9% of Business is from Coupons

19 replies
Hey Warriors,

I've been working with a local pizza shop and the owners have been tracking their business and marketing.

We found out 9% of their business is from coupons. Is that high, low, normal? I know they don't profit much from coupons, but if they pick up the couponers as customers then it's worth it. They also upsell and are collecting contact info to stay in touch.

Thoughts?
#business #coupons
  • Profile picture of the author Aaron Doud
    If I understand correctly you are saying 9% of tickets have a coupon attache, correct?

    While I don't have any official data that seems low for a pizza place. The major chains are coupon crazy for a reason. The american consumer has been trained to use coupons and/or buy specials at pizza places. You have to remember that Pizza places no longer use coupons to get new customers. The vast majority of coupon users are repeat customers.

    Does he run specials besides the coupons? It may be that people simply buy the specials.

    You mention that coupons are not profitable for him. Are his prices perhaps too low already? This could be good or bad depending on how he markets. After all Little Cesars makes good profit running low price pizza. But their advertising promotes the price and the speed. If his advertising does soemthing similar he is doing good.

    Of course the way to judge that from a consultant's stand point would be to judge their traffic on Friday and Saturday night vs. some of their competition. If they are the busiest location they are doing things right and the key is to merely keep doing those things while finding new ways to grow. If they are the slowest what they are doing (perhaps lack of coupons and specials) is causing them to lose business.

    Of course there is more to it than that. Factors such as taste, quality, price, and location come into play as well.

    I know this reply was a bit long winded and does not directly answer the question. The reason is there is no "right" answer. There is merely the best answer for their business. And their pricing model may not support couponing the same way the major chains do.
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  • Profile picture of the author misterme
    No matter if it's low or high, you always want to increase the response rate, so go at it from that standpoint.

    What's more important is your ROI.
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    • Profile picture of the author Biz Max
      It may be low, if accurate. Many businesses have severe problems when it
      comes to tracking advertising. This business may be doing it right, or there
      may be an in-house problem.

      or

      Their coupon is not really much better than regular prices. I know Dominos
      coupons have decreased just because of their 'carryout specials'. Much more
      people are fetching their pie these days
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  • Profile picture of the author jamesfreddyc
    Originally Posted by AmericanMuscleTA View Post

    Hey Warriors,

    I've been working with a local pizza shop and the owners have been tracking their business and marketing.

    We found out 9% of their business is from coupons. Is that high, low, normal? I know they don't profit much from coupons, but if they pick up the couponers as customers then it's worth it. They also upsell and are collecting contact info to stay in touch.

    Thoughts?
    From discussions I've been in with Hair Salon owners/managers, there is a concern with too much business from coupons offered to the mass market as it creates budget-shopping customers that jump from place to place based upon price. The business model is then in a constant race to the bottom competing with other salons that are trying to win these customers.

    I am not certain if that 9% is high or not, but I'd pay close attention to the opt-ins they are getting. Increasing loyalty discounts, rather than mass marketed coupons to boost business seems like a way to combat the lowest bidder problem. "Premium" customers (aka, the opt-in's) would be a great source to generate revenue from BOTH existing customers and new ones.

    How?

    I'd think you could have a "premium member" campaign (email, sms or whatever) that offered the discount, plus an extra discount for referrals. This would possibly build revenue from both existing and new customers.
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    • Profile picture of the author Aaron Doud
      Originally Posted by jamesfreddyc View Post

      From discussions I've been in with Hair Salon owners/managers, there is a concern with too much business from coupons offered to the mass market as it creates budget-shopping customers that jump from place to place based upon price. The business model is then in a constant race to the bottom competing with other salons that are trying to win these customers.
      That is true but only if...
      1. Enough Salons choose this model.
      2. The Salons choosing this model provide equal quality.
      3. The are enough customers looking for this level of quality at the lowest price


      The reason I point this out is that in a true free market none of that will be true. And it dispels the price shopper myth.

      In a true market one of the competing salons would offer a better value and they would win the price war. People buy on value and not price and that is why you can't win a market by offering the lowest price. But you can win by offering the best value.

      On another note pizza places and salons are very different beasts. A salon can not easily increase production. This is because they offer professional services. They can't simply hire more people and more ingredients to cover increased demand.

      This is why in a Salon discounting may not be the best way to maintain loyalty. And only new and/or struggling salons would benefit from discounting to get new customers. A Salon with very few openings would be best served by a referral program and in fact might actually make more money by raising prices and losing customers vs. gaining new customers.
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    • Profile picture of the author midasman09
      Banned
      Something that has worked for me AND my Pizzeria clients is;

      "Coupon PostCards" to New Residents....whether Home Buyers or Renters makes no difference because they ALL like to eat Pizza.

