Coupon definition
/What is a Coupon?
A coupon is a voucher that entitles the holder to a discount on a particular purchase. The issuance of a coupon allows the seller to advertise the discounted price of a product or service, net of the coupon, while not necessarily paying the amount of the coupon; a buyer must take action to present the coupon in order to receive a discount. Only the more price-sensitive shoppers collect and present coupons; all other shoppers typically pay full price. Thus, the net result of a coupon issuance is a relatively small discount from gross sales for the seller.
Advantages of Coupons
There are numerous advantages associated with the use of coupons, which include the following:
Attracts new customers. Coupons encourage first-time buyers to try your product or service.
Increases sales. Temporary discounts can create a sense of urgency, leading to increased sales. Also, customers are more likely to buy additional items when they feel they're saving money.
Encourages repeat business. Repeat customers often spend more and are cheaper to retain than acquiring new ones.
Promotes specific products. Coupons can draw attention to new, underperforming, or overstocked products. They can also be used to test-market new offerings by incentivizing customers to try them.
Increases brand awareness. Distributing coupons through multiple channels (online, print, email) can expand your brand's visibility. Also, when shared, coupons serve as a form of word-of-mouth advertising.
Encourages bulk purchases. Discounts tied to buying in larger quantities drive higher sales volumes.
Stimulates off-season sales. Coupons can be used to drive traffic during slow periods or off-seasons.
Gain a competitive edge. Coupons can differentiate your business in a crowded market by appealing to value-conscious customers.
Track market effectiveness. Coupons with unique codes or links provide measurable data on redemption rates and customer behavior.
By strategically using coupons, businesses can drive sales, attract new customers, and build long-term loyalty while gaining valuable marketing insights.
Disadvantages of Coupons
Coupons are expensive to print and distribute. Also, if a customer uses a coupon, the issuer loses the margin represented by the amount of the coupon; this represents a clear loss to the seller if the buyer was going to make a purchase even if the coupon had not been offered.
Accounting for Coupons
There is no accounting for a coupon, since the discount stated on the coupon is deducted from the price of the related product or service at the point of sale. The result is a net sale, which is then recorded by the selling party.
Bond Coupon
A coupon is also the annual interest rate paid on a bond, stated as a percentage of the face value of the bond. It may also be referred to as the coupon rate.