Give discounts to attract new drinkers?
I was wondering what everyone thought about offering discounts and coupons to drive more traffic to your shop. Pro or cons. I recently posted a new ad in a college paper offering a 10% discount if a student shows their ID. Good or bad idea?
Replies to This Discussion
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Permalink Reply by John P on
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BAD idea as a long term solution. It will artificially inflate your customer numbers, but you will not grow a long term loyal base from these customers. There are times when it can be appropriate, but it should never be an ongoing thing.
Discounts can be good when.
- You are introducing a new product.
- Holiday, Seasonal, Anniversary promotion
- Tie in to a charitable event.
Customers will pay what your product is worth. They are paying for the quality of ingredients, your skill and knowledge to know what to do with these quality ingredients, as well as whatever casual ambiance or electrified coffee experience you provide. Once you have established a value, if you want to discount on key occasions, the general populace will already understand the value of your product and not view it as a discounted item. Attempting to attract long term customers based on discounts will only get you discount customers. There is no loyalty from the coupon shoppers or discount seekers.
Customers don't shop for quality based on price. Price only becomes a factor when you aren't delivering what you promised. We just raised our prices on Dec 1st, the last time was May '07 we're a bit behind, .50 on small drinks and .70 on large iced drinks. [espresso is now $2.75, 12 latte $3.50, 24 iced mocha $4.95] And we had more people Tuesday than Monday, and more today than yesterday, including quite a few new customers. The only comment we had was from a frequent customer who said, "You should have raised them before." Discounts as a matter of business? No. Occasional promotional discounts now and again? Yes, under the right circumstances.
There are plenty of college students who will appreciate your product and pay for it. And when their friends wonder why they don't go to the other coffee places, they'll smile and explain, "you have to taste it".
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Permalink Reply by Chris Hooton on
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I've thought about doing it selectively, giving (or selling at a discount) cards to regulars to give to their friends for a discount or a free drink. It would be a partnership: the shop could help regulars give their friends a drink and the shop gets word of mouth.
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Permalink Reply by Al Soto on
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Good points. I am about to open a new drive thru coffee shop so I am using it to introduce myself. But I agree I do not want to make it a habit. In fact, I may just drop the 10% altogether because I think the demand is there and after reading what you wrote. Starbucks closed in September so I have less competition.
Al
PS. My 16 ounce flavored latte will be $3.65.
John P said:BAD idea as a long term solution. It will artificially inflate your customer numbers, but you will not grow a long term loyal base from these customers. There are times when it can be appropriate, but it should never be an ongoing thing.
Discounts can be good when.
- You are introducing a new product.
- Holiday, Seasonal, Anniversary promotion
- Tie in to a charitable event.
Customers will pay what your product is worth. They are paying for the quality of ingredients, your skill and knowledge to know what to do with these quality ingredients, as well as whatever casual ambiance or electrified coffee experience you provide. Once you have established a value, if you want to discount on key occasions, the general populace will already understand the value of your product and not view it as a discounted item. Attempting to attract long term customers based on discounts will only get you discount customers. There is no loyalty from the coupon shoppers or discount seekers.
Customers don't shop for quality based on price. Price only becomes a factor when you aren't delivering what you promised. We just raised our prices on Dec 1st, the last time was May '07 we're a bit behind, .50 on small drinks and .70 on large iced drinks. [espresso is now $2.75, 12 latte $3.50, 24 iced mocha $4.95] And we had more people Tuesday than Monday, and more today than yesterday, including quite a few new customers. The only comment we had was from a frequent customer who said, "You should have raised them before." Discounts as a matter of business? No. Occasional promotional discounts now and again? Yes, under the right circumstances.
There are plenty of college students who will appreciate your product and pay for it. And when their friends wonder why they don't go to the other coffee places, they'll smile and explain, "you have to taste it".
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Permalink Reply by Matt Swenson on
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The discount is a good psychological perk to some customers, but like John said, many pay for quality, not price.
