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You can draw customers to your store if you offer sales and discounts relevant to their interests. Discount codes and coupons are a great way you can offer these sales, especially if you operate in an online environment. However, you need to make sure you adequately plan for offering such discounts so that you can maintain a profit. You will also have various legal obligations that apply. This article will provide a short guide to offering discount codes or coupons for your New Zealand business.

Benefits of Offering Discount Codes and Coupons

Customers will be more likely to buy your products if they think they are getting a deal and saving money. Offering discount codes and coupons can accomplish this, and you get to control how you distribute this information.

For example, say you want to draw in more young people to buy your products. You may offer a new discount code or coupon for young people who can show you their student ID. Potential benefits of discount codes and coupons include:

  • drawing in new customers;
  • advertising your products;
  • selling off excess or outdated stock;
  • prompting sales in a low sales period;
  • boosting your reputation with certain groups or demographics;
  • driving traffic to your business; or
  • re-engaging inactive customers.

For example, if a frequent customer has not purchased something from your business in the past three months, you may send them an email with an exclusive discount coupon to draw them back.

Potential Drawbacks of Discount Codes

When you offer discounts at your business, you will decrease your profits for that period. You need to make sure you factor discounts into your long term plan and have a worthwhile goal for each sales period. If you offer discount codes or coupons too often, you run the risk of undermining customer confidence in your product quality. You also need to make sure you do not run afoul of your legal obligation to be honest about your pricing.

Legal Responsibilities

Whenever you offer any kind of discount at your business, you need to ensure that it is a genuine discount. If you advertise using was/now pricing, the prices listed need to be accurate.

For example, say you provide a discount code that takes 20% off your products’ usual price. However, you need to prove that you have offered that usual price before at your business and that you are not making it up for the purpose of the sale.

If you mislead your customers at all about your pricing, you could face severe legal penalties. Any special deal or discount needs to be genuinely different from your usual offering price.

What Is Your Strategy?

The key to offering discount codes or coupons to your customers is to have a clear strategy when doing so. You need to maintain a balance between offering a discount low enough to entice customers but high enough that you can still meet your profit targets. When developing your strategy, be sure to keep the following points in mind.

Plan and Track Your Discount Codes

Be sure to keep track of which stock you offer discount codes for and how low your prices become. Ensure you know your current profit margin and how offering these discount codes or coupons will play into your long term strategy for pricing and profitability. Determine what your customers respond to.

For example, do your customers respond better to small weekly specials or one-off store-wide discount code campaigns? 

Develop a Marketing Plan

Discount and coupon codes are only effective if customers know about them. Set a goal for your marketing campaign, and identify what strategies do and do not work. Adjust and adapt as you need to.

For example, you may reward your customers with a discount code if they share one of your social media posts or similar.

Research Your Competitors

Look at what discounts and coupons your competitors offer to see what other choices your customers may have. Determine the correct market level for your discounts, and determine whether you can match or beat your competitors’ prices.

Choose Expiration Dates

Every discount code has to have an expiration, and coupons cannot last forever. Your specials need to be different from the usual offering price. Otherwise, you run the risk of misleading your customers

Consider Customer Rewards

You can use discount or coupon codes as a way to reward repeat customers or engagement with your business. For example, if a customer signs up to your email newsletter, they may receive a coupon for 10% off their first order. Alternatively, you may occasionally send exclusive discount codes to customers that complete a certain number of transactions with your business. 

Key Takeaways

Offering discount codes and coupons can be an efficient way to encourage purchases and draw in new customers to your business. However, you need to make sure you are not operating at a loss when you offer these special deals. You should also ensure that any discount is genuine and that you do not mislead your customers about pricing. If you would like more information or help with discount codes and coupons at your business, contact LegalVision’s regulatory and compliance lawyers at 0800 005 570 or fill out the form on this page.

Frequently Asked Questions

What does a discount code mean?

A discount code is a string of letters or a phrase, such as SAVENOW, that a customer would input at your online checkout to gain a discount on their order.

How do coupons work?

Coupons used to be physical pieces of paper, like the discount coupons you might find in a supermarket newsletter. These days, businesses often offer digital coupon codes that function the same way, except you use them at online checkout.

Should I offer coupons or discount codes for my business?

Offering discount codes or coupon codes can be a good way to draw in old customers or entice new customers for particular sales periods. You can offer discounts to exclusive customers or target groups as well.

What does ‘usual price’ mean?

The usual price is the normal price you would charge for a good, compared to a discount price. To comply with your legal obligations, the usual price must be genuine and regularly used at your business.

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