Why Do Retailers Use Coupons?

Read about great coupon deals and savings for August 2023.

Coupons are everywhere today. You can find them in newspapers, on printed flyers sent to you in the mail, and even on the Internet. But people often ask why retailers even bother with coupons. After all, can’t they just put on a sale and lower their prices?

And the answer to that second question is “Yes!” In fact, retailers do put on sale events throughout the year. Any time they think consumers may have some extra money to spend retailers are likely to schedule sale events. They have learned to schedule sales around holidays and weekends when people are most likely to be spending money, and that means that more potential customers have saved money to spend.

So sale events are very important for retailers, but they have limited appeal to irregular and new customers. For one thing, consumers who don’t know what a retailer’s sale prices are like are less likely to visit the retailers’ stores.

Also, many retailers will discount merchandise that is not selling fast enough, or they were offered an incentive by a manufacturer to take on a lot of extra merchandise. Fashion-sensitive consumers may be less likely to go for the sale prices on apparel and merchandise if they think everyone else will be wearing the same things. Sales are more appealing to consumers who have to save money.

Food retailers compete on discounts and sale pricing, of course, and they hope to draw back shoppers with regular sale prices on different items. They will buy larger quantities of certain types of items when they can negotiate better deals with the manufacturers. Manufacturers agree to the discounts to build up consumer interest in their products, hoping for repeat sales at full suggested retail price in the future.

So with all these sales, why do retailers offer coupons? The answer is simple psychology. Retailers flood the marketplace with coupons to encourage consumers to buy products they normally would not buy. The retailers may not make as much money off these products as they would when selling at full price but the more items of any product a retailer can sell the more it can buy in bulk from the manufacturer. Buying in bulk leads to discounts for the retailers, who can then pocket the difference or pass on the savings to consumers.

Some consumers also feel like they’ll only save money if they use coupons. Retailers reach out to these consumers with coupons to make their brand name products more competitive with less well-known products, including the “store brand” versions of those same products. Although stores make good money by selling their own generic versions of popular products many consumers are loyal to brands. So being price conscious, especially when times are hard, consumers are more likely to make incidental or discretionary purchases when they think they are being offered a special discount via coupon.

Some consumers will hold on to coupons for as long as they can, hoping to match the coupons with sales on those same prices. This strategy has been known to hit retailers hard and they may watch how many coupons are out in the marketplace before they lower prices on brand products.

In fact, by tracking how many coupons are distributed versus used the retailers are able to see which products require price incentives and which products will be purchased by consumers regardless of whether there are sales or coupons. If you wonder why certain products never seem to go on sale or receive coupons it is because their sales numbers are so strong neither the manufacturers nor retailers see any need to promote the goods with coupons and sales.

Coupons also provide retailers with a means to advertise themselves and their products to potential new customers. Advertising is often seen as invasive or annoying but most consumers look upon coupons favorably. Hence, retailers can “get the word out” about their companies and store locations by sending out coupons (or distributing them through newspapers and magazines).

The Internet has also made coupons a highly competitive part of doing business in the retail world. It is now so easy to find coupons online that retailers actively feed coupons to Websites that sign up for their affiliate programs. Through these Websites the retailers hope to attract new customers or draw back customers who are only rare or occasional visitors to stores.

Also, retailers may participate in special “launch promotions” for high-profile manufacturers. When major new products are finally made available to the general public retailers line up to offer special deals and discounts to their customers in order to generate excitement and stimulate additional purchases. People don’t like to stop spending money, and if they have a little extra money after getting their promotional item they often buy additional merchandise.

So while you may see retailers schedule special sale events around new products, some retailers also throw in manufacturer coupons (or their own) in order to compete with other retailers for those consumer dollars.

Ultimately, coupons are just another way for retailers to entice consumers into their stores to make purchases they might otherwise NOT have made.