I recently was in Florida for a training for a lady who bought a shop from a man that had been open for 4 months. The shop was inside a corporate park and next to a verizon building with 2k employees. As an opening week promotion the guy gave all Verizon employees a 15% discount. Well, 4 months in this was still going on and he got mad that he wasn't making money and sold the shop. When i arrived to train, i took look at the books i noticed that literally 95% of the customers were getting a 15% discount. On top of that, his COGS was at 46%. The discounts, along with poor cost management, had created a financial black hole making next to impossible to turn a profit no matter the volume. (obviously there were ways to correct this, they just weren't done until he sold it)
What I am trying to say is that if you offer a discount, have a set time limit for the promotion. While doing so, closely monitor the amount of customers utilizing the discount and and watch your cost of goods sold to make sure they do not get too out of whack. Pennies saved translate to dollars made in this area.
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Agreed. My profit on that 16 oz latte will be about $2.00
Al
Matt Swenson said:The discount is a good psychological perk to some customers, but like John said, many pay for quality, not price.
I recently was in Florida for a training for a lady who bought a shop from a man that had been open for 4 months. The shop was inside a corporate park and next to a verizon building with 2k employees. As an opening week promotion the guy gave all Verizon employees a 15% discount. Well, 4 months in this was still going on and he got mad that he wasn't making money and sold the shop. When i arrived to train, i took look at the books i noticed that literally 95% of the customers were getting a 15% discount. On top of that, his COGS was at 46%. The discounts, along with poor cost management, had created a financial black hole making next to impossible to turn a profit no matter the volume. (obviously there were ways to correct this, they just weren't done until he sold it)
What I am trying to say is that if you offer a discount, have a set time limit for the promotion. While doing so, closely monitor the amount of customers utilizing the discount and and watch your cost of goods sold to make sure they do not get too out of whack. Pennies saved translate to dollars made in this area.
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Permalink Reply by Brady on
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Matt Swenson said:What I am trying to say is that if you offer a discount, have a set time limit for the promotion. While doing so, closely monitor the amount of customers utilizing the discount and and watch your cost of goods sold to make sure they do not get too out of whack. Pennies saved translate to dollars made in this area.
This is why I like coupons - on flyers or in print ads if you are a new store. It gets the word out about your shop while limiting your overall liability. This way you can also be more generous that you could with a standing offer.
This is a good discussion... lots of good points here.
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Yes. I can see both sides on this. Now perhaps also targeting a select group would be better. So in my case, a college paper that only goes to 4-5000 students and not the whole town may not be a bad idea.
Brady said:Matt Swenson said:What I am trying to say is that if you offer a discount, have a set time limit for the promotion. While doing so, closely monitor the amount of customers utilizing the discount and and watch your cost of goods sold to make sure they do not get too out of whack. Pennies saved translate to dollars made in this area.
This is why I like coupons - on flyers or in print ads if you are a new store. It gets the word out about your shop while limiting your overall liability. This way you can also be more generous that you could with a standing offer.
This is a good discussion... lots of good points here.
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Permalink Reply by JmyWhsprs on
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I guess depending on the kind of store you have.
In my opinion, if you have a small,local coffee shop, don't advertise discounts but instead, give people free extra shots, no charge syrup adds... etc... It makes people feel like they are cool!
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Permalink Reply by DAN on
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when the first machine showed up here about 15 years ago I said anyone who pays 3 dollars for a cup of coffee is crazy, every now and again they would hand out 20% off coupons and i would throw them away, 2 years latter I got a coupon in the mail for a free one and have been drinking as few as 1 a day and as many as 3 a day ever since, I started off with mochas then to snickers now I drink red eye always a 20 ounce ... so I can honestly say the one time free cup has got (12 years x 365 cups at least )= 4380 cups in return from me....
I may be the exception or I may be the rule either way 1 free coupon returned over $13000.00 so far and counting from me
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i should add to this only the first 200 or so drinks went to the originall place that gave me the coupon for a free drink .
DAN said:when the first machine showed up here about 15 years ago I said anyone who pays 3 dollars for a cup of coffee is crazy, every now and again they would hand out 20% off coupons and i would throw them away, 2 years latter I got a coupon in the mail for a free one and have been drinking as few as 1 a day and as many as 3 a day ever since, I started off with mochas then to snickers now I drink red eye always a 20 ounce ... so I can honestly say the one time free cup has got (12 years x 365 cups at least )= 4380 cups in return from me....
I may be the exception or I may be the rule either way 1 free coupon returned over $13000.00 so far and counting from me
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Permalink Reply by Jason Dominy on
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The 10% student discount is a great idea. I don't agree with lots of long term discounting, although loyalty cards are a good idea. Like "Buy 10 get one cup free" kinda things. It encourages loyalty.
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