(By Rick Fink) Bed Bath & Beyond’s recent bankruptcy announcement is a lesson in Marketing 101. Yes, discounting and couponing can be an effective marketing strategy, but too much of it, and business can suffer! While constant couponing was not the only reason for BB&B’s demise, it played an intricate role.
The purpose and function of coupons and coupon marketing is to encourage people to shop by offering an incentive, mostly in the form of a discounted price. However, it can also offer free merchandise in one form or another.
While there is nothing fundamentally wrong with offering discounts to attract new customers, doing it on an ongoing regular basis is a flawed business practice. There is an old saying in marketing, “The worst type of discount or coupon is a discount (or coupon) given to a customer who didn’t ask for it.” Over time, that is exactly the culture BB&B created.
Nearly everyone agrees that BB&B had very nice stores filled with very nice merchandise, and people enjoyed shopping there. The problem was, customers over time became addicted to only buying when they had one of their famous blue coupons, and it became rare when someone purchased at the regular price. Therefore, while sales were strong for many years, their margins were weak, and they continued to get smaller and weaker. This, along with other marketing mistakes, ultimately was death by a million cuts. Or, in BB&B’s case, a billion cuts, which is the number of coupons they mailed out each year, according to a 2020 New York Times article.
This is what Dr. Yuping Liu-Thompkins, a professor of marketing at Old Dominion University and director of the university’s Loyalty Sciences Lab on Customer Loyalty, said about couponing, “It’s a very effective short-term strategy in terms of generating sales, but coupons are not good for long-term loyalty”.
There is no arguing that coupons can garner business and new customers. Businesses have been utilizing them successfully, and not so successfully, for over 130 years.
Not only was John Pemberton a brilliant pharmacist, but he was also a brilliant marketer. In 1886 he created the recipe for Coca-Cola; now all he had to do was to get people to try it and violá, he created what is widely agreed to be the very first coupon for one free glass of Coke.
The second known coupon was in 1909 when Post distributed coupons for a penny off its Grape-Nuts cereal.
Imagine if Coca-Cola and Post Cereal constantly offered coupons to entice us to purchase their products. How long would they have lasted? The answer… about the same as Bed Bath and Beyond.
In today’s digital world, couponing has gone online with digital couponing. No longer is there a need for the cut-and-save coupon. In fact, in many cases, you can simply go to a store’s website and see their special offers while shopping. Evidently, these companies were never informed about the “worse type of coupon”.
Don’t let this article or opinion scare you away from suggesting a discount or coupon strategy to your clients. As stated, it can be very effective, if executed correctly.
If you choose to do so, proceed with caution. The downside to couponing and discounting is that it can work very well, very quickly. We refer to this as “Cocaine Marketing”. Like the drug, one can become addicted and soon you find yourself attempting to always experience that gratification.
One last lesson from BB&B before we say goodbye: Bed Bath & Beyond didn’t become a known brand from their coupons. Their brand identity was built with traditional intrusive advertising.
Rick Fink from ENS Media can be reached at 605-310-2062 or at [email protected]. Read Rick’s Radio Ink archives here.
Same with ‘bonus’ spots. They eventually become the regular price.