It’s been written that traditional direct mail coupons are a “lose-lose scenario” for two competing brands as they effectively negate the possibility that one company can profit over the other. Beyond the profit margin, coupons are out-of-time, out-of-place propositions that don’t take into account our busy, mutable schedules.
Boston University’s Questrom Graduate School of Management recently discussed a new homegrown BU study on the benefits of geo-targeting—a new pricing tactic that uses location-based smartphone coupons to benefit both consumers and brands.
Consider the potential for companies to entice consumers on the move in real time and for consumers to change their location to take advantage of better offers. The article further explains, “Consumers might get one coupon offer if they’re close to the seller’s store, a better offer if they’re near a competitor’s store, and a third if they’re by neither.”
In contrast, Sun argues, the older, traditional coupon model has a distinct weakness, in that consumer’s have to wait for it to arrive at their home mail address.
“If a coupon is mailed, consumers can’t change their home address to get a different coupon,” she added.
If companies aren’t careful, they could easily become patsies at the mercy of savvy consumers and savvier competitors. Sun explains, “The increased flexibility for these consumers to arbitrage by changing locations puts a restriction on how aggressively the firms can compete with other firms at each location.”
Sun argues that these restrictions actually inspire competition rather than negate it, like the seemingly antiquated coupon model.
“From a competitive standpoint, geo-targeting has fewer bad implications than traditional coupons. If you use it in the right way, mobile targeting can outperform both non-targeted uniform pricing and traditional coupon targeting.”