      So....go to "MelissaData.com" and find out how many "New Residents" there are every mo in your area....and what they charge for their List.

      I use a different service for 30cents/name. I've used MelissaData and found them to provide good lists.

      I then make up a Giant PostCard with 4 to 12 different biz offers on it (including my Pizza Guy) and mail every week via First Class.

      I started with just a Pizza Guy and added more "Exclusive" sponsors.

      Don Alm
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  • Profile picture of the author Eddie Spangler
    I think each biz is different.

    For years we never went to Arbys without a coupon, in fact without the coupons their prices always seemed too high for what is basically fast food junk.
    They bombarded us with coupons, normally in newspaper inserts.


    BUT evertime we went, most other customers were not using coupons, guess they figured that value was there to pay full price.
    Just because our family didnt pay full price doesnt mean others wont.

    Same with biz owners who auto think coupons will bring them bargain seekers only. It really depends if their original offering was a good value to begin wtth in enough peoples eyes.

    I always figured Arbys raised the price a little to accomodate for the sheer number of coupons it distributed and it all worked out in the end.

    So really it takes trial and error vs a one size fits all answer.
    You know this testing thing that expert marketers keep harping on
    yet most people ignore in search of the magic bullet.

    As far as pizza goes, if I owned a pizza joint I wouldnt care if the majority of people had coupons as long as I was hitting my profit targets. Personally I suggest to clients that we initially use coupons for discounts and to bring people through the door but over time it is better to offer returning customers add on perks vs discounts as they generally cost less AND have a higher perceived value and tends to weed out the pure bargain seeker. (although if we are under max capacity bargain seekers are not necessarily bad, especially if our staff is trained on upselling)

    For example 25 percent off a $30 tab is $7.50 off our bottom line but a free premium dessert that sells for 7-8 bucks may be MORE attractive to our prime customers, ESPECIALLY if they felt the $30 was fair to begin with, and still only cost us 2-3 bucks off the bottom line.
    BUT these type of value added deals are more effective when the brand is already somewhat known to the general public or to get more return customers.

    Added bonus coupons seem to be less effective from my observation when the brand is unknown and in this case the dollars off coupon may work better.
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  • Profile picture of the author jamesfreddyc
    Aaron,

    I think your response is perfectly reasonable. The discussion I was in was about a collection of local salons that had some opting for groupon offers as ridiculous discounting to attract customers. The resounding reply was this type of model inokes a price war that gets the biz of the lowest bidder and devalues the participating salon.

    Wholeheartedly agree that it is a different biz than a pizza parlor and likely not a good comparison
    However I saw some parallels in that these salons were basically turing themselves and services into commodities.

    ....just like a slice of pizza and a coke for $3.99
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  • Profile picture of the author AmericanMuscleTA
    Thank you all for the replies!! JamesFreddyC... your two posts were the only ones that I was not able to "thank." Not sure why.

    Aaron, you are correct. 9% of the customers who come to the pizza shop have a coupon with them. They currently don't have any specials. I told them the best people to market to are the ones who have already tried, and liked, their pizza.

    Every time they run an ad in the local newspapers or coupon books their business picks up, then it dies down again. I told them to start doing direct mail, but they said it's "too expensive." They're one of my clients that are going on my EDDM postcard. Oh, and they have the best pizza in town! Made fresh, and takes 90 seconds to cook!

    WhiteRhino, I have them keeping pretty darn good records of where the coupons are coming from. Unless, of course, the employees don't keep the coupons or track them. Which, that is always a possibility.

    JamesFreddyC, once I convinced them to collect contact info they have been doing pretty well at it (just started a couple weeks ago). They're tallying up their response from their first campaign to these opt-ins.

    Eddie Spangler, the only thing I like at Arbys is their fish sandwiches! Yum! ha.
    Regards to testing, they feel if they didn't make money off the ad it wasn't worth it. I explained Lifetime Value to them, and a light bulb went off in their heads! :-) And, I like what you said... as long as their hitting their profit targets it shouldn't matter where the customers come from.

    midasman09, They haven't started marketing to new residents, yet. I was thinking of MovingTargets.com would be a good place to start for new residents. Or... I could just pull a quick list off the county auditor's site. I'll have to check out MelissaData.com.
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    • Profile picture of the author Aaron Doud
      Originally Posted by AmericanMuscleTA View Post

      Aaron, you are correct. 9% of the customers who come to the pizza shop have a coupon with them. They currently don't have any specials. I told them the best people to market to are the ones who have already tried, and liked, their pizza.

