Discount coupons are when you offer your customer a concession off the next purchase, based on the current purchase, a typical figure often mentioned is half the profit. It works in the sense that it increases sales but in practice often, the retailer discovers that the profit goes down. In Toowoomba newsagency, they did an extensive calculation similar to the one that I did and the result is that the owner decided to stop using discount coupons. The analysis is showing all its done is produced a large number of bargain hunters.
What is at the moment proving to be a major problem, is that they have educated their customers with discount coupons and have decided to get rid of them, a lot of customers are getting upset. Switching them to a rewards program is proving to be a difficult sell even though the rewards program is much better.
I think one lesson is clear if you decide on a discount coupon program, and it does not work; it is very hard to make an exit strategy.
