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Why You Should Stop Using Coupons

Motley Fool - Tue May 24, 5:32AM CDT

Woman selecting coupons from a container at the store checkout

Image source: Getty Images

A whopping 40% to 80% of all Americans use coupons on a regular basis. While we think we are saving money when using coupons, studies show that coupons are a marketing and psychological tool to convince you to spend even more money.

A company's main goal is to maximize profit. Coupons aren't given away for free. While companies may not make as much money on that particular product or service, the purpose of a coupon is to get you to open up your wallet in other ways. Here is how companies use coupons to get you to shop more.

Coupons cost you more money

Coupons heavily influence the buying experience. According to one study, 25% of people end up spending more money when they use a coupon. In addition, almost half (48%) of customers buy products sooner with a coupon and over a third (37%) buy more than they normally would. Coupons are meant to drive traffic to a company's store. Companies hope you will also end up buying other non-discounted products. Many of these companies bank on the fact that a $5 trip to the market ends up becoming a $20 trip.

One of the best examples are Costco rotisserie chickens. The price has stayed the same at $4.99 since 2009. These chickens are sold at a heavy discount. Costco sells hundreds of millions of chickens per year and loses $30 million to $40 million a year on them. Why is it willing to lose money on one of its most popular products? Costco brilliantly places its chickens in the very back of the warehouse. By driving more foot traffic into the store and in the back section, its goal is to encourage you to purchase things you normally wouldn't. Is it working? Last year, Costco had one of its best years on record. Total sales for Costco in 2021 were $192 billion, an increase of 18% from 2020. Costco's net income, or profit, increased 25% to $5 billion.

Another study found that when using coupons, consumers not only spent more within the category of the promoted item, but they also spent significantly more overall during their shopping trip. Especially if you have a flexible budget (or no budget), you are more likely to buy things on impulse. As a result, consumers are more likely to spend more when using a coupon than not.

Coupons encourage you to buy things you don't need

According to a Consumer Report study, 63% of consumers buy things they don't need because of coupons or sales. Psychology Today states, "The thrill of using a coupon and getting a better deal than other consumers takes precedence and shoppers lose sight of the actual cost…Any money saved by using coupons is quickly relinquished (and then some) by buying unnecessary items."

When companies want to get rid of unwanted inventory, they mark down the prices. Consumers love sales because it makes them feel like they are saving, not necessarily spending. Many companies offer coupons on items that people don't normally buy. They are hoping that when you are thumbing through the coupon book, an item catches your attention and you buy items you might not otherwise because you think you are saving money. This is why it is easier for us to remember how much we saved on a product as opposed to how much we paid for it.

Coupons encourage you to buy more than you need

Getting a bulk discount is another form of a coupon. Aside from shopping at Costco, many grocery stores will give you a discount if you buy a minimum amount. Sodas are a popular product where if you buy multiple cases, you will get a discount.

While it seems that you are paying less per item than before, bulk buying doesn't necessarily mean it is good for your wallet. In fact, 71% of people toss out expired food they never opened and 59% buy in bulk even if they have little or no storage space.

Companies want you to buy in bulk. They are able to increase inventory turnover and have less operational expenses. But buying in bulk means you have spent more money for items you may not need and have no place to store, and in the end have to throw them out. Purchasing just what you need may cost more per product, but it costs less overall and doesn't give a false sense of saving money.

Coupons are one of the top marketing strategies that businesses use to boost sales and increase customer loyalty. It is important to understand that their goal is to make a profit, so they wouldn't be willing to lose out on revenue if they don't think they can get it from you in a different way. The key to using coupons is to be disciplined and use them for products that you need. If not, then you may be spending much more than you normally would without using coupons.

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