands.

But it is all mental.

You might ask why are these companies still in business today? I will leave you with one of the answers and continue this article another day.

Conclusion until we meet again

A high price is often associated with a higher quality item. We have been programmed to think by organizations that if something cost more its better than the cheaper alternative.

Even though this is often true, companies exploit this fact by inflating the mark up of their stock, far beyond what it is worth. All in an attempt to make you believe that this item is a must-have.

Often, you might see the item and consider buying it but decided against it because of the expense.

Until you see an ad or email about a massive discount on the item. And you rush to purchase believing that you are now receiving this “high-quality” item at a steal when in reality you just bought an average item at the price it should cost.

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Not all brands are like this! But it is a common strategy in the industry and teaches us an important lesson —

Do not blindly associate price with quality.

Right now you might feel like everything is a lie…but this is not necessarily true.

Most of the gains made from corporations through discounts and sales are associated with what we do after that first purchase.

And they are much better at directing our behavior than we think. It is just better for us as consumers to look at the larger picture and analyze what mental game might be being played on our subconscious and try to avoid them.

That is more easily said than done, trust me I know!

Therefore, our next post will be surrounding, some effective steps to help you save money and win the psychological war within and around us.