Most business-to-business companies don’t offer coupons, but that doesn’t mean there isn’t something to learn from the strategy. Actually, most of us, whether we use coupons or not, don’t really give them much thought. It seems they’re just another means to entice us to buy something.
Even if we’re not manufacturing peanut butter, there is much to be learned from coupons, for they tell us a great deal about prices. How do you price your product or service? Do you just have a standard mark-up over labor and materials? Have you done research into what competitors are charging? Smaller businesses often don’t even have direct competitors. They’ve done a great job offering some product or service that no one else offers the same way, so competitive market pricing can be very difficult to determine.
Even if you can’t just look at the marketplace to discover what the price should be, a flat mark-up of costs is rarely the best strategy, although it is a good place to start. It is surprising, though, how often this model is applied. I worked with a company some years ago that was selling a laser product for about 60% less than their competition! They weren’t losing money, so no harm done, but after we unceremoniously raised the price we generated more revenue without damaging sales one bit.
Coupons are more than just promotions to encourage purchases that might not have happened otherwise. Instead, they help to divide the market place up and provide valuable information about the real prices people are willing to pay. Suppose you see a coupon for 50¢ off your favorite peanut butter. A thrifty, unemployed college student might very well make the effort to bring that coupon, along with many others, on his next shopping trip. A couple of married professionals with three kids won’t be able to find the time between bringing kids to soccer practice and late night business dinners to take advantage of the lower prices they get by finding, clipping, and sorting coupons.
Manufacturers get to offer their products at two different prices and nobody complains. One lower price enables people who have the luxury (or inconvenience) of valuing money more than time to still buy their goods, and the other allows those whose time is worth too much right now to simply pay top-dollar and get it over with. The manufacturer a chance to see how the product is seen in the market place, without risking pricing it too high or too low, losing customers or leaving money on the table.
It’s still unlikely that an original equipment manufacturer (OEM) is going to start offering coupons to their customers, but adapting this strategy to determine prices based on time, but also delivery, guarantees, service, and of course, volume discounts, can provide valuable insight and reduced risk. What’s worked for your business?