      Every time they run an ad in the local newspapers or coupon books their business picks up, then it dies down again. I told them to start doing direct mail, but they said it's "too expensive." They're one of my clients that are going on my EDDM postcard. Oh, and they have the best pizza in town! Made fresh, and takes 90 seconds to cook!
      If their business is fluctuation based on when they run coupons it is clear what works. If they can't see that there may be no hope for them.

      Now if their margins are too low to make money with coupons (as you seemed to suggest) that means they have to change their prices.

      This business needs more than marketing help. They need to change their business plan from "What they hope works" to "what clearly works".

      Coupons and deals are what they need, that much is clear. What isn't clear is rather this company is willing to adjust their business to make it work. I've watched enough shows like Restaurant Impossible to know that for many restaurant owners their ego seems to mean more than making money.

      So my advice to you is to lay out the facts and be willing to walk. You can lead the horse to water but you can't make them drink. And is the horse isn't drinking you are not being paid.
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  • Profile picture of the author AmericanMuscleTA
    Aaron, you're right... they should probably change their prices. They offer premium, fresh products. Nothing is canned.

    It was like pulling teeth to get them to start collecting contact info... but they see the benefit. So, I can definitely convince them.

    Like Dan Kennedy says... if you raise the prices you may not have as many customers but you'll have more money. Cha-ching!
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  • Profile picture of the author TrumpiaTim
    9% seems a bit low, another possibility is that they if they are only doing direct mail marketing today, they should probably look into the following:

    1) SMS Marketing
    2) Email Marketing
    3) Social Media

    Engaging in all of the above should result in an increase of coupons being used.
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  • Profile picture of the author sameera
    Offering coupons to your customers is a great deal in any website. People love ordering things online and they have lots of online store options. the only way to attract customers to your website is to offer exciting deals, offers and coupons.
    Coupons, daily deals can generate good revenues, you only need to make perfect planning to when offer a coupon and deals.
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  • Profile picture of the author bizgrower
    Irresistible offers that are still profitable.

    If they have just one location and not in a tourist area,
    they can reach "market saturation" - meaning that just
    about all the people who are going to buy from them
    are reached and couponing may stop working.

    Customers may have to be carefully weaned off a loss leader
    coupon to the new deals. "Hey, what happened to the (whatever)
    deal?" Meaning they have to be prepared to lose some customers and
    gain others in their new target market.
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  • Profile picture of the author gaurav1991
    hi
    ya you are right my friend no matter if it's low or high, you always want to increase the response rate, so go at it from that standpoint.
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  • Profile picture of the author Peter Lessard
    Interesting discussion. I have some interesting long term insight into this. I worked delivery in several pizzeria restaurants when I put myself through school and made life long friends with several owners. My observations are over a 25 year period in Ottawa, Canada.

    First off I think enough people commented on the high/low of the coupon now for us to all know there is no high/low it depends on their goals/profits etc...

    I have not paid much attentin to pizza chains, this is about mom and pop shops. I do know personally 3 mom/pop pizzerias that are still around after 20+ years and their businesses would be considered very succesful and their families would be considered wealthy by most standards in that the business has allowed the original owner and children/family to buy and pay for houses, pay for education and provide a nice living for all. I have also watched TONS go bankrupt. Here are the common denominators I observed. Like all marketing if one element is missing I have observed that no matter what they did to prop up the others the end results was always failure.

    1. Location. I do NOT know what makes a great location. I just know this. When a pizzeria has failed at a specific location I have watched many others buy that location thinking they could make it work and it has always failed. Year after year there are new owners, they never last long. Since I grew up in this area and I am now 46 I marvel at the number of pizzerias that come and go at one location when only 2km away another lasts for 25 years.

    2. Food quality and pricing. The ones I know that are succesful have great food and the highest prices. One particular owner I know scans menus and if he sees higher prices raises his. He has five locations and makes absurd amounts of money. Each of these owners seems equally aware that they have 2 groups of buyers, the parents and what the parents will feed their kids so if they do have a special its generally on a pepperoni or cheese pie that the parents plan on feeding the kids while the adults will enjoy their favorite premium pie from the menu.

    3. Advertising. Each of them do some of those coupon books for the pies aimed at the kids but each has learned over time that special and price are not important to their business but being in the minds of their clients is so all of them mail full color menus (used to be just a few colors) to a radius around them and to my knowledge menus go out weekly, simply rotating through their territory so that perhaps each client will only receive something every few weeks. They use specials but they seem only sufficient to justify the purchase in their clients mind that really wants the better pizza. Things like a free pop or save a buck, none of them engage in big discounts because its not their market. None of them use Canada post, they all use a private service they trust to make sure their menu gets out and is not lost in the shuffle.

