A television show called Extreme Couponning features people

A television show called \'Extreme Couponning\' features people who go to extreme lengths to collect and use discount coupons. Though the program focuses on extreme cases, couponning is a popular strategy used by businesses to generate sales. What key economic concepts underlie the use of discount coupons by businesses? How critical is the underlying market structure in the choice of this strategy for business revenue growth?

Solution

What is a Discount?

Discounts are a specific type of marketing promotion in which you invite shoppers to save money on specific products or product groups. Discounts are a significant part of your online merchandising strategy. You can use discounts to introduce new products, retain existing customers, or drive revenue growth. Because the process of creating a discount is complex, as a marketing manager, you will have to understand how discounts work in Commerce Server 2007.

The use of coupons to generate sales is based on the concept that a coupon encourages the consumers to be attracted to a particular product and entice them to buy. A coupon gives the impression that the product has a reduced selling price.

The economic concept that applies here is the law of demand. This law of simply states that \'as the selling price of the product goes down, quantity demanded for that product goes up\'.

What’s the difference between a coupon and sale?

A sale is available to everyone that walks through your door or visits your website. In theory, coupons are limited to a select group of potential buyers in possession of a physical coupon or promo code. Because of this difference, coupons can be more attractive, because they can allow you to sell at a higher price (your normal price) to some customers, while discounting to those that are more price sensitive.

Why do retail stores, restaurants, and local businesses use coupon advertising?