Five Warning Signs Merchants Need to Know About Scammy Discount Programs

Access has spent a lot of time on this blog talking about discount programs because, well, it’s kind of our thing. We’ve talked about what a discount program can do for a business as well as what ingredients go into a program that people will use and love. They’re a tremendous way to bring in new customers and build incremental revenue.

I want to address the merchants, the businesses who provide the meat for discount programs. For the most part, these restaurants, retailers and service providers are just trying to grow their customer base while also continuing great value and service to the people already in their stores.

Merchants get calls and sales pitches all day long on marketing services: Coupon distributors, daily deals, text messaging campaigns, loyalty programs, direct mail pieces, and on and on and on. Sorting through the mess is an impossible task, but necessary if they want to keep their businesses open.

I can provide some help at discerning the differences between discount programs. After 30 years in the space we’ve seen the good, the bad and the scammy in this industry. Here are some warning signs of someone who’s simply looking to take merchants for a ride:

• Inflexibility on coupon terms. A well thought out, strategic coupon can be a huge boon to a business, but some groups aren’t interested in what’s best for the merchant. Some want the deepest deal possible, which can hurt merchant profitability and make it more difficult to properly service all customers. Others only want to fill a slot and accept offers that are so weak they won’t see traffic.Choose a partner that can help you hone in on offers that will allure customers and drive company profitability. Keep in mind, most digital coupon platforms can change offers at any time. The flexibility to change your coupons at any time empowers you to test and optimize deals in ways that printed pieces cannot offer.

• Changes to your current point of sale technology and process. A coupon should work within the existing point of sale system, whether that’s through scanning bar codes or simply presenting a printed offer or mobile coupon. Merchants should back away from anyone looking to sell an expensive scanner or register just to be able to accept coupons.

• No information on who will have access to the offer. Audience is key to a successful discount, and every program should be able to tell you who their primary members are. It may be people who donate to a fundraiser or members of an education association. If you offer a discount publicly, be warned that it could erode your customers’ perception of your retail pricing structure. They may wait for a coupon before visiting again. In general, we recommend limiting your audience to memberships in order to drive new business without cannibalizing existing business that is willing to pay retail.

• Money to participate or revenue on each transaction. Merchants are the product that comprises discount programs, and consumer memberships to those programs are generally sold for profit. Generally, card-linked rewards (when a merchant pays a portion of qualifying transactions back to cardholders) are the only time finances will enter the picture in the relationship between a merchant and a discount program provider. The merchant’s investment into the program should rarely extend beyond a quality offer that people will want to take advantage of. 

• No feedback channels. Every program should offer a way for a merchant to ask questions, air issues and provide feedback. Some discount programs will throw a merchant’s offer out to the wilderness and completely ignore any requests or issues. Again, the discount program product doesn’t survive without merchants, and those merchants should have the ability to provide feedback and complaints to the program.

Discount programs are a fantastic way to reach new audiences are build incremental revenue. When done right they’re low-risk and high-reward. Done wrong and they’ll hurt profitability and frustrate customers.

The good news is most merchants are used to identifying BS when they hear it. But promising new customers is a sweet spot, many mom and pop business owners/managers aren’t marketers, and they may not know much about promoting their business to the public at large. Hopefully this can help them push back on some of the scammier companies in this business. 

(Sign image courtesy of bixentro)