    4. Each is keenly aware after hard lessons that MR PERSONALITY must be present or the business suffers. Each of these owners has a strong likeable personality that was born to make friends or has a front man/long term employee with the same skills. I have watched each try to back away from their company as it started to make more money with catastrophic results. One of the 3 has had the same employee for 23 years and he left once and after 2 months they begged pleaded and bribed him to return. It seems in the high end pizza who is making it and handing it to you matters. Its like going to your favourite barber, you simply would NOT use another barber, you would leave and come back lol. The pizzeria I speak about above that bribed the employee to come back told me he saw customer drive into the parking lot and when they saw their favorite cook was not working they drove on! I also believe that each of these 3 continues to be succesful because they have kids that grew up in the business and are equally personable and have captured the new generation of buyers, the ones that grew up eating the pepperoni slice dad ordered and now have moved on to the deluxe pies.

    I have also watched each of these pizzerias get rid of a new competitor by doing nothing other than ramping up the frequency of their menu delivery. No special prices just blanketing the area more often. After so long in business they can pretty much put a price tag on getting rid of a competitor and generally the new guy does not have deep enough pockets to stick around.

    Sorry this is not particularly related to your question on coupons but thought it might be worth sharing.
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  • Profile picture of the author AmericanMuscleTA
    TrumpiaTim, They also market in a few local newspapers (one was a big hit when they did a full feature on them), and they have an app (they just hit over 100 downloads). They've only sent out one email promotion... ugh!

    Sameera, I should have them direct their coupons to their website for some special offer. Hmm...

    Bizgrower, Nope, not in a tourist area. They have the highest quality pizza I've ever had in our area. Fresh, high quality, locally grow ingredients. I was thinking they should go after people who are into fitness that love pizza, but don't want to eat it because it's not healthy for you (this pizza shop has the healthiest pizza in town!). And, you're right... current customers may have to be weaned off some coupons.

    Gaurav1991, True that!

    Plessard, WOW! Thanks for taking the time to respond. Lots of great info!

    Yep, this pizza place is a local shop, no chain here (All the chains are slammed next to each other).

    Their location is not the greatest and I told them that. They are just south of the main road through the city (There are at least 5 chain pizza shops within a quarter mile on this main road). And, to make matters worse, our city moved our library which was pretty much next door to the pizza shop... Ugh! I've seen other people try different businesses in this shop and they all fail. That's why I can't stress enough to the owners they needs to market market market! Oh, and they have the best quality pizza around!
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  • Profile picture of the author bizgrower
    They might consider delivery if they are not already doing it.

    They might start looking for a better location, maybe a building they
    can afford to buy. Possibly for less than the rent/utilities/maintenance
    if they are leasing. In my neighborhood - similar menus and the 3 year
    old place with the higher quality and better location and atmosphere is
    blowing the doors off the 11 year old place. Definitely worth their looking
    at the numbers and how they can apply their cash flow to reinvest in the
    business/ marketing/advertising...

    The family deal Plessard mentioned is very good. I forgot about it.
    A long time ago I managed an Italian restaurant with excellent
    pizza and delivery. I think on Tuesdays we basically had a kids eat
    free with the purchase of two adult meals deal - dine in only.
    They could do something like that - maybe expand it to all their
    slower nights.

    I never tried this, wanted to because it makes sense from a human
    nature standpoint, read about it in a trade magazine - so it worked
    for a restauranteur. Anyway, on one Tuesday a month (or whatever
    slow night) they buy the whole meal for a lucky random winner.
    (Probably announce the winner at 7:30 PM or so) In the article I read,
    it filled the place up and brought a significant rate of return for the few
    dollars it actually cost the owner (food costs should be about 28% or
    so, drink costs way better than that). An alternative would be to do
    this often on random night(s) every week:

    FB, Twitter, SMS: Lucky random winner night tonight...
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  • Profile picture of the author AmericanMuscleTA
    Thanks, Bizgrower! I love the idea about offering a whole meal for free to a family! Heck, maybe expand on that and give away three meals throughout the day to some lucky random winners. I got to get them to have a great online presence.

    Right now the owners just started delivery to businesses for lunch.

    About a tenth of a mile down the street, and a busy intersection the city tore down an old gas station. Right now the land sits vacant for testing... but I kept thinking that would be the perfect spot for them. To bad they can't just pick up the building and move it to that spot today. :-P
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