blog post

Text Discount Codes are Bad for Business—Here’s Why

March 28, 2022
min read
Parrot Team

Text discount codes may seem like the best way to increase website traffic and customer loyalty, but relying on them decreases your profit margins and degrades your brand’s value.

There’s a host of problems that comes with relying on discount codes, and there are better ways to connect with potential customers.

The Truth About Text Discount Codes

Text discounts are discounts that a client or customer is notified of via SMS.

Common types of text discount codes include:

  • Temporary discount codes that offer a fixed expiry date, percentage, minimum order amount, and maximum times that specific code can be used per customer
  • “Show this text at checkout” messages that act in lieu of a discount code, barcode, or QR code

Everyone with a phone has received a discount code via text before. The sheer volume might indicate that discount codes must be lucrative. However, text discounts aren’t as profit-generating as they seem. The truth about discount codes is that they devalue the cost of your goods or services instead of adding value to the customer. People start to view your brand as throwaway or annoying vs. high-quality. Brands that rely on discount codes are leading with price instead of value, and that’s bad for business over time.

Hubspot lists lower perceived value, projected lack of confidence, reduced profits, and setting a bad precedent as negative impacts of text discount codes. Society as a whole has seen the impact of constant email discount codes from brands, and the result is generally people unsubscribe or wait to buy until a huge discount is offered.

Text Discount Codes vs. Product Launches and VIP Experiences

Establishing your brand as higher quality is a better goal than quick short-term sales, and you can achieve this by using other methods of texting.  

Exclusive product launches and VIP experiences stand out from discount codes in a crucial way. Rather than devaluing the product or value by offering steep or consistent discounts, they offer additional value to customers without any price reduction. They also offer recipients something they wouldn’t normally have access to. Examples of promotions when launching a product using texts or offering a VIP experience could include:

  • Free shipping
  • Access to something exclusive
  • Access to something before the public

Rather than discount codes, which only cheapen brand image over time and don’t offer any value or insights, promotion-oriented strategies like exclusive product launches or VIP experiences build trust and increase customer lifetime value.

Long-term Effects of Text Discount Codes

Text discount codes have various long-term effects that are negative on a business’s perception and profits.

1. Hurting Profit Margins

Text discounts hurt your profit margins by resulting in the following:

  • Lower customer satisfaction over time
  • High levels of revenue churn
  • Low customer lifetime value, which only continues to plummet over time when relying on discount codes

This is because when using discounts, you train your customers to wait for deals, and, over time, they’ll either hold back their purchases until you increase your discount rates more or seek even lower prices elsewhere.

2. Attracting Customers That Aren’t Your Ideal Customers

There are many types of customers. They are:

·   The bargain hunters will cut you down on price or leave your business as soon as they find a cheaper option

·   The “just lookers” who will not commit to purchases or will purchase very infrequently

·   The researchers who have visited your website to compare prices or products before finalizing their buying decision

·   The buyers, who know precisely want they want and are looking to see if you are the business that can offer it to them

·   The loyal customers, who love your business’s USP, your offerings, and your price and will come back frequently to shop from you after their first purchase

Which one of these would you want to purchase from your company?

We recommend scaling back your SMS discounts if you want to cut the bargain hunters, the “just lookers,” and the researchers from your customer list. Otherwise, they’ll start to make up the bulk of your consumer base.

3. Racing Competitors to the Bottom

If you leverage text discounts as your unique selling point instead of focusing on the marketing, quality, and promotional aspects of your product, you’ll quickly find yourself in a race to who can offer the lowest price.

That means that if your competitors start offering 10% discounts on all products, you’ll have to do 15%.

25% discount? Well, you’ll need to one-up them with 30%.

…See how rapidly this can spiral?

Remember that following your competitors’ discount tactics isn’t a sure-fire strategy, as you have no insight into what their metrics look like behind the scenes.

Are Discount Codes Ever a Best Practice?

Text discount codes aren’t always wrong. There are a few instances where discount codes work.

  • Having one-time use discount codes to ensure that the novelty of discount codes doesn’t wear off for your customers
  • Using link-based discount codes that will send customers directly to the checkout page that will automatically apply said discount

However, we recommend using these SMS discount tactics sparingly. Instead, focus on providing long-term value, trust, and two-way conversations to your customer base.

How to Create a Text Promotion That Works

A great example of text promotion is Pink Horse Power.

Pink Horse Power sells an all-natural herbal supplement. With the help of Parrot, the Pink Horse Power team launched a campaign event on Cyber Monday to release a new product via text and saw significant success: out of the 3,047 SMS messages delivered via Parrot; Pink Horse Power received 199 responses from potential customers.

This resulted in 14 orders from customers, who purchased through text and earned Pink Horse Power $1,330 in under four hours.

Pink Horse Power’s success shows that two-way conversations create value when you’re selling something. Talking to your audience instead of texting a code they can’t reply to is a solid revenue generator.

Instead of endless discounts, turn your focus to enhancing your customers’ purchasing experience and adding value to your products and services.  

Parrot is here to help you start selling without relying on text discounts. Sign up today!

Parrot Team

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