Many advertisers feel that a coupon based promotional campaign is a waste of time and money in this dot com world; but people in the know have a different approach. The secret is in the details, and the old idea of offering a break-even or even a loss-leader coupon has fallen by the wayside in this volatile economy.

The idea behind older coupon redemption methods was to get the potential customer to visit the store, and while they were there buying your coupon-based products or services at a loss (or at best at break-even), they would discover other bargains that would make-up for what they lose on the coupon. It doesn’t work that way. Don’t do it. If you cannot make a profit on a coupon offer, it isn’t worth doing.

FACTS
The U.S. Department of Commerce produces a census-based report on the typical market penetration for a typical local coupon ad. (Read that as the number of people in your community that actually see your offer.) Typically, only about fifteen percent of the people both see your coupon ad and read it in enough detail to understand what it is you offer. (Results in your community may be higher, and your newspaper or other publication will have specific information for your market. Since the percentages can range all over the place, use their figures.) That’s not the point. The point is in the facts and statistics.

APPLICATION
Let’s apply what we know to a coupon run of 100,000. This could be a newspaper ad, an insert, a special flyer, or one of those coupons-by-mail packs. Fifteen percent means about 15,000 readers. Marketing statistics indicate a national redemption rate of around 1 percent for ads of this type, meaning that of the 15,000 readers, 150 might visit your store to redeem your offer. Some of these visitors will actually redeem your coupon, and this percentage depends on you, your firm, your sales staff, the quality of the product, and similar variables. (Remember, your area might have far different statistics, so get these before you take any action.)

The next step is to calculate your costs. Start with the cost of the ad, the cost of the product, and your profit margin (if any). Factor in the ancillary sales you feel might occur (if any), and calculate your profit or loss per coupon. The results will probably indicate that not only will you not break-even as you hoped, but you could lose a major chunk of your real product cost on every coupon redeemed. This is probably not an effective or efficient use of your advertising dollar. Before you spend the big bucks, check out the following five-step program (and others available free on our website at www.tulenko.com) for better ideas that can result in profits for your coupon ad!

IDENTIFY THE TARGET
Begin by describing your potential customers (buyers) in as great a detail as you can. What is their style of living, how much money they have to spend, where and when do they shop, what is their age range? Next, go to your Public or School Library or use your own computer to look up Census Bureau information that will show you where these potential customers live and work. Plot the information on a map of your community or service area.

DEFINE YOUR OBJECTIVES
Now define just what is it that you want to have happen. What do you want your potential customer to do? Make a phone call? Come to your place of business? Come to another location? Look you up on the Internet? Order by mail or phone? Be specific in defining exactly what it is you wish to accomplish.

SELECT PROMOTIONAL TOOLS
Select the best tool to reach your target market. Examine direct mail, newspapers, magazines, flyers, radio, television, door-to-door, tele-marketing, public presentations, and all of the other methods of accomplishing your objective; then select the one or two which offer the best possibility of accomplishing your objective using cost per potential customer as the deciding factor. I would recommend you sit with your media advertising people for a heart-to-heart talk as part of this examination.

SELECT MEDIA
Next choose the specific media provider offering the best deal on a cost per potential customer basis. By having a clear identification of your target market, you can sometimes negotiate more favorable terms, giving you an edge over your competition. They aren’t going to do this market/media analysis.

ANALYZE RESULTS
Keep accurate records of sales made from the campaign. Use a different method the next time and compare results. Within a short period of time you will have excellent historical records which can guide you in making your advertising dollar both efficient and effective.