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April 25, 2011

Coupons: OUT, Managed Offers: IN

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Everybody loves a discount, right?

Well, not necessarily.

People love value, and while value is often delivered in the form of a discount, it certainly doesn't make the two concepts the same.

Despite today's hustle and bustle over daily deals, coupons, and flash sales, (I've fallen prey to them all!), this is NOT a way for brands to build value, relevance or relationships, nor is it a way to maintain long term profitability. Continuous discounting eventually devalues brands in the eyes of consumers. This has been proven time and time again.

Discounts and coupons also erode profitability in the long term. Of course, coupons and discount deals may increase short term revenues, but how can a brand know when the long term profitability needle has dipped into the red for the sake of short term gains? And what if that brand, like so many of our clients, has multiple properties and sub brands? How could they possibly know when the short term revenues are no longer beneficial given long term projections based on aggregated cash flows and the overall valuation of the brand(s)?

Clearly, coupons and discounting are not tactics to be taken lightly and may not be a good fit for all brands. But that is not to say brands shouldn't make special offers to grow and motivate their consumer base. So what's the solution?

Offer management might sound like it is another name for all this coupon-groupon-daily deal fanaticism. But it's not. We actually think it's the answer to the discount dilemma described above.

A good offer management system has an approval loop that allows the master brand to collect data on all the offers being deployed by a brand (or multiple sub-brands) and helps corporate analyze which offers work best in any given senario, while ensuring brand integrity along the way. Based on globally aggregated information, corporate can then inform local marketers of the offers that work best for their properties, depending on a set of variables specific to that property (size, location, customer base, class, date, day of the week, etc.).

With this kind of data and guidance, local properties can hone their offers and make the most intelligent decisions that will maximise value for consumers and profitability for the brand.

For example, a local hotel can offer additional services that have been proven valuable to their target consumer base, such as free shuttle service, or complimentary hot breakfast, as opposed to attracting visitors by simply dropping room rates, or selling sets of rooms to groupon or OTAs at a fraction of the room's value. The local marketer can access the offer management system via the web and incorporate their offers into brand compliant marketing and advertising materials, reducing production costs by simplifying the supply chain, thus further enhancing profit margins.

Value is feeling like your net benefit exceeds your loss. So, brands can create value by charging less, or providing greater benefits. Finding the right balance between the two for your product/service and your target market is the key. Offer management systems that educate marketers on what works and makes that information available to every brand marketer who needs it, is a great way to strike that balance.

Does your brand use discounting to drive trafic or have you in the past? What is your experience? If you would like to learn more about offer management, visit our website.

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by Kevin Groome

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