Everyone wants to feel like they're getting a good deal. Merchants often attempt to capitalize on this desire through coupon offers, rebates, and "special discounts." Coupons have become the promotional drug of choice to woo more business from new and old customers alike. Unfortunately, coupons can destroy customer relationships almost as fast as they are made.

The worst coupon abusers are merchants who set a relatively high list price compared to the competition, and then use coupons or other incentive plans to discount it so buyers feel like they're getting a good deal. I had a fabulous customer service experience derailed by such a pricing blunder.

I was looking for a new dry cleaner and discovered FC Cleaners (not their real name). When I walked in, they discovered I was a new customer, handed me a Passport book, and explained to me that I would routinely receive a significant discount whenever I presented the book with incoming dry cleaning orders.

I wasn't impressed until I picked up my order. All of my shirts now had bar code labels. The computer-printed labels attached to the neatly hangered and bagged clothes described each article in detail, right down to my neck size. They truly knew how to use technology to manage a relationship! I also knew I could go to any FC Cleaners in Atlanta and be instantly identified by my bar code labels.

Soon I returned to have more cleaning done. I dropped off the clothes, and then remembered I had forgotten my Passport. Oh well, I'll just bring it with me when I pick them up. As planned, I returned in a few days with my Passport. My enthusiasm for our relationship disappeared when they explained, "Sorry, you'll have to pay stupid people prices since you failed to present your passport when you dropped off your order."

Of course, they didn't explain it that way. They cordially explained that their policy prevented them from giving me a discount. As Dr. Martha Rogers of Peppers and Rogers Group says, Policies treat everybody like nobody, and that's exactly how I felt. When I dropped off the clothes, their computer could tell them who I was, where I lived, the details of all my garments, and my complete transaction history. But it couldn't -- or is it wouldn't? -- tell them that I was a Passport discount buyer. As a result, I was forced to pay retail and fork over an extra ten spot. From a goodwill perspective, they would have been much better off without a list price discounting program.

Sometimes I'll be in line at a store when the person ahead of me presents a coupon to the cashier and immediately gets a discount. I have no such coupon. It looks like I'll be paying stupid-people prices again.

On occasion a friendly cashier has offered to give me a coupon on-the-spot. Very thoughtful -- but maybe not. Does this mean their merchandise is really overpriced? Does this store have any integrity? Do they really have a consistent pricing policy? My assumption is that, for some reason, I don't look like a sucker today.

If you want to use coupons for promotion, consider making them an integral part of your pricing strategy. I recommend to my clients that they only offer discounts, including coupons, for one-time irregular (preferably non-repeating) events. Examples might be first-time orders, year-end closeout of a particular model, or cleaning off shelves in preparation for inventory. A new product launch would qualify. However, end of the month discounts don't hold water, nor does the lame excuse, "I need another deal to make quota."

Coupons are useful to get people in the door and give you a try, but you need to have a way to track repeat buyers. Don't train customers to never show up without a coupon. I won't buy a pizza without one. Instead, honor them with a "frequent buyer" program that rewards them with lower prices or -- better yet -- additional services when they come back time and again. Show them you know they're not stupid, and they'll know how smart you are. The goodwill you generate will result in good business for you.

2005 Paul Johnson. All rights reserved.

Note: This article is available for reprint at no charge. We only ask that you include our copyright notice in your reprint, along with the About the Author (byline) information we provide at the end